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After the Dow Jones Industrial Average (INDEX: ^DJI ) finished off an impressive first quarter last week, investors are hoping the momentum will carry into Q2. The blue chips gained 8.1% over the past three months, and Bank of America (NYSE: BAC ) led the way with a 72% share-price increase. Receiving an investment from Warren Buffett last year and passing the Fed's stress test a few weeks ago helped turn around the beaten-down stock.
Going into the second quarter, investors seem to be questioning whether the market can keep up the rally. Fears loom of a stagnating recovery in the job market, earnings estimates are down, and European debt problems and slowing growth in China continue to be a concern.
According to a poll by FactSet, analysts are predicting S&P 500 (INDEX: ^GSPC ) earnings per share to drop by 0.2% from profits a year ago. The predicted decline would mark the first since Q3 2009; the analysts seem to think the strong earnings growth can't continue but are still projecting a revenue bump of 3.8%.
As we begin the second quarter, here's what investors will want to look for in the coming days.
Focusing on Monday's outlook, two reports will be coming out. The ISM Manufacturing Index, due at 10 a.m. ET, will reveal March data in that sector, including employment, production inventories, new orders, and supplier deliveries. The market is expecting a figure of 53, up from 52.4 in February, which marked the 31st consecutive month of positive numbers. (A reading of 50 is neutral; above 50 indicates an expansion and below a contraction.) As the ISM index is a leading indicator of production three to six months out, cyclical companies such as Alcoa (NYSE: AA ) and Caterpillar (NYSE: CAT ) could move as the result of a surprising report.
Market watchers should also get a big hint of what's in store on Friday, when monthly jobs numbers come out. Strong employment growth has helped buoy the recovery as the unemployment rate has dropped from 9% last fall to 8.3%. The market is expecting an addition of 200,000 jobs, down from 227,000 in February, which would keep the jobless rate right at 8.3%.
Friday's closure in observance of Good Friday will push the market's response to next week, which also happens to kick off earnings season, with Alcoa set to report on April 10. Analysts are predicting a $0.04 EPS loss for Alcoa.
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