Get ready for a tricky earnings season

The jobs report on Friday made no one happy because it clearly showed the domestic economy has slowed down.

Now come the earnings reports for the second quarter, and they're likely to test investor patience big time. Europe is starting to hurt results -- just as economists have been warning for months.

If there's any good news to expect over the next few weeks, it will be decent profits from Apple (AAPL) and maybe some stocks related to, dare we say it, housing.

This week features Alcoa (AA), Yum! Brands (YUM) and banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC). The economic reports include Monday's report on consumer credit, the minutes from the June Federal Reserve meeting and the June Producer Price Index report.

The reports will come after a week where the Dow Jones industrials ($INDU) fell 0.8%. The Standard & Poor's 500 Index ($INX) dropped 0.6%, and the Nasdaq Composite Index ($COMPX) managed a small gain.

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The Nasdaq-100 Index ($COMPX) finished 1% higher, thanks to a 19.6% gain for Netflix (NFLX), a 12.5% increase for Green Mountain Coffee Roasters (GMCR) and a 3.8% increase for Apple, which finished the week above $600 for the first time since the end of April.

It was a downer of a jobs report
And, of course, there was the jobs report that suggested payroll employment rose only a seasonally adjusted 80,000 in June, and April and May weren't much better.

Seasonal adjustments smooth out the usual events like the end of a school year when faculty and other staff in schools, colleges and universities leave for the summer. Without them, July would be a month everyone dreaded. But the adjustments for June took a raw gain of 391,000 and turned it into 80,000. (Yes, that means the economy may be a touch better than you hear.)

Still, the report was a downer for investors around the world, and stocks tumbled. The Dow was off 194 points before the usual speculation that the Federal Reserve would step in and buy up billions of dollars of government bonds to stimulate the economy.

Maybe the Fed will. Maybe it won't. But the speculation and bargain-hunting trimmed the Dow's loss to 124 points.

But the worries about the domestic economy and how slowdowns in Europe will affect the domestic economy won't go away over the weekend.

Alcoa and JPMorgan are the key reports, but listen to Wells Fargo
The earnings season begins after Monday's close when aluminum giant Alcoa reports its second-quarter results. What will be more important than the earnings themselves will be the guidance.

The company is expected to report 6 cents a share in earnings, down from 32 cents a year ago. Revenue is seen falling 11.4% from a year ago to $5.83 billion. Aluminum is used in cars, planes, new buildings and the like. The market has been glutted with the supply from China, and prices have fallen.

And the big question is how the widening recession in Europe is affecting Alcoa's results -- if the answer is badly, then the next question is when a rebound may come. The stock fell slightly on the week, but it tumbled 12.7% in the second quarter.

Yum! Brands, the owner of Taco Bell, KFC, Pizza Hut and other chains, is closely watched for what it says about its fast-growing business in China. China is a puzzle because it apparently is suffering through a miserable real-estate bubble, and expectations are that growth will slide substantially. China is 45% of Yum's business.

JPMorgan Chase is going to have a lot to say about that disastrous trade announced in May that may cut quarterly profit by $4 billion, maybe more. The trade was a complex series of buy-and-sell moves involving credit default swaps and other derivatives that went wrong because Europe didn't fall apart this winter.

Analysts see earnings of 79 cents a share for the quarter, compared with $1.27 a share a year ago. The estimates have come down because of the trading debacle. At the end of April analysts were projecting $1.24 a share in earnings.

Wells Fargo is seen delivering good earnings, 81 cents a share, up 16% from a year ago. It's a huge bank and the nation's largest mortgage lender. One in three mortgage loans are now originated through a Wells Fargo office.

It has modified some 772,000 mortgages as of May 31, and so far, the company says, borrowers are paying on time.

There are concerns about the business getting too big. But the company has insisted it has the experience to handle the risk. So far, investors agree; the stock is up 19.9%, compared with JPMorgan's 2% gain.

One other earnings report to watch: Marriott International (MAR). The hotel operator is expected to report 42 cents a share in earnings, up from 37 cents a year ago, with revenue off slightly to $2.8 billion. Marriott has a big international presence, and so far, investors don't seem worried. The guidance and analyst call will confirm whether investors are right.

The stock is up 35% this year but appears to have peaked right around $40.

Markets for the week
			7/6/2012			6/29/2012			% chg.			YTD chg.
Dow Industrials			12,772.47			12,880.09			-0.84%			4.54%
S&P 500			1,354.68			1,362.16			-0.55%			7.72%
Nasdaq			2,937.33			2,935.05			0.08%			12.75%
Russell 2000			807.14			798.49			1.08%			8.94%
Crude oil			$84.45			$84.96			-0.60%			-14.55%
(per barrel)			0.00			0.00			0.00%			0.00%
U.S. Dollar Index			83.56			81.75			2.21%			3.77%
10-yr. Treasury			1.54%			1.66%			-6.93%			-17.48%
Gold			$1,578.90			1,604.20			-1.58%			0.77%

Fed minutes are the big economic report
In quantity, it's a light week for economic reports.

But the Fed's minutes from its June 19-20 meeting will be perused carefully for signals on when the Fed might organize a new program of quantitative easing. The divisions within the Fed and its members on whether to make a move at all have been quite strong. The minutes may shed light on how inflexible the opponents are for any more easing.

The most important reports after the Fed meeting include its own report on consumer credit. A gain in nonsecured credit (aka credit cards) would suggest more economic confidence than recent data have indicated.

Also due are reports on oil and natural gas inventories (Wednesday and Thursday, respectively), initial job claims on Thursday and the University of Michigan Consumer Sentiment Index.

Lastly is the Labor Department's Producer Price Index. This should show falling energy prices, but it also shows the first signs of a new round of food inflation from the drought in the Midwest and South.

Outside the United States, a few economic reports could move markets. These would include reports on industrial production in France, Italy and Britain on Tuesday; the Bank of Japan's interest-rate announcement on Wednesday.

The reports with the biggest potential impact on markets: China's reports on gross domestic product and industrial production, both on Thursday.