Earnings stumbles could awaken bears

Earnings could make for a bumpy ride in U.S. stocks next week if more key companies undershoot expectations, possibly causing a spike in volatility.

Disappointments from Alcoa (NYSE:AA - News) , Google (NasdaqGS:GOOG - News) and others in the first week of earnings have dampened some of the enthusiasm about results, ensuring that eyes will be glued to reports in the coming days.

"We've all been lulled to sleep here lately. This earnings season will hopefully be a telling point to try to give people conviction to go one way or the other," said Mike Gibbs, managing director and chief market strategist at Morgan Keegan in Memphis.

"There are potential land mines out there that could create a little bit more volatile trading," he said.

The CBOE Volatility Index, a barometer of investor anxiety known as the VIX (Chicago Options:^VIX - News), briefly fell on Friday to its lowest level since July 2007. It ended at 15.32, well below its mid-March high of 31.28.

Others agreed that further disappointments could stir up volatility.

"If earnings disappoint greatly from any of the major players next week in the financials or technical sector, this could be a catalyst for a return of volatility into the market," said Joe Kinahan, TD Ameritrade chief derivatives strategist, in Chicago.

For the week, the Dow Jones industrial average (DJI:^DJI - News) slipped 0.3 percent, while the Standard & Poor's 500 Index (^SPX - News) and the Nasdaq Composite Index (Nasdaq:^IXIC - News) each shed 0.6 percent.

http://finance.yahoo.com/news/Earnings-stumbles-could-rb-3302848480.html?x=0&.v=2

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