A torrent of earnings this week threatens to swamp Wall Street's impressive rally, as results so far have shown the corporate outlook remains murky and investors worry that better-than-expected results from banks still don't prove the sector is stable.

Investors will get a look at the performance of a swath of major companies, including everything from Wells Fargo to Caterpillar, providing a broad look at the economy's health.

The market has been particularly sensitive to bank earnings after their dire straits brought the market to a 12-1/2 year low in early March. The latest quarter has come under increased scrutiny after dismal fourth-quarter results that showed the economy was gripped by panic at the end of last year.

Last week, Goldman Sachs , JPMorgan Chase & Co and Citigroup all reported better-than-expected results for the first quarter, but analysts were wary of the results' sustainability and said they did not signal an all clear for the sector at the heart of the economic crisis.

I think the market is somewhat skeptical on these better-than-expected financial earnings and are looking forward to getting more detail on that, said Scott Wren, senior equity strategist at Wachovia Securities in St. Louis.

Earnings for S&P 500 companies are expected to decline 37.4 percent in the quarter, according to Thomson Reuters data, with all 10 sectors taking a hit.

Economic indicators will be relatively light in the coming week, keeping earnings on center stage. But investors will be looking at data on new and existing home sales, as well as durable goods orders to see if the reports can extend the optimism sparked last month by signals that the economic slump may be waning.

BANKS AND BLUE CHIPS GALORE

Banks, which began reporting earnings last week, will continue to be in focus, with results from Bank of America , Wells Fargo and Bank of New York Mellon among the major ones.

Bank of America was among several banks that said last month they had made money at the beginning of the year, helping spark the rally that has seen the broad S&P 500 rack up six consecutive weeks of gains and an advance of close to 30 percent since early March.

Even more important than the numbers will be the guidance company executives give on their outlook going forward as market watchers try to get a handle on when the economy and corporate fortunes may improve.

Visibility remains murky and what people are doing is trying to downplay expectations a little bit, said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.

If you look at JPMorgan and Citigroup, even though they beat expectations, they said that looking ahead, times are going to be challenging.

The last earnings season was marked with companies withdrawing guidance or refusing to give any due to the inability to predict the depth and longevity of the financial crisis.

In all, 11 of the 30 blue-chip companies that make up the Dow will report this week, including International Business Machines , Caterpillar Inc, Merck & Co Inc , Boeing Co and McDonald's Corp .

Wells Fargo announced its preliminary results earlier in the month, saying it expects to post a record $3 billion profit for the quarter.

HOME SALES MAY HINT WORST IS OVER

But with so much optimism already pushing the S&P 500 up 28.5 percent from the bear market low, investors could take the opportunity to book profits this week.

8,300 on the Dow suggests to me we've had such a nice run, the market is going to, at minimum, trade sideways for a while, if not undergo a more pronounced pullback (this week) after the expirations run its course, said Todd Clark, managing director of stock trading at Nollenberger Capital Partners in San Francisco.

Indeed, CitiFX analysts said in a note that with so much perfection priced in, such as optimism over bank earnings and the economy, mark-to-market accounting changes, proposed changes on the uptick rule and the U.S. Treasury Department's toxic asset plan, the question is where the next piece of good news is going to come from.

Without another dose of good news, the market could struggle to continue charging ahead from its March bear market lows, they added.

However, a pullback could be seen as a buying opportunity for investors on the sidelines who missed out on the current rally and have been waiting for a chance to get back into the market.

Reports on new and existing home sales and durable goods orders will be watched to see if they build on last month's signals that the recession may have hit bottom.

The one focus will be on whether these green shoots that we saw last month will take deeper roots or whether they will have another cold spell that will freeze them out, Praveen said.

Other data on tap includes leading economic indicators for March and weekly initial jobless claims.

(Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)

(The Wall St Week Ahead column appears weekly. Comments or questions on this one can be e-mailed to leah.schnurr@thomsonreuters.com)

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