After a third consecutive week of stock market gains, the Dow Jones Industrial Average (DJINDICES:^DJI) and the broader S&P 500 Index (SNPINDEX:^GSPC) both closed at five-year highs on Friday. Conversely, the VIX(VOLATILITYINDICES:^VIX) registered its lowest closing value in more than five and a half years. The VIX, which is derived from option prices on the S&P 500, is a measure of investors' expectations for stock market volatility over the next 30 days.

A big week for the technology sector
Next week will be short in terms of trading days, with the markets closed in observance of Martin Luther King Jr. Day. But don't let that fool you, as it marks one of the peaks of the current earnings season, with no fewer than 11 Dow components and 80 S&P 500 companies expected to report their results for the fourth quarter. These are the Dow components that are on tap for next week:

  • Tuesday: DuPont, Johnson & Johnson, IBM, Travelers, Verizon Communications
  • Wednesday: McDonald's, United Technologies
  • Thursday: 3M, AT&T, Microsoft
  • Friday: Procter & Gamble

One sector to track carefully next week is technology, as the four largest technology companies -- representing more than two-fifths of the sector's market weighting in the S&P 500 -- are reporting. (In addition to IBM and Microsoft, Google and Apple are also on tap for Tuesday and Wednesday, respectively.) Technology is the largest sector in the S&P 500; these four stocks add up to more than 8% of the entire index.

Investors have de-rated tech shares recently, but positive results and outlooks from the executives at these companies could put an end to that trend, particularly when one considers that, on the basis of earnings estimates for the next 12 months, only financials and energy now sport a lower price-to-earnings multiple than technology's 12.5. Furthermore, relative to the five- and 10-year P/E multiple averages, Technology is cheaper than all other sectors.