NEW YORK (Reuters) – January has turned out strong for equities with just two trading days to go. If you're afraid to miss the ride, there's still time to jump in. You just might want to wear a neck brace.

The new year lured buyers into growth-related sectors, the ones that were more beaten down last year. The economy is getting better, but not dramatically. Earnings are beating expectations, but at a lower rate than in recent quarters. Nothing too bad is coming out of Europe's debt crisis – and nothing good, either – at least not yet.

"No one item is a major positive, but collectively, it's been enough to tilt it towards net buying," said John Schlitz, chief market technician at Instinet in New York.

Still, relatively weak volume and a six-month high hit this week make some doubt that the gains are sustainable.

But then there's the golden cross.

Many market skeptics take notice when this technical indicator, a holy grail of sorts for many technicians, shows up on the horizon.

As early as Monday, the rising 50-day moving average of the S&P 500 could tick above its rising 200-day moving average. This occurrence – known as a golden cross – means the medium-term momentum is increasingly bullish. You have a good chance of making money in the next six months if you put it to work in large-cap stocks.

In the last 50 years, according to data compiled by Birinyi Associates, a golden cross on the S&P 500 has

augured further gains six months ahead in eight out of 10 times. The average gain has been 6.6 percent.

That means the benchmark is on solid footing to not only hold onto the 14 percent advance over the last nine weeks, but to flirt with 1,400, a level it hasn't hit since mid-2008.

The gains, as expected, would not be in a straight line. But any weakness could be used by long-term investors as buying opportunities.

"The cross is an intermediate bullish event," Schlitz said. "You have to interpret it as constructive, but I caution people to take a bullish stance, if they have a short-term horizon ."

GREECE, U.S. PAYROLLS AND MOMENTUM

Less than halfway into the earnings season and with Greek debt talks over the weekend, payrolls data next week and the S&P 500 near its highest since July, there's plenty of room for something to go wrong. If that happens, the market could easily give back some of its recent advance.

But the benchmark's recent rally and momentum shift allow for a pullback before the technical picture deteriorates.

"We bounced off 1,325, which is resistance. We're testing 1,310, which should be support. We are stuck in that range," said Ken Polcari, managing director at ICAP Equities in New York.

"If over the weekend, Greece comes out with another big nothing, then you will see further weakness next week," he said. "A 1 (percent) or 2 percent pullback isn't out of the question or out of line."

On Friday, the S&P 500 (.INX) and the Nasdaq Composite (.IXIC) closed their fourth consecutive week of gains, while the Dow Jones industrial average (.DJI) dipped and capped three weeks of gains. For the day, the Dow dropped 74.17 points, or 0.58 percent, to close at 12,660.46. The S&P 500 fell 2.10 points, or 0.16 percent, to 1,316.33. But the Nasdaq gained 11.27 points, or 0.40 percent, to end at 2,816.55.

For the week, the Dow slipped 0.47 percent, while the S&P 500 inched up 0.07 percent and the Nasdaq jumped 1.07 percent.

A DATA-PACKED EARNINGS WEEK

Next week is filled with heavy-hitting data on the housing, manufacturing and employment sectors.

Personal income and consumption on Monday will be followed by the S&P/Case-Shiller home prices index, consumer confidence and the Chicago PMI – all on Tuesday.

Wednesday will bring the Institute for Supply Management index on U.S. manufacturing and the first of three key readings on the labor market – namely, the ADP private-sector employment report. Jobless claims on Thursday will give way on Friday to the U.S. government's non-farm payrolls report. The forecast calls for a net gain of 150,000 jobs in January, according to economists polled by Reuters.

Another hectic earnings week will kick into gear with almost a fifth of the S&P 500 components posting quarterly results. Exxon Mobil (XOM.N), Amazon (AMZN.O), UPS (UPS.N), Pfizer (PFE.N), Kellogg (K.N) and MasterCard (MA.N) are among the names most likely to grab the headlines.

