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Analysts expect fourth-quarter earnings to showcase Apple's powerful one-two punch of the iPhone and the iPad, although some still question whether, with a plethora of rival products set to hit store shelves, Wall Street can justify Apple's stratospheric valuation.

The shares of the second largest corporation in the S&P 500 jumped more than 4 percent on Friday as anticipation mounted ahead of Monday's report.

As has been the case for many quarters, iPhone growth will be the main driver, even as anticipation builds over an iPhone early next year tailor-made for the network of top mobile carrier Verizon Wireless Inc -- a move that would instantly boost Apple's consumer reach in the United States.

Apple's shares stand at a record high after breaking through the $300 mark for the first time this week. The company has so far proved resilient in the face of weak U.S. consumer spending. At the same time, gross margins should get a boost from falling component costs.

Although there is little doubt September quarter numbers will be strong, investors have come to demand an out-sized performance, so the bar is raised every three months.

Analysts say a big upside surprise may be tougher to achieve this time around given constraints in iPad and iPhone supply.

But the iPad is playing a bigger role in Apple's business and could be a wild card this quarter, and Wall Street is eager to gauge consumer enthusiasm for the tablet. While demand has been strong, manufacturing bottlenecks have limited production.

Apple trades at nearly 21 times forward earnings, a healthy premium over smartphone and PC rivals.

(For a table comparing Apple's valuations and estimates against its rivals, click here: link.reuters.com/ruc78p)

A SECOND LEG

Investors are looking at the iPad as the second pillar of growth along with the iPhone, which has keyed Apple's surge over the past few years, but is facing stiff competition from smartphones based on Google's Android software.

"It's going to be a combination this time of their two most important products, iPhone and iPad, and both are going to do very well," said Gleacher & Co analyst Brian Marshall, who expects Apple to pass Exxon Mobil Corp as the largest company in the S&P 500 in short order.

Apple launched the iPad in April and sold 3.3 million units in the June quarter. Analysts expect sales of 4.5 million to 5 million units for September.

Susquehanna Financial analyst Jeff Fidacaro noted that because investor expectations are so high, there may be some disappointment if the iPad number is below 5 million.

U.S. Federal Reserve Chairman Ben Bernanke signaled the central bank would likely ease policy further in a speech in Boston on Friday morning, and investors expect the Fed will launch a new asset-buying spree as soon as next month.

The overall consumer price index rose 0.1 percent in September and the core index, which excludes volatile food and energy prices, remained unchanged for the second straight month, data released by the Labor Department showed on Friday.

"If anything that may make them more likely to embark on asset purchases, and that may mean they're going to be more aggressive with those asset purchases," said Richard Bryant, head of treasury trading at MF Global Securities in New York.

U.S. stock index futures rose and prices of U.S. Treasury securities fell following the release of the data, while the dollar initially slipped further.

DEFLATION RISK

A prolonged drop in prices would likely lead consumers to put off purchases and businesses to cancel investments, compounding economic woes.

Investors expect the Fed could pump billions of dollars into the economy, in a second major round of "quantitative easing", to support the recovery.

"(This) gives the Fed room to do whatever it wants to do," said Jim Awad, managing director at Zephyr Management in New York.

At the same time, sales at U.S. retail sales rose by a stronger-than-expected 0.6 percent in September, lifted by big-ticket items including autos, electronics and appliances, Commerce Department figures showed.

The reading suggested consumption may have been a bit stronger than economists had anticipated in the third quarter.

Meanwhile, a gauge of manufacturing in New York State jumped in October, lifted by improvements in new orders and shipments, the New York Federal Reserve said in a report.

The New York Fed's "Empire State" general business conditions index rose to 15.73 in October from 4.14 in September.

"Retail sales and the Empire State index were strong, suggesting the economy is indeed improving. But inflation remains low and troubling," said Hugh Johnson, chief investment officer at Hugh Johnson Advisors in Albany, New York.

The U.S. economy slowed sharply in the second quarter, weighed down by a hefty trade gap and dwindling fiscal stimulus.

The weak economy has kept the pressure on President Obama's Democratic party, which looks likely to lose control of the U.S. House of Representatives in November 2 elections.

(Additional reporting by Caroline Valetkevitch, Ryan Vlastelica, Emily Flitter, Wanfeng Zhou and Rodrigo Campos in New York and by the New York Economics and Markets Desk; Writing by Jason Lange)

Federal Reserve Chairman Ben Bernanke was scheduled to speak at 1215 GMT at the Federal Reserve Bank of Boston "Revisiting Monetary Policy in a Low-Inflation Environment" conference.

At 1230 GMT (8:30 a.m. EDT), the Commerce Department will release September retail sales numbers. Economists expected a 0.4 percent increase, a repeat of the August rise. Excluding automobiles, sales were forecast to rise 0.4 percent, compared with a 0.6 percent increase in August.

Google eased fears that big spending would erode margins as its results blew past Wall Street targets, and the web search leader revealed for the first time the strength of its fledgling mobile and online display ad businesses. Frankfurt-listed shares in Google were up 9 percent.

Major U.S. companies reporting results on Friday include General Electric and Mattel.

The Labor Department releases at 1230 GMT the September consumer price index (CPI). Economists in a Reuters survey expect CPI to rise 0.2 percent compared with a 0.3 percent increase in August.

Wal-Mart, the world's largest retailer, is competing with Russian group X5 to buy up-for-sale grocer Kopeika, business daily Vedomosti reported on Friday. * Thomson Reuters/University of Michigan Surveys of Consumers release preliminary October consumer sentiment index at 1355 GMT. Economists in a Reuters survey expect a reading of 69.0 compared with 68.2 in the final September report.

Other macroeconomic releases on Friday include U.S. business inventories for August at 1400 GMT and Economic Cycle Research Institute's weekly index of economic activity for October 8.

European shares turned negative in morning trade, with miners and oil majors lower after commodity prices edged down. The pan-European FTSEurofirst 300 index slipped 0.1 percent.

Japan's Nikkei average fell 0.9 percent on Friday, hurt by broad profit-taking after a rally on Thursday and as financial stocks tracked their Wall Street peers lower on worries about a widening U.S. foreclosure crisis.

The Dow Jones industrial average dipped 1.51 points, or 0.01 percent, to 11,094.57 on Thursday. The Standard & Poor's 500 dropped 4.29 points, or 0.36 percent, to 1,173.81. The Nasdaq Composite shed 5.85 points, or 0.24 percent, to 2,435.38.

(Reporting by Atul Prakash; Editing by Michael Shields)