What to watch

Profit reports key to market’s next move

The next test for the rebounding stock market is third-quarter earnings season.

Stocks could continue their recent rebound if results top low expectations and CEOs can reassure investors that they continue to make money at a decent clip, despite slowing growth in China, tumult in emerging markets, turbulence in financial markets and uncertainty about the Federal Reserve’s plans on raising interest rates.

Heading into the earnings reporting season, the bar has been set low. Analysts forecast profit for Standard & Poor’s 500 companies to contract 4.5% — and if that negative profit growth holds, it would mark the first time earn- ings have contracted in a quarter since 2009 during the financial crisis, according to Thomson Reuters.

The energy sector is the big drag this quarter once again, with profits seen plunging nearly 65% from the same period a year ago.

“Market attention now turns to corporate earnings,” says John Stoltzfus, chief investment strategist at Oppenheimer.

A key sector is financials, as it often is said any market advance needs a good showing from the nation’s banking sector. JP Morgan Chase kicks off bank earnings Tuesday, followed by Bank of America and Wells Fargo on Wednesday and Citigroup on Thursday.

The financial sector has been a laggard in the recent rally. Though the broad Standard & Poor’s 500 stock index is up 7%, the financial sector is up 4.3%.