With almost 200 companies' reports in so far, about 59 percent have beaten earnings expectations – down from about 70 percent in recent quarters.

(Reporting by Rodrigo Campos; Additional reporting by Chuck Mikolajczak and Caroline Valetkevitch; Editing by Jan Paschal)

STOCK SLUMP: Stocks mostly fell after the government said the U.S. economy grew more slowly than expected in the last three months of 2011. The Dow Jones industrial average and the S&P 500 each fell less than 1 percent. The biggest losers were utility stocks, down 1.3 percent.

BAD WEEK: The fall in the Dow capped a down week for the blue-chip index, the first weekly loss in 2012.

THE GOOD NEWS: Nearly two stocks rose for every one that rose on the New York Stock Exchange, suggesting investors may still be bullish. And despite the drop for the day, the Dow is still up nearly 4 percent this year. The Russell 2000 index of riskier small stocks is up nearly 8 percent.

NEW YORK – The stock market closed mostly lower Friday, capping its first losing week of 2012, after the government reported that economic growth was slower at the end of last year than economists expected.

The Dow Jones industrial average spent the whole day in the red. It ended down 74 points, or 0.6 percent, at 12,660.46. The loss snapped a three-week winning streak for the Dow, which is still up 3.6 percent for the year.

The Standard & Poor’s 500 struggled above even with an hour to go in trading, but it lost the gains and finished down 2.10 points at 1,316.33. The Nasdaq composite, which has more than doubled the Dow’s gain for the year, edged up 11.27 to 2,816.55.

Economic growth for October through December came in at an annual rate of 2.8 percent. That was the fastest of 2011 but lower than the 3 percent that economists were looking for.

Utility companies led the way down with a fall of 1.3 percent. Most of the other nine industries in the S&P also fell, but only slightly, continuing a curious trading pattern this year: Trading has been calm in the past four weeks, a big change from the violent moves up and down that marked much of 2011.

Friday was the 17th day in a row of moves of less than 100 points up or down for the Dow. The last time the index had a longer period of such small moves was a 34-day stretch that started Dec. 3, 2010.

Despite the drift lower, investors displayed some bullishness.

Roughly two stocks rose for every one that fell on the New York Stock Exchange. And the Russell 2000 index of smaller stocks rose nearly 2 percent for the week. Investors tend to sell stocks in the Russell when they’re worried, not buy them, because smaller firms often don’t have much cash and other resources when times get tough.

“Risk-taking is picking up,” says Jeff Schwarte, a portfolio manager at Principal Global Equities. He says his firm has been buying small firms since late last year. “We’re still finding attractive stocks.”

Next week, investors will turn their attention to Facebook, the powerhouse social network, which appears headed for the most anticipated initial public offering of stock in years.

The Wall Street Journal, citing people familiar with the matter, said Friday that Facebook could raise as much as $10 billion in an offering that would value the company at $75 billion to $100 billion.

That would vault Facebook into the largest public companies in the world, on par with the likes of McDonald’s, Amazon.com and Visa. The Journal said Facebook could file IPO papers as early as Wednesday.

Among stocks making big moves Friday:

• Chevron fell more than 2 percent, the most of the 30 stocks in the Dow average, after its quarterly profit and revenue came in well below what analysts were expecting. Oil and natural gas production declined.

• Ford fell 4 percent after reporting disappointing earnings because of weak sales in Europe. The company said its results were also hurt by problems at parts suppliers in Thailand because of flooding there.

• Starbucks fell 1 percent after reporting late Thursday that that full-year results were likely to come in less than expectations.

• Procter & Gamble, which makes Tide, Crest and other consumer products, fell less than 1 percent after cutting its earnings outlook.

• Legg Mason dropped 5 percent after the investment management company’s earnings fell by half as clients pulled money out. Legg Mason posted earnings of 20 cents per share. Analysts expected 25 cents, according to FactSet.

