Stocks seen higher but data may bring in cool front

Employment report for October due Friday; earnings growth rate rises to 17%

U.S. stocks are expected to edge higher next week as investors struggle to decide whether to take their cues from strong corporate earnings or signs that economic growth is moderating.

Some analysts said the strength of earnings - nearly three-quarters of major
companies have reported higher-than-expected profit for the third quarter -- should provide support for the market next week. Others said the recent rally has left the major indexes vulnerable and that any weakness in the raft of economic reports due could send stocks lower or keep them range-bound.

"The market is projecting at least no Fed [action], modest economic growth and diminishing inflation numbers. Any economic report that deviates significantly from that is going to shake up the market," said Paul Nolte, director of investments at Hinsdale Associates.
Investors will have to parse data including October payrolls, snapshots of September's inflation, manufacturing and construction reports as well as monthly retail sales data from chain stores.
But the economic data won't completely steal the spotlight from the strength that corporate earnings have shown so far this season and from the pile of results still to be released, analysts said.
"In the third week of earnings season, we're still coming out with more positive surprises...and usually those taper off by this time," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.

Major results on deck next week include Verizon Communications, Procter & Gamble, Humana Inc., Time Warner Inc., and Clear Channel Communications, which said earlier this week that it's considering strategic alternatives.

As of Friday, have reported results, with 94 reports scheduled for next week.
So far, according to Thomson Financial, 74% of companies have beat earnings estimates, 11% have matched, and 15% have fallen short of expectations.
The blended growth rate, which combines reported and estimated figures, is now up to 17.4% from 15.3% at the beginning of the quarter. That's the highest growth rate since the fourth quarter of 2004.

"Those are very strong numbers versus expectations," said John Butters, senior research analyst at Thomson Financial, since typically 60% of companies at this point in an earnings season post results above expectations, 20% match, and 20% come in below.
Companies are also beating estimates by 6.4%, above the long-term average of 3.2%.