Traders work on the floor at the New York Stock Exchange. Brendan McDermid | Reuters

Stocks are likely to remain hostage to developments involving the coronavirus in the week ahead, and even so, the market could continue to hit new highs. Economists have been reducing China's growth outlook for the quarter, with some seeing little or no growth and then a bounce back in the high single digits next quarter. The U.S. economy is not expected to take a big hit, but the question for the stock market is how will corporate earnings be impacted. "It does feel as though the market thinks the worst is over," said Ed Keon, chief investment strategist at QMA. "The pace of change is slowing. None of us really know, and there's a lot of skepticism, including in Washington that they can't believe what's coming out of China."

Keon believes the market looks poised to head higher and it is trading as if the virus will not make a big dent in the economy or profits. "The market didn't really get much of a drawback, compared to SARS or other episodes. There's no doubt he world will suffer a hit over the first and second quarter and maybe longer," he said. Companies reporting earnings in the coming week include Walmart Tuesday; ViacomCBS Thursday, and Deere on Friday. Hyatt Hotels reports Wednesday, and Norwegian Cruise Lines reports Thursday. Economic releases include Tuesday's Empire State and Thursday's Philadelphia Fed manufacturing surveys, as well as Markit PMI on Friday. There are also a parade of Fed speakers, including Vice Chairman Richard Clarida, Fed Governor Lael Brainard and Dallas Fed President Robert Kaplan.

Profit warnings

Some companies are already raising warnings, like Cisco which said orders were down and that the forward-looking numbers were not factoring in potential supply chain disruptions. Nvidia said it would take a $100 million hit from the virus, but its revenue forecast was still above expectations. Under Armour said its sales will be impacted by the virus, when it projected disappointing revenue growth this week. Estee Lauder said its sales will be hit by a decline in travel-related luxury sales. "This is going to start to show up because it will affect supply chains" and exporters, said Keon. "It will have a negative impact. But at the moment, at least, it doesn't look like it will be a huge deal to companies in the U.S...It will be a factor. The question is, is it a lasting factor that will hurt them through the year, or is it a quarter or two and then gets back to normal. None of us know."

About 64,000 people, mostly in China, have been infected and about 1,400 have died from the virus. Barry Knapp, Ironsides Macroeconomics director of research, said he sees only a minor impact on U.S. corporate earnings. "There will be some hits in some of the consumer companies that have reasonably big businesses in China. I see this as being a fairly small effect on the U.S.," Knapp said. He said the disruption to the supply chain should not be nearly as bad as it was when Japan was hit by a tsunami and earthquake in 2011. He expects stocks to continue to move higher, ending the year higher, but he says the market could run into turbulence in the spring when the Fed discusses cutting back its purchases of Treasury bills. For now, the Fed asset purchases, a strong U.S. consumer and the positive benefit to business spending from the trade deal should help drive stocks higher. But by April or May, the Fed could become a negative. "Could we go up another 3 or 4% between now and then? Sure, we could," he said. Knapp said since World War II, market corrections fanned by Fed policy changes have resulted in brief pullbacks, averaging about 8%. He said the market should then rebound. "It trades in a range for a quarter or two and then resumes its uptrend," he said, noting the uptrend could coincide with the presidential election this year.

Resilient market

Even with the negative news and doubts about the virus, analysts say the market has the momentum to move higher. But Robert Sluymer, technical analyst with Fundstrat, said the market may stay range bound for awhile until there's more clarity on the virus. "I had a 3,340 to 3,360 [on the S&P 500] as the point where the market starts to consolidate, and we're there," said Sluymer. "I don't have a year-end target but I think it's higher. I think we're in a sloppy range. I think it's range bound." But Sluymer also said he thinks the market is just pausing. "Stocks are consolidating above support. The market is acting incredibly resilient and it still looks like an intermediate term pause, a consolidation," he said. Keon said he's looking for more gains though the market will continue to be swung by virus-related headlines. "I think it's going to work its way higher, not at the pace you saw last year. But that's the way we have our portfolios positioned — the market will work its way higher this year," he said.

Week ahead calendar