NEW YORK: Expectations for a recovery in the economy and corporate profits have pushed stocks to multi-month highs.

But those hopes will be put to the test this week as investors brace for fresh economic data and the start of the corporate "confession" season.

As the quarter draws to a close, clues to the health of third-quarter earnings will likely begin to trickle out of corporate America, as companies scramble to adjust expectations ahead of the flood of quarterly earnings reports.

With many investors betting the end of the year will bring better economic times and the sharp run-up in stock prices since the spring, the market may be vulnerable to any bad news.

"The economic news is getting better, but the corporate earnings outlook is not as optimistic. So, as we hear from companies, I think investors may get a little skittish," said John Forelli, portfolio manager at Independence Investments LLC.

The latest economic reports have been patchy, at best, and so investors will be eyeing a batch of reports due out this week - including durable goods figures, weekly jobless claims and home sales data - for more hints about the strength of the rebound.

The Standard & Poor's 500 index has surged about 18 per cent so far this year, while the blue-chip Dow Jones industrial average has climbed about 16 per cent, and the technology-packed NASDAQ Composite Index has jumped a hefty 42 per cent.

The S&P 500 ended last week with a gain of 1.7 per cent and the Dow finished up 1.8 per cent after both touched 15-month highs earlier in the week.

The NASDAQ ended the week up 2.7 per cent after posting its highest close since March 2002 last Thursday.

The investment banking sector will be in the spotlight this week, with three banking heavyweights - Goldman Sachs Group, Lehman Brothers Inc and Morgan Stanley - set to issue their quarterly scorecards.

Expectations for solid results from the sector's marquee names were hoisted late last week after Bear Stearns Cos Inc reported strength in its mortgage bond business and soothed worries that banks would take a hit in that area as interest rates climbed.

Agencies via Xinhua

(Business Weekly 09/23/2003 page7)