Stocks tread water ahead of earnings season

By Nathaniel Popper

Jan. 9, 2012 12 AM PT

Reporting from New York —

Stocks have been in a holding pattern ahead of a week that may provide important clues about American corporate earnings and Europe’s ability to deal with its debt problems.

The Dow Jones industrial average opened almost unchanged after French President Nicholas Sarkozy and German Chancellor Angela Merkel met today in Berlin.

During a news conference, the two committed to defending the euro, which has been falling in value in recent weeks as investors worry that the currency will not be able to withstand the continent’s economic problems. The euro has risen in value against the dollar in trading today, after three days of declines.

Sarkozy said candidly during the joint news conference: “I won’t tell you that we have resolved the problems.”

The more important summit comes later in the week when the officials of the European Central Bank meet to consider whether to drop its interest rate or step up its bond-buying program to help struggling banks.

In the United States, investors will get their first glimpses this week of how major American companies did in fourth quarter of 2011. On Monday afternoon, Alcoa is expected to be the first to announce its numbers; the aluminum company is expected to show a small profit or small loss.

Corporate earnings have been one of the few bright spots of the U.S. economic recovery over the last two years. For the most recent quarter, however, analysts are projecting that profit growth will have slowed down.

U.S. stock markets closed Friday down slightly, but the Dow was up 1.2% for the first week of 2012. That provides a hopeful signal for investors who view the first week of January as a good predictor for the year ahead.

The Dow was down 5.7 points or 0.05% to 12,354.21 in early trading today. The Standard & Poor’s 500 index was up 0.49 points or 0.04% to 1,278.30.

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