JUST as the mood was getting positively giddy on Wall Street, what with the Dow Jones Industrials sitting tall atop the 10,000 mark for the first time in a year, investors were reminded on Friday that the stock market's extreme sensitivity to earnings results in these early days of economic recovery could derail the bullish case for buying stocks just as easily as it can support it.

The parade of estimate-beating earnings from major companies such as Alcoa, Intel and, most importantly, JPMorgan, Goldman Sachs and Citigroup last week helped boost investors' appetite for stocks despite their already lofty gains of the last six months, to say nothing of the previous week, sending investors on a buying spree that sent the major US stock market indexes to their highs for the year and brought out the 'Dow 10,000' party hats on the floor of the New York Stock Exchange.

That parade was sidetracked at least for a day on Friday by disappointing reports from Bank of America, General Electric (GE) and IBM, whose displeasing earnings reports made it clear that a stellar profit-reporting quarter for the companies that make up the S&P 500 is by no means a foregone conclusion.

'The strong reaction to the disappointing numbers from Bank of America and GE just shows you how important Wall Street considers earnings right now. Investors are becoming less willing to accept 'less bad' and will make both individual companies and the entire market pay if we don't get the solid pick-up in revenues that they are now expecting,' said Joe Battipaglia, market strategist at Stifel Niclous.

That tight focus on earnings is in all likelihood a positive sign for stock-market bulls, if the majority of companies continue to post earnings results on the course set thus far for third-quarter profit-reporting season. Through Oct 16, a whopping 79 per cent of the 61 companies in the S&P 500 Index that have reported earnings for the third quarter thus far have topped analysts' consensus expectations, while only 10 per cent have reported earnings below analyst expectations, according to earnings tracking firm Thomson Reuters I/B/E/S.

That's a result that is not only well above typical quarters, when about 60 per cent of companies beat estimates and more than 20 per cent 'miss', but it also puts the third quarter ahead of even the sterling 73 per cent positive earnings surprises registered in the second quarter.

'More than just turning in strong bottom-line numbers, companies are producing the top-line growth investors are looking for,' said John Butters, senior equity research analyst at Thomson Reuters. Sixty-one per cent of the companies reporting thus far have beaten Wall Street analysts' revenue expectations.

'In order for stocks to continue to climb from here, investors will need to see more of the same they got last week: Real evidence of sales and revenue growth, and I think it's likely they get it,' said James Awad, managing director at Zephyr Management.

But by no means will it be all good news from these corporate results, Mr Awad warned. 'And with stocks having run up another 10 per cent the last few weeks, the market is vulnerable to not just misses, but even to cases like GE and IBM where they beat on earnings per share, but fell short on revenues or sales. I think the next two weeks are a roller-coaster ride, though one that ends higher,' he forecast.

On Friday, stocks faltered after four days of gains. The blue chip index dropped 67 points, or 0.7 per cent, to 9,995, dipping below the 10,000 mark it reached on Wednesday for the first time since October 2008. The S&P 500 index lost eight points, or 0.8 per cent, to 1,087, and the Nasdaq Composite slumped by 16 points, or 0.8 per cent, to 2,156.

For the week, the Dow still rose 1.3 per cent, the S&P 500 gained 1.5 per cent and the Nasdaq advanced 0.8 per cent .

The coming week is a critical one, as major companies from all sectors of the market are due to report third-quarter earnings in what analysts say is a crucial juncture for the stock market. It won't be all about earnings, noted traders, who are watching the dollar as it continues to weaken, and are also keeping a wary eye on spiking oil prices, which moved sharply higher in the past week and are beginning to make some investors nervous as it marches to US$80 per barrel.

The economic calendar is relatively light amid the heavy dose of earnings reports, but the September housing starts report and the producer price index tomorrow, the Fed's Beige Book of leading economic indicators on Wednesday, and September existing-homes sales on Friday will all get some attention.

Fed chairman Ben Bernanke is slated to speak today at the San Francisco Fed's Asia Economic Policy Conference, and again on Friday.

In the end, this week will be all about the earnings reports, and there are plenty of them for investors to sink their teeth into. This week's earnings-report calendar includes 13 of the Dow's 30 companies. Today's busy schedule of reports features Apple and Texas Instruments, and also includes BB&T, Boston Scientific, Gannett and Hasbro.

The Dow components are in focus tomorrow, with many of them, including Caterpillar, Coca-Cola, DuPont, Pfizer and United Technologies, scheduled to announce their earnings before the opening bell.

The roster of tomorrow's reporting companies also includes Bank of New York Mellon, Black Rock, UnitedHealth Group, Lockheed Martin and UAL. Yahoo! and Seagate Technology are due to report after the close of trading.

Wednesday is a key day for banks and pharmaceuticals, with Wells Fargo, Morgan Stanley and US Bancorp due up, along with Eli Lilly and Amgen. The day also features Dow component Boeing, Altria and Northrop Grumman.

On Thursday, it's back to the Dow again, with earnings releases scheduled for 3M, American Express AT&T, McDonald's, Merck and Travelers Companies.

Besides the Dow companies, Thursday features Amazon.com, Broadcom, Delta Air Lines, Dow Chemical, UPS and Schering-Plough. Friday's line-up is headlined by Microsoft, with Honeywell, Schlumberger and Whirpool also due up.