“If the stock market is to keep rising this year, investors will have to keep their expectations under control,” writes E.S. Browning in today’s Wall Street Journal.

“This bull market has been sustained for 15 months now by a drumbeat of steadily improving earnings news. Like children opening presents at birthday parties, investors have required a succession of better and better reports to keep them impressed and to keep stock prices moving up. For the most part, they have gotten that steadily improving news.”

“But now, as the latest earnings-reporting season kicks into high gear, investors’ expectations are high, and they are harder to impress — something companies such as Intel learned last week. Whether stocks can continue to race ahead this year will depend on whether investors get news that doesn’t quite measure up, as was the case with Intel last week, or news that is better than hoped, as was the case with International Business Machines.”

“A year ago, this wasn’t a problem. Any good earnings news was cause for joy. But after last year’s 25% rise in the Dow Jones Industrial Average (and 50% gain in the Nasdaq Composite Index), expectations are higher, stocks are expensive, and investors are getting harder to please.”

” ‘It’s all about expectations,’ says Todd Leone, head of listed trading at brokerage firm SG Cowen in New York. A lot of traders, including Mr. Leone, are warning that technology stocks in particular could face some volatility now, because they rose so much last year.”

“Troubling signs are cropping up. Investors have seen the return of the ‘whisper number’ — the buzz about better-than-expected results that circulates among stock traders before earnings reports.”

“Intel, for example, more than doubled earnings in the fourth quarter, compared with a year earlier, on record quarterly revenue. But the whisper expectation was for more. Intel’s forecast for the first quarter, typically a slow period for tech business, was deemed insufficiently dazzling, so the stock fell despite the strong earnings.”

“Some highfliers, such as Juniper Networks, beat the whisper numbers and kept rising. Some of last year’s laggard stocks did well, too.”

“The stock of IBM, for example, raced forward last week even though its earnings in many people’s eyes were less dazzling than Intel’s. One big difference is that IBM had risen less than 20% last year, while Intel had more than doubled and Yahoo almost tripled. So IBM doesn’t suffer from the same inflated expectations as Intel or Yahoo — or Juniper.”

“It may be too soon to conclude that the Intels and Yahoos have given up market leadership. Many tech stocks looked wobbly in the fall when they last reported earnings. That problem proved short-lived as corporate performance improved, and the stocks recovered.”

“And last week, the major indexes continued to rise despite the slump by stocks such as Intel (which happens to be a component of the Dow industrials, the Nasdaq composite and the Standard & Poor’s 500-stock index). The Dow industrials gained 1.4% on the week, their eighth consecutive week of gains. The index finished at 10600.51, a 22-month high. The S&P 500 rose 1.6% for the week, hitting a 21-month high. The Nasdaq composite, dominated by technology stocks, jumped 2.6%, finishing the week at a 30-month high.”

“The real problems could come later this year, as expectations get frothier, says Chuck Hill, director of research at Thomson First Call in Boston, which tracks corporate earnings. ‘We have been worried about this for a while,’ Mr. Hill says.”