NEW YORK (Reuters) – Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest U.S. publicly traded companies, is up 20 percent from its October closing low. It keeps climbing on a mixed bag of fourth-quarter earnings, improving U.S. economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index, or VIX (.VIX), a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets?

At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked what was the second major leg of the stock market's rally from bear market lows the year before.

Is this the start of the third?

FRIENDLIER FOOTING FOR STOCKS

For Andrew Garthwaite, the Credit Suisse analyst behind the firm's more bullish stance, there are big changes afoot that are creating a more benign environment for stocks.

First, the European Central Bank's long-term repo operations are succeeding in reducing stresses in the region's banking sector. This week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth straight day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by U.S. investors in the new year show the banking system is flush with cash.

The U.S. economy is looking stronger than thought, with notable movement in the long-dormant housing market, where sales of previously owned homes just rose to an 11-month high.

In China, the engine of global growth whose manufacturing sector has been showing worrying signs of slowing, policymakers have demonstrated willingness to make conditions easier by lowering banks' reserve requirements.

"As we approach our year-end target two weeks into January, we have to ask ourselves the following questions: What has changed? Will equities rally further?," Garthwaite said in a research note.

His answer to the second question was yes. Credit Suisse raised its year-end S&P 500 target to 1,400 from 1,340. Critically, however, the firm did not overweight equities, saying the risks of a more severe recession in Europe and a slowdown stateside were still there.

HEALTHY DOSE OF SKEPTICISM

For Nicholas Colas, chief market strategist at the ConvergEx Group in New York, the rally remains largely untested. More scary headlines from Europe or any signs that the global economy is deteriorating could spark a sharp reversal.

Heading into the weekend, Greece was closing in on an initial deal with private bondholders that would prevent it from tumbling into a chaotic default. Creditors faced to 70 percent of the loans they have given to Athens.

"It's a confidence-based rally with the overhang of several still meaningful events to come," Colas said. "It is all well and good to say that the Greek default is well understood, but we haven't gone through it."

Outside the United States, there are mixed signals from the global economy, too.

China's factory activity likely fell for a third successive month in January. The HSBC flash manufacturing purchasing managers index (PMI), the earliest indicator of China's industrial activity, stood below 50.

The Baltic Exchange's main sea freight index (.BADI), which tracks rates to ship dry commodities and can be a useful gauge of economic activity, fell to its lowest level in three years on Friday on a growing surplus of vessels and a slump in cargo demand.

That is at odds with the work of RBC technical analyst Robert Sluymer. He sees growing outperformance of industrial metal copper to the safe-haven bet of gold as well as an upturn in a basket of Asian currencies as a bullish sign for the economy.

The caution generated by the mismatches in the various data points is perhaps reflected in by U.S. interest rates.

The yield on the U.S. 10-year Treasury note has hovered at 2 percent or just below for the last month despite a brief spike in mid-December. That suggests bondholders are not eagerly embracing the improving economy thesis for the moment.

"There is still a lot of skepticism about recovery, about moving into risk assets, about a lot of things," Colas said.

"If you really wanted to believe this about incrementally economic certainty and expansion … I would have thought you'd expect to see the 10-year back over 2 percent."

EARNINGS, DATA AND THE FED

A blitz of earnings and economic indicators next week will provide an important gauge of the economy's health.

What's more, the Federal Reserve's policymakers will convene their first meeting of the year with a two-day session that starts on Tuesday. The Federal Open Market Committee, the Fed's rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers' interest-rate forecasts could alter expectations for rates on the margins.

Monday will start one of the two most hectic weeks of the earnings season. Marquee names due to report earnings on Monday include Texas Instruments Inc (TXN.O) and Halliburton Co (HAL.N), followed by Apple Inc (AAPL.O), DuPont (DD.N), Johnson & Johnson (JNJ.N), McDonald's Corp (MCD.N), Verizon Communications (VZ.N) and Yahoo! Inc (YHOO.O) – all on Tuesday.

