“He is going to scold yet again on the fiscal cliff,” said Diane Swonk, chief economist at Mesirow Financial. “He has to mention it. It’s already suppressing growth right now.”

Besides Bernanke, there is a busy economic calendar, starting with Monday’s retail sales and including consumer inflation and several housing reports.

There are earnings expected from dozens of major companies such as Coca-Cola, American Express, Bank of America, Microsoft, IBM and General Electric. (GE is the minority shareholder of NBCUniversal.)

MAJOR EARNINGS NEXT WEEK

KO

77.28

0.64

+0.84%

6,461,444

AXP

57.93

1.00

+1.76%

4,825,672

BAC

7.82

0.34

+4.55%

168,677,206

MSFT

29.39

0.76

+2.65%

38,604,689

IBM

186.01

2.92

+1.59%

3,822,236

GE

19.77

0.33

+1.7%

31,986,222

• Track CNBC's Earnings Calendar Here
• Slideshow: The Earnings Hall of Shame

While earnings news may or may not confirm the slowing economy, it is Bernanke’s testimony that could help set expectations for the rest of the summer.

The Fed has made it clear it has come to no agreement on further easing, and Bernanke and others have kept quantitative easing, or QE, as an option if the economy or financial conditions deteriorate.

Still, just the idea of another round of Fed asset purchases has provided support for the stock market, and there is already speculation that Bernanke will discuss it during his Jackson Hole speech in late August, as he did two summers ago. (Read More: Stocks Might Be 50% Lower Without Fed)

Bernanke has previously warned that if Congress fails to act, the economy could hit a so-called "fiscal cliff," estimated to be as much as a $720 billion hit to the economy from the combined expiration of tax breaks Dec. 31 and automatic spending cuts that will occur starting Jan. 1.

But the fact that there seems to be no will in Congress to act until after the November election is making some investors nervous and economists say it is causing business leaders to hold off on spending and hiring.

• Read More: Dollar Could Fall Off Fiscal Cliff Into Euro Abyss

“He will talk about Europe as a risk. He’s going to talk about the weak underlying situation. And that QE3 is on the table,” Swonk said.

But, she said the fiscal cliff could dominate. “The headline will be ‘you guys need to do no harm here.’”

Swonk said if the post-election, lame duck Congress fails to address the fiscal situation, pushing it off until March 31, it could trigger another downgrade of the U.S. credit rating.

 

 

“Measurably to confidence,Europe is number one, but the fiscal cliff is number two. We have real economic issues here,” she said.

Mark Luschini, chief investment strategist at Janney Montgomery, said the stock market is not yet fully focusing on the fiscal cliff, with Europe and earnings its immediate concerns.

“I think what’s baked in at the moment is the possibility we face it, not the probability we face it,” he said. “I think a probability outcome for the fiscal cliff would not allow equities prices to be trading at today’s prices…you’re talking about a haircut to GDP growth of plus or minus 5 percent.”

Analysts said investors mostly believe Congress would not allow the trigger of automatic spending cuts on defense and federal programs. The cuts are onerous and were negotiated as part of the debt ceiling pact last summer. 

Yet, Sam Stovall, chief equity strategist at S&P Capital IQ said he could not totally rule it out. “People are a little concerned about it…They might actually be stupid enough to do it, and try to blame the other aisle,” he said.

Rhetoric from Washington picked up in the past week as President Obama said the tax cuts should not be extended for Americans earning more than $250,000, a position opposed by Republicans.

“The play (for Bernanke) is he can’t do this alone, and there could be more monetary policy to come but quantitative easing is at a point of diminishing returns,” said Art Hogan of Lazard Capital Partners. “What they’re trying to do is keep the lending rate below the rate of inflation, and you’ve got that. To what end does more quantitative easing, except for rallying the stock market, do to stimulate the economy?”

Swonk said the Fed may be considering other moves. “I don’t really understand why the street has jumped the gun so much on QE3. They’ve made it clear they’ve got limited ammunition, and they have to time it right. I think they may use it by September It doesn’t mean it has to take the form it’s already taken,” she said. Fed officials have said they could consider purchasing mortgage securities, while the past two QE programs have targeted Treasury securities.

“I think Bernanke basically has one silver bullet left, and as a result he doesn’t want to shoot it off too soon. I think the bullet would have a better effect as a reactive bullet than a proactive bullet,” Stovall said.

Earnings Central

Stocks rallied Friday after JPMorgan [JPM  36.07    2.03  (+5.96%)   ] reportedbetter-than-expected profitsand revealed a $5.8 billion loss from derivatives trading in its London office. JP docked its former employees’ pay,  clawing back two year’s worth. Despite the reputational damage and government interest in the losses, it managed to give the market a sense that the worst is behind it.

The Dow jumped to 12,777, snapping a six-day losing streak. The S&P 500 ended the week at 1,356, while the Nasdaq closed at 2,908.

Financial stocks rallied after the report form JPMorgan and also Wells Fargo[WFC  33.91    1.06  (+3.23%)   ], which beat expectations on the back of its mortgage business. Financial stocks were up more than 2 percent Friday, ending the week with a gain.

Stovall said expectations have been coming down for the second quarter, and as of now, earnings for the S&P 500 are expected to show a decline of 2.25 percent. But he points out that in the last five quarters, earnings averaged a 4 percent improvement over expectations.

Most sectors are expected to show declines this quarter, the worst of which is expected to be energy, down 20 percent. “Only three sectors are expected to show an increase—consumer staples, industrials and technology,” he said.

Hogan said there might some good news in the numbers, outside of the companies heavily impacted by Europe. “On the margin, expectations for earnings next week—and we’ll get 80 S&P companies reporting—are so low that there’s a real chance for some upside surprises,” he said.

On Wednesday, CNBC’s Delivering Alpha conference takes place in New York. Treasury Secretary Timothy Geithner is the key note speaker at the conference, which examines global investing opportunities with major investors. Former Treasury Secretarys Hank Paulson and Robert Rubin will also participate.

nice job BigBear for setting up this weekly thread....