U.S. stock market looks to tech and finance

NEW YORK (MarketWatch) � The U.S. stock market�s recent decline risks turning into a full-fledged correction in the days ahead as first-quarter earnings season gets into full swing.

Yet earnings could also be the catalyst for a rebound.

�Earnings will start to kick into gear; the expectation was extraordinarily dour. So now, we�ve had four bellwethers, and they�ve all beaten, a couple of them nicely, and with good guidance,� said Phil Orlando, chief equity market strategist at Federated Investors.

Click to Play U.S. week ahead: Banks� results

The coming week will bring earnings from Citigroup and Bank of America, plus retail sales and data from the Philly Fed. Laura Mandaro reports on Markets Hub. (Photo: Reuters)

�I�d say earnings will be less important than future guidance; everybody is beating their numbers,� said Doug Roberts, chief investment strategist for Channel Capital Research.

�Those already reporting represent the industrial, financial services and technology, key elements of the economy, so the market is off �to a pretty good start,� added Orlando, listing aluminum maker Alcoa Inc. AA , search engine Google Inc. GOOG �and banks J.P. Morgan Chase & Co. JPM �and Wells Fargo & Co. WFC ��It�s consistent with the thinking that earnings season will be better than the very low bar set.�

Technology and finance will be well represented of the more than 90 S&P 500 companies reporting results in the days head. Read a preview of IBM�s results.

On the tech front, Wall Street will hear from companies including eBay Inc. EBAY , Intel Corp. INTC , International Business Machines Corp. IBM , Qualcomm Inc. QCOM �and Yahoo Inc. YHOO � Read full story on expected sales dip from chip giants.

American Express Co. AXP �and Goldman Sachs Group Inc. GS �and are among those on deck from the financial sector.

�I don�t think earnings will be the catalyst for a pullback; any selling pressure is likely to come from the euro zone,� said Art Hogan, a market strategist at Lazard Capital Markets in New York.

Wall Street�s worst week so far this year started �with Italian and Spanish bond spreads blowing out � that is mostly likely to be the catalyst for a continuation of the selloff,� according to Hogan.

Pullback time?

On Friday, the major indexes fell after China reported its economy slowed more than anticipated, with the Dow Jones Industrial Average DJIA �falling 136.99 points, or 1.1%, to close the week at 12,849.59, down 1.6% from the prior week and its most substantial weekly hit since mid-December.

The S&P 500 Index SPX �retreated 17.31 points, or 1.3%, to 1,370.26, down 2% from the week before, while the Nasdaq Composite Index COMP �dropped 44.22 points, or 1.5%, at 3,011.33, off 2.3% from the prior week�s close.

The week coming includes a slew of economic reports, with retail sales on Monday seen as particularly important to Federated�s Orlando. �We know the stores reported very strong comp sales for the month of March, so I�d like to see some follow through strength in the Commerce Department data,� he said.

The week also brings range of housing data and weekly jobless claims on Thursday, which follows last week�s �disaster,� which Orlando added should probably be ignored, as it was likely distorted by the Easter-Passover holiday weekend.

Whether the market pulls back further will likely depend on earnings, events around the globe and domestic data. �We spent the entire first quarter with virtually no volatility, and for a whole quarter the mantra for most was �I missed the move, and I�m now waiting for a pullback,� said Hogan, who believes �we probably have not completed the process.�

�People are getting nervous, waiting for the correction � if something pops out of a hat, it could be more,� commented Roberts. �People figure I�m up nicely for the year, so I�ll take a few chips off the table.