Boeing (BA.N), ConocoPhillips (COP.N) and United Technologies (UTX.N) are set to release results on Wednesday. Thursday's earnings line-up includes 3M Co (MMM.N), AT&T Inc (T.N), Starbucks (SBUX.O) and Time Warner Cable Inc (TWC.N). On Friday, earnings are expected from Chevron Corp (CVX.N), Honeywell International (HON.N) and Procter & Gamble Co. (PG.N)

In the coming week, economic indicators to watch will include December pending home sales data, a key measure of the housing market, on Wednesday as well as the latest weekly claims for jobless benefits on Thursday. December durable goods orders and new home sales for December also will be released on Thursday.

The week will wrap up with the Commerce Department's first look at fourth-quarter U.S. gross domestic product and the final reading for January on consumer sentiment from Reuters and the University of Michigan.

In terms of companies beating expectations, fourth-quarter earnings season has not been as good as previous ones. Of the approximately 70 companies in the S&P 500 that have reported earnings so far, 60 percent have exceeded analysts' estimates, according to Thomson Reuters data.

In comparison, in the third quarter at this early point in the reporting cycle, 68 percent had beaten Wall Street's forecasts – well below the 78 percent in that category in the second quarter, Thomson Reuters data showed.

There have also been some high-profile misses on both revenue and earnings.

General Electric Co's (GE.N) fourth-quarter revenue fell short of Wall Street's expectations, with Europe's weakening economy and weak appliance sales the main culprits.

On the other hand, banks' earnings have served as a positive catalyst for the stock market so far. The sector has been one of the market's leaders despite mixed earnings, a sign that investors' worst fears did not materialize.

(Reporting By Edward Krudy; Editing by Jan Paschal.)

NEW YORK (Reuters) – Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.

The S&P 500, a broad measure of the market valuation of the biggest U.S. publicly traded companies, is up 20 percent from its October closing low. It keeps climbing on a mixed bag of fourth-quarter earnings, improving U.S. economic data, and easing credit conditions in Europe. It now stands at its highest level since early last August.

We have already seen what is probably the first upgrade of a target level for the index this year courtesy of Credit Suisse.

The CBOE Volatility Index, or VIX (.VIX), a measure of what investors are paying to protect themselves against the risk of losses, is at its lowest level in seven months.

So it raises the question: Is this another Jackson Hole moment for risk assets?

At the Wyoming retreat in late August 2010, Federal Reserve Chairman Ben Bernanke sparked what was the second major leg of the stock market's rally from bear market lows the year before.

Is this the start of the third?

FRIENDLIER FOOTING FOR STOCKS

For Andrew Garthwaite, the Credit Suisse analyst behind the firm's more bullish stance, there are big changes afoot that are creating a more benign environment for stocks.

First, the European Central Bank's long-term repo operations are succeeding in reducing stresses in the region's banking sector. This week, three-month dollar Libor, the cost at which European banks can borrow dollars, marked its ninth straight day of declines.

Analysts say heavy cash infusions from the European Central Bank since late last year and signs of revived willingness to lend by U.S. investors in the new year show the banking system is flush with cash.

The U.S. economy is looking stronger than thought, with notable movement in the long-dormant housing market, where sales of previously owned homes just rose to an 11-month high.

In China, the engine of global growth whose manufacturing sector has been showing worrying signs of slowing, policymakers have demonstrated willingness to make conditions easier by lowering banks' reserve requirements.

"As we approach our year-end target two weeks into January, we have to ask ourselves the following questions: What has changed? Will equities rally further?," Garthwaite said in a research note.

His answer to the second question was yes. Credit Suisse raised its year-end S&P 500 target to 1,400 from 1,340. Critically, however, the firm did not overweight equities, saying the risks of a more severe recession in Europe and a slowdown stateside were still there.

HEALTHY DOSE OF SKEPTICISM

For Nicholas Colas, chief market strategist at the ConvergEx Group in New York, the rally remains largely untested. More scary headlines from Europe or any signs that the global economy is deteriorating could spark a sharp reversal.

