Source: The Canadian Press

Earnings will set the tone for trading on stock markets next week with most of the major economic reports for January out of the way.

“The big reports that we’re going to get in January are behind us,” said John Johnston, chief strategist, The Harbour Group at RBC Dominion Securities.

“So earnings will dominate and the only (economic) number next week is the U.S. December retail sales number.”

Stock markets got off to a positive start to 2011 as indexes measuring the U.S. manufacturing and service sectors showed greater-than-expected expansion. But markets softened by Friday after the December U.S. employment report missed expectations, with job creation coming in at 103,000, way down from the 180,000 or so that markets had expected.

However, the jobless rate moved down to 9.4% from 9.8% and revisions showed that 71,000 more jobs were created in October and November than originally thought.

Losses were slight as markets put the best face on the data.

“The key thing for investors is that in the second half of last year we saw a nice pickup, nice underlying job growth in the private sector,” added Johnston.

“And when we incorporate likely upward revisions again to the November and December numbers in the report that comes out a month from now, you’re probably going to see an acceleration in that trend.”

As usual, aluminum giant Alcoa Inc., viewed as a bellwether for the resource sector, kicks off the quarterly reporting season in the U.S. on Monday.

The company’s stock was under pressure late last week after Citigroup analyst Brian Yu cut the firm to “hold” from a “buy,” as it was approaching his stock-price target of US$17. Alcoa shares had advanced almost 15% in the past month.

Yu also trimmed his fourth quarter profit estimate for Alcoa to 17 cents a share from 19 cents due to the weak U.S. dollar and rising input costs.

Investors will also take in earnings from heavyweights in the tech and banking sectors.

Chip company Intel Inc. reports Thursday while J.P.Morgan Chase releases its latest earnings on Friday.

“I suspect the fourth quarter will be good and I’m hoping to see some further underlying pickup on the revenue side, which would be kind of more a sign of economic growth,” said Johnston.

“The (latest) survey I have seen, dated early December, has about 25% growth for fourth-quarter earnings. I’m sure those estimates are higher now.”

Typically, the Canadian earnings season lags the U.S. reports by about three weeks so this coming week is light for domestic companies.

However, Corus Entertainment (TSX:CJR.B) hands in results Tuesday while Shaw Communications (TSX:SJR.B), Astral Media Inc. (TSX:ACM.A), Cogeco Inc. (TSX:CGO) and its subsidiary Cogeco Cable Inc. (TSX:CCA) report on Thursday.

Calgary-based Talisman Energy Inc. (TSX:TLM) also will discuss its outlook for 2011 on Tuesday.

The U.S. retail sales data for December will be released at the end of the week.

“It can often move the market (and) you can get some big revisions,” observed Johnston.

Analysts expect the results will be skewed by severe storms that pounded the U.S. Northeast late in the month.

“You had some pretty severe stuff and people weren’t able to travel,” said Johnston, adding that the retail picture looks positive for this year.

“With a temporary payroll tax cut, there should be more money in the hands of consumers this year and with the job picture improving gradually, you have an environment that consumer spending is going to do OK even in an environment where Americans are paying down their debt. “

Economists expect that U.S. retail sales rose 0.8% during December and ahead 0.7% excluding autos.