Inflation data for September will have a bearing, too. The reports could start a rally or spur a decline, depending on how much fuel they offer the Federal Reserve when it meets to decide on interest rates later this month.
"The path of least resistance right now, particularly with large-cap stocks, is up," said Mike Holland, fund manager of Holland Balanced Fund. "The valuation of the large-cap stocks that are in the Dow, for example, are still reasonable relative to inflation and interest rates."
Stocks have had a strong run in the past week with the Dow Jones Industrial Average closing at record levels three times and the Nasdaq Composite Index surpassing its best closing level in five months.
The Dow has gained 7.8% since the start of the third quarter. The Nasdaq has added 8.9% and the S&P 500 has risen 8.4%.
Earnings will continue to be the big driver for equities and "more specifically, guidance and what the companies are saying about the prospects for the fourth quarter and for the first quarter of [next year]," said Stephen Sachs, head of trading at Rydex Investments.
Sachs, like Holland, expects to see another climb in stocks.
The market is entering the busiest two weeks of the earnings season. The lineup for next week includes Intel Corp, IBM, 3M Co, Google Inc, Johnson & Johnson, Coca-Cola Co.and Honeywell International Inc.
"We're at a critical crossroads here. If we're going to keep this rally going, we're going to need to see that guidance from Corporate America very strong," said Sachs.
So far, companies are showing strength in their third-quarter results, said John Butters, senior research analyst at Thomson Financial.
"It's been a fairly positive quarter in terms of pre-announcements," he said.
US market opened reddish FLAT .... Consumer sentiment and business inventories data out at 9.50pm & 10pm respectively. Let's see if Dow can go beyond 12,000 tonite!
Blue-chip gauge charts new territory, broader market surges as investors cheer upbeat economic and corporate news.
By Jessica Seid, CNNMoney.com staff writer
October 12 2006: 5:54 PM EDT
NEW
YORK (CNNMoney.com) -- Stocks rallied Thursday afternoon, with the Dow
Jones industrial average climbing well past the 11,900 barrier for the
first time in its 110-year history, after several key earnings figures
and an economic report from the Federal Reserve that investors cheered.
The Dow (up 95.57 to 11,947.70, Charts)
jumped more than 0.8 percent, blowing past the previous record closing
high of 11,867.17 set Tuesday and notching its fifth record in little
more than a week.
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