Heading into the weekend, Greece was closing in on an initial deal with private bondholders that would prevent it from tumbling into a chaotic default. Creditors faced to 70 percent of the loans they have given to Athens.

"It's a confidence-based rally with the overhang of several still meaningful events to come," Colas said. "It is all well and good to say that the Greek default is well understood, but we haven't gone through it."

Outside the United States, there are mixed signals from the global economy, too.

China's factory activity likely fell for a third successive month in January. The HSBC flash manufacturing purchasing managers index (PMI), the earliest indicator of China's industrial activity, stood below 50.

The Baltic Exchange's main sea freight index (.BADI), which tracks rates to ship dry commodities and can be a useful gauge of economic activity, fell to its lowest level in three years on Friday on a growing surplus of vessels and a slump in cargo demand.

That is at odds with the work of RBC technical analyst Robert Sluymer. He sees growing outperformance of industrial metal copper to the safe-haven bet of gold as well as an upturn in a basket of Asian currencies as a bullish sign for the economy.

The caution generated by the mismatches in the various data points is perhaps reflected in by U.S. interest rates.

The yield on the U.S. 10-year Treasury note has hovered at 2 percent or just below for the last month despite a brief spike in mid-December. That suggests bondholders are not eagerly embracing the improving economy thesis for the moment.

"There is still a lot of skepticism about recovery, about moving into risk assets, about a lot of things," Colas said.

"If you really wanted to believe this about incrementally economic certainty and expansion … I would have thought you'd expect to see the 10-year back over 2 percent."

EARNINGS, DATA AND THE FED

A blitz of earnings and economic indicators next week will provide an important gauge of the economy's health.

What's more, the Federal Reserve's policymakers will convene their first meeting of the year with a two-day session that starts on Tuesday. The Federal Open Market Committee, the Fed's rate-setting panel, will release its policy statement on Wednesday. No fireworks are expected, but a decision to release individual policymakers' interest-rate forecasts could alter expectations for rates on the margins.

Monday will start one of the two most hectic weeks of the earnings season. Marquee names due to report earnings on Monday include Texas Instruments Inc (TXN.O) and Halliburton Co (HAL.N), followed by Apple Inc (AAPL.O), DuPont (DD.N), Johnson & Johnson (JNJ.N), McDonald's Corp (MCD.N), Verizon Communications (VZ.N) and Yahoo! Inc (YHOO.O) – all on Tuesday.

Boeing (BA.N), ConocoPhillips (COP.N) and United Technologies (UTX.N) are set to release results on Wednesday. Thursday's earnings line-up includes 3M Co (MMM.N), AT&T Inc (T.N), Starbucks (SBUX.O) and Time Warner Cable Inc (TWC.N). On Friday, earnings are expected from Chevron Corp (CVX.N), Honeywell International (HON.N) and Procter & Gamble Co. (PG.N)

In the coming week, economic indicators to watch will include December pending home sales data, a key measure of the housing market, on Wednesday as well as the latest weekly claims for jobless benefits on Thursday. December durable goods orders and new home sales for December also will be released on Thursday.

The week will wrap up with the Commerce Department's first look at fourth-quarter U.S. gross domestic product and the final reading for January on consumer sentiment from Reuters and the University of Michigan.

In terms of companies beating expectations, fourth-quarter earnings season has not been as good as previous ones. Of the approximately 70 companies in the S&P 500 that have reported earnings so far, 60 percent have exceeded analysts' estimates, according to Thomson Reuters data.

In comparison, in the third quarter at this early point in the reporting cycle, 68 percent had beaten Wall Street's forecasts – well below the 78 percent in that category in the second quarter, Thomson Reuters data showed.

There have also been some high-profile misses on both revenue and earnings.

General Electric Co's (GE.N) fourth-quarter revenue fell short of Wall Street's expectations, with Europe's weakening economy and weak appliance sales the main culprits.

