Bank economists are holding their collective breath as earnings season goes into full swing. “So far this earnings season, a small majority of firms have surprised us, on the upside,” say the economists at RBC Financial Group.

“The sheer volume of reports and the concentration of big names coming out this week will make or break the Market’s assessment of whether or not better than expected economic performance in recent months is showing up in earnings reports in relation to lofty valuations.”

RBC says that it may yet be too early to tell whether high valuations are justified. “U.S. markets are nonetheless likely to be highly agitated and volatile over much of this week. All of this will likely swamp the impact of the advance GDP release for the first quarter this coming Friday, not least of which because it is best treated as a rough early guide to economic growth that can be subject to large revisions.”

Canada’s provincial economic accounts were released this morning, but RBC economist are predicting little impact. “No market impact is in the cards, but they provide an assessment of provincial growth trends for 2001. Alberta was the growth leader once again (+2.9%), but a telltale sign of last year1s overall weakening in the Canadian economy had Alberta posting half of its 2000 growth rate. Saskatchewan was the only provincial economy to contract last year, down -1.9% over 2000 thanks to the nasty combination of a prolonged drought and its impact upon farm incomes, and the second straight year of outright population decline.”