NEW YORK (Los Angeles Times) -- With corporate earnings season set to hit full stride this week, the stock market will be paying far more attention to what companies say about the quarters ahead than to the one that just ended.

Investors have long known that second-quarter financial reports will be dreary. Overall profits for the biggest U.S. companies are expected to be down more than one-third from a year earlier -- the eighth consecutive quarterly drop. In hard-hit sectors, including financial services and raw materials, earnings could be off by more than half.
But Wall Street is more interested in what companies divulge about their prospects for the rest of 2009 -- whether executives forecast their businesses improving and the recession lifting.
“This earnings season is of such crucial importance,” said Dan Greenhaus, market analyst at Miller Tabak & Co. in New York. “So much attention, more so than even usual, is being paid to it.”
As bad as corporate America's bottom line has been lately, the results would have been even worse without aggressive cost cutting -- something that can't last indefinitely, said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
The torrid spring rally in stocks was premised on the notion that the economy would improve in this year's second half. Most economic indicators have pointed to a gradual easing of the downturn. But the market has been growing anxious.
Stocks have slumped in the last month as investors have worried that the economy isn't mending as quickly as they had hoped.
The Dow Jones industrial average fell for a fourth consecutive week last week following a recent report showing an unexpected drop in consumer confidence last month and retailers reporting disappointing June sales.
Wall Street now is looking for evidence that inventories are fully depleted and that companies are boosting production -- even modestly -- to satisfy increasing demand, he said.