On the other hand, banks' earnings have served as a positive catalyst for the stock market so far. The sector has been one of the market's leaders despite mixed earnings, a sign that investors' worst fears did not materialize.

(Reporting By Edward Krudy; Editing by Jan Paschal)

NEW YORK (Reuters) – Stocks posted their best week since Christmas, even with a mixed finish on Friday after strong earnings from tech bellwethers IBM (IBM.N) and Intel (INTC.O) contrasted with Google's (GOOG.O) disappointing report.

The market heads into the most hectic week so far in this earnings season after a mixed start, with some worries over revenue and growth offset by sharp cost-cutting to protect the bottom line.

For the week, the Dow rose 2.4 percent and the S&P 500 gained 2 percent as investors showed some relief that earnings didn't reflect the worst elements that battered the market in the last year, especially given the problems in the euro zone that have been weighing on investor sentiment.

"For the time being, investors are pretty much taking earnings in stride. They knocked Google down this morning, but the general feeling in the marketplace is (stocks) are very undervalued at these levels, even given the marginal misses they're making in earnings," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

Indeed, investors in recent weeks have been heartened by improving economic data, even though progress has been uneven. Reflecting improved economic sentiment, the Dow Jones Transportation Average, an indicator of the economy's strength (.DJT) has gained about 2 percent in each of the last two weeks.

IBM (IBM.N) lifted the Dow a day after it offered a strong outlook and results from several big-tech names signaled they were shaking off nervousness about economic growth and boosting technology spending. IBM's stock rose 4.4 percent to $188.52.

On the flip side, Google Inc (GOOG.O) slid 8.4 percent to $585.99. The Internet search giant's quarterly profit and revenue missed expectations on declining search advertising rates.

The Dow Jones industrial average (.DJI) gained 96.50 points, or 0.76 percent, to 12,720.48 at the close. The Standard & Poor's 500 Index (.SPX) inched up just 0.88 of a point, or 0.07 percent, to 1,315.38. But the Nasdaq Composite Index (.IXIC) dipped 1.63 points, or 0.06 percent, to close at 2,786.70.

NASDAQ UP ALMOST 3 PCT FOR WEEK

For the week, the Nasdaq climbed 2.8 percent, making this its best week in seven.

General Electric Co (GE.N) was unchanged at $19.15 after the conglomerate's revenues missed consensus forecasts. Fellow Dow component American Express Co (AXP.N) fell 1.8 percent to $50.04 as it set aside more money to cover bad loans.

Intel Corp (INTC.O) rose 2.9 percent to $26.38, while Microsoft Corp (MSFT.O) advanced 5.7 percent to $29.71. Both reported results late Thursday.

Still, in what could be seen as a more bearish sign for the earnings period, 60 percent of the S&P 500 companies that have reported results so far this earnings season have beaten profit expectations, below the 68 percent that beat estimates at this point in the reporting cycle for the third quarter and well below the 78 percent that exceeded estimates in the second quarter, according to Thomson Reuters data.

That's based on results from just 14 percent of the S&P 500 companies. But strategists say it could be a sign of what's in store for the rest of this earnings season and perhaps future quarters.

During the session, investors also kept an eye on Greece, where a bond-swap deal between the cash-strapped country and its private bondholders appeared to be close, according to sources. An agreement was deemed possible heading into the weekend. Creditors could lose up to 70 percent of the loans given to the fiscally troubled nation.

Hopes are an agreement would prevent the nation from spiraling into bankruptcy and bring some stability to the debt-strained euro zone.

Volume totaled about 7 billion shares traded on the New York Stock Exchange, the NYSE Amex and the Nasdaq, above the daily average of 6.68 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of not quite 3 to 2 while on the Nasdaq, about three stocks rose for every two that fell.

