Bank earnings, data to call shots for stocks

By Ellis Mnyandu

NEW YORK (Reuters) - With Wall Street's rally stalled, next week could be crunch time as big banks' earnings, including Citigroup's (C.N), roll in and investors scrutinize reams of economic data for clues on the recovery.

Bank of America Corp (BAC.N), Intel Corp (INTC.O), and General Electric (GE.N) are among several Dow components due to post their quarterly scorecards in the coming week. Their outlooks may shed light on whether the much anticipated economic revival has legs.

The economic calendar has plenty of indicators for investors to chew on, including June retail sales, the Producer Price Index and the Consumer Price Index, industrial production, weekly jobless claims and housing starts.

Any negative surprise will add fuel to what is shaping up to be the market's first significant pullback since the Standard & Poor's 500 broke away from a 12-year closing low in early March.

"It looks to me like the market might be vulnerable to a correction," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.

"Earnings are probably the key factor next week. People are going to be looking to see if there's any mention of a turnaround in earnings."

This past week, the U.S. stock market exhibited high anxiety about the start of the latest earnings season.

The market drifted lower and broke through key technical support despite Alcoa Inc (AA.N) kicking off the reporting season on Wednesday with a smaller-than-expected quarterly loss.

The benchmark S&P 500 .SPX rallied as much as 40 percent from the 12-year closing low of March 9. But it met some strong headwinds in May and June that stalled the sharp run-up.

The S&P 500 has lost more than 7 percent from its recovery peak in early June. That puts it on the cusp of a long-awaited correction, defined as a drop of at least 10 percent from a recent peak.

O Friday, the Dow Jones industrial average .DJI and the Standard & Poor's 500 Index .SPX ended the session modestly lower and wrapped up their fourth straight weekly decline on a profit warning from Chevron and a slide in consumer sentiment. The Nasdaq Composite Index .IXIC eked out a gain on Friday with a lift from the tech sector.

For the week, though, all three major U.S. stock indexes fell: The Dow was down 1.6 percent, the S&P 500 was off 1.9 percent and the Nasdaq was down 2.3 percent.

BANKS, COMPUTERS AND HARLEYS

Much of the earnings spotlight will fall on banks next week since their rebound kicked off the spring rally following news of a surprisingly strong start to 2009 and reassuring results from the government's stress tests.

In the banking sector, investors will first hear from Goldman Sachs (GS.N) on Tuesday, followed by JPMorgan (JPM.N) on Thursday, and then Bank of America (BAC.N) and Citigroup (C.N) on Friday.