CNBC Week Ahead: Stocks in Tug of War—but Trend Looks Up

Stocks enter the week ahead locked in an intense tug-of-war between investors who hope the worst is over and those who expect more bad economic news to derail the market's rally.

Traders, for weeks now, have been expecting a pull back after the market's near 30 percent run. But stocks continue to hold gains despite the past week's slight decline.

"There's so much cash on the sidelines, it needs to find an entry point. Any time we have a dip, buyers are coming in," said BlackRock Vice Chairman Robert Doll.

In the coming week, another wave of earnings will be big news for markets, and there is also a Fed meeting, first quarter GDP and monthly auto sales. The focus will also be on banks, as investors await the May 4 release of government stress test results on 19 institutions that received government funds.

"The economic data stream will be be busier, but it will certainly take a back seat to earnings," said Art Hogan, managing director with Jefferies. "We've had a pretty significant run. I think the market is proving that we do continue to have a pattern of news that is more good than bad, and I think that continues next week and we do continue to trend higher."

Earnings have not been the negative catalyst some had feared this quarter. "We had about a third of the S&P 500 so far, and the beat to miss ratio is higher than average. About 70 percent have met or beat estimates," Hogan said. In the fourth quarter, only 30 percent met or beat estimates.

Stocks broke a six-week winning streak and were slightly lower in the past week. The S&P 500 fell 3 points for the week or 0.39 percent to 866 but it is still 28 percent higher than its March low. The Dow was off 0.7 percent at 8076, but the Nasdaq rose 21 points or 1.3 percent to 1694.

The S&P is down 4.1 percent for the year, but the tech-driven Nasdaq is positive, up 7.4 percent for the year and at its highest level since early November. Materials stocks were the best performers, up 2.2 percent for the week, followed by tech shares, which rose nearly 2 percent. The worst performers among S&P sectors were health care, down 3.7 percent and consumer staples, down 2.8 percent. more...