Expectations high for earnings reports

NEW YORK - Earnings season shifts into high gear next week, and with nearly one-third of S&P 500 names set to post results, investors hope the news provides a catalyst to buy stocks and leave the market's recent weakness in the dust.

Several behemoths, including Apple, the largest U.S. company by market value, as well as Microsoft, McDonald's, and AT&T, are due to report earnings.

They'll be accompanied by highfliers like Netflix and Facebook, giving the first real cross-section of the state of corporate America as temperatures rise across the country and investors hope to put the cold weather behind them. Strategists will also be looking for clues on how badly China's slowdown hits U.S. corporate results.

The first batch of earnings came out as equities were working their way through a sell-off led by trading-crowd favorites like Netflix and the biotech stocks. With the late-week recovery, the hope is that the recent volatility has ebbed. If poor results dominate next week's action, that could reignite the selling.

"If we were to have a set of earnings releases that were well off expectations to the downside, that could create hesitation in the market," said Andre Bakhos, managing director at Janlyn Capital L.L.C. in Bernardsville, N.J.

A few themes will dominate in the coming week: The outlook for China, the rotation to slower-growing stocks, and results from high-flying trading favorites.

S&P 500 companies' first-quarter earnings are projected to have increased 1.7 percent from a year ago, Thomson Reuters data showed. The forecast is down sharply from the start of the year, when profit growth was estimated at 6.5 percent, but has climbed from a low of 0.6 percent reached on Wednesday.

That jump occurred despite notable disappointments from IBM and Google. Even with those two lackluster reports, equities still mostly rallied Thursday.

The benchmark S&P index rose 2.7 percent for the holiday-shortened week, helping the index recapture nearly all of the declines suffered in the previous week. The U.S. stock market was closed on Good Friday.

Investors eyeing the impact of China's troubles on corporate America's bottom line will have a few spots to pick from, including Apple and Qualcomm.

Apple derives 13 percent of its sales from China, according to Thomson Reuters data. Qualcomm's revenue for its fiscal year ended Sept. 29, 2013, showed China accounted for nearly half of the company's revenue.

Trading in Facebook options expiring next Friday suggest investors expect about a 12 percent move in the stock's price by the end of next week.