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Earnings Season: What to Watch

Written by: Jeff Kleintop 04/10/12 - 2:46 PM EDT
Tickers in this article: AAPL
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- After a strong first quarter, the stock market, measured by the S&P 500 Index, got off to a weak start in the second quarter with a decline of -0.7% last week.

Investors focused on the Federal Reserve's lack of support for round three of quantitative easing in the minutes that were released from the March Fed meeting. As we noted a few weeks ago in our commentary, this is one of the 10 indicators we are watching that might foreshadow another spring slide in the stock market.

While macroeconomic data and events are likely to remain key drivers of the market this week, microeconomics will also garner investors' attention as companies begin to release their first-quarter earnings reports. While only a handful of S&P 500 companies report results this week, it is widely considered to be the start of earnings season with big, well-known companies like Alcoa(AA) and JPMorgan Chase(JPM) due to report first-quarter results.

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Four times a year, investors focus on the most fundamental driver of investment performance: earnings. The close connection between earnings and stock market performance can be seen in the fact that the S&P 500 Index and earnings per share have both risen about 80% over the past three years. A slowdown in earnings growth may indicate the same for the stock market.