Earnings to lift stocks

By Cal Mankowski

NEW YORK (Reuters) - Stocks should complete the last leg of their recovery from February's big sell-off next week as Friday's surprisingly strong job growth data calms investor concerns about the outlook for the economy and consumer spending.

The next question is whether U.S. equities can then take the step and recapture the record levels from two months ago. That will hinge on the corporate profits picture, which begins taking shape next week as the first of the market's bellwethers deliver first-quarter earnings reports.

"Unless we see a more significant drop in profit margins than the market might be expecting, the trend will probably be higher," said Brandon Thomas, chief investment officer at Envestnet Asset Management in Chicago.

While the number of scheduled earnings releases is not large, investors will see results from Dow industrials components Alcoa Inc. (AA.N: Quote, Profile, Research, Stock Buzz) and General Electric Co. (GE.N: Quote, Profile, Research, Stock Buzz), both seen as important indicators of the condition of the global economy.

Alcoa, the world's largest aluminum producer, reports on Tuesday, and GE, whose operations range from heavy industry to media and international finance, will announce results on Friday.

Stock markets had a holiday Friday ahead of the Easter weekend, but in their absence the U.S. Labor Department reported 180,000 nonfarm jobs were created in March, far more than expected, and job-creation figures from January and February were revised upward. The unemployment rate fell to 4.4 percent from 4.5.

The news sent bond yields soaring to seven-week highs, and Fed fund futures showed a diminished likelihood of a Federal Reserve benchmark interest rate cut any time soon.

"The figures inflicted a sharp blow to the view that the economy deteriorated in the aftermath of the February 27 stock market adjustment and emergence of subprime (mortgage sector) woes," said Michael Englund, chief economist at Action Economics in Boulder, Colorado.