(Reporting By Caroline Valetkevitch; Editing by Jan Paschal)

NEW YORK (Reuters) – Stock investors will return to a tug of war between signs of domestic strength and overseas concerns next week as a batch of critical earnings reports look to add credence to the idea the economy is improving, while credit rating downgrades in Europe will keep that region's difficulties in view.

Bank stocks will probably once again be a primary focus, as not only will European issues call the group's profit outlook into question, but many key names report results.

Equities have recently undergone a decoupling with respect to Europe's sovereign debt crisis as signs of progress in the euro zone, along with improving U.S. data, have pushed Wall Street higher on improved growth prospects. Financials have been a beneficiary of that rising tide, with Bank of America up 22 percent since the start of the year.

So far this month, the S&P 500 (.SPX) is up 2.5 percent, while the Dow (.DJI) is up 1.7 percent and the Nasdaq is up 4.1 percent.

"We're going to see more volatility in the weeks ahead with tension between earnings and Europe," said Christopher Sheldon, the Boston-based director of investment strategy at BNY Mellon Wealth Management, which oversees $171 billion globally.

"We want to see Europe resolved, but there will continue to be ups and downs, and while earnings will continue to be relatively good, we do expect slowing compared with 2011."

However, the uncertainty about Europe returned in a big way on Friday after Standard & Poor's downgraded the ratings of several euro-zone countries, including Italy, after the market closed. Talk of the downgrades spurred a selloff that erased most of the gains for the week, when the S&P rose for four straight sessions.

A downgrade could exacerbate the area's difficulties and bring concerns about how they might affect U.S. banks profits back to the forefront.

Still, market participants looking for signs of strength don't have to look far. Data has been bullish lately, including Friday's consumer sentiment reading at an eight-month high that sharply exceeded what was anticipated.

"The prospect of a downgrade has been around for a while, so despite today's reaction, everyone was aware of the potential, and I don't think it will be as impactful, especially as corporate business trends remain strong," said Hank Herrmann, chief executive of Waddell & Reed Financial Inc in Overland Park, Kansas.

HINTS OF BETTER TIMES AHEAD

Earnings reports from numerous bellwethers could reinforce the growth story. Bank of America Corp (BAC.N), General Electric Co (GE.N), Intel Corp (INTC.O), Goldman Sachs Group Inc (GS.N) and Microsoft Corp (MSFT.O) are among the names set to report.

Early reads have supported the idea that better times lie ahead. JPMorgan Chase & Co (JPM.N) said the domestic economy was strengthening even as its profit fell 23 percent, while Alcoa Inc (AA.N) rallied earlier in the week after giving a bullish outlook for the aluminum sector.

"Banks will be an important part of the story, especially with Europe in the picture, and investors will also be looking at names like GE, which have global exposure, to see what insights can be gleaned from that," said Herrman, who helps oversee $90 billion in assets.

Next week, when markets will be closed on Monday because of the Martin Luther King holiday, will also see the release of the New York Fed's January manufacturing data, December readings on inflation from both the Producer Price Index and the Consumer Price Index, as well as December housing starts.

For the week, the Dow rose 0.5 percent while the S&P 500 gained 0.9 percent and the Nasdaq added 1.4 percent.

(Wall St Week Ahead runs every Friday)

WASHINGTON – They were let back into Zuccotti Park, but kicked them out of a vacant house in Seattle. In other places, Occupy protesters are in courtrooms fighting evictions.

While the movement flickers, the protest in the nation’s capital is persisting into the winter, buoyed by demonstrators who camp out on federal land in a city with a tolerant, even celebrated, history of civil disobedience. Washington even has two Occupy sites within blocks of each other.

“We didn’t initiate it — that was with Occupy Wall Street — but we’re carrying it on. And you know what? So are they,” said Joseph Bieber, who came to Washington after the Occupy site in Philadelphia was shut down.

Demonstrators like Bieber have found a new home in D.C., where organizers expect a protest Tuesday on Capitol Hill — dubbed Occupy Congress — to draw thousands of people and bring renewed attention to the movement in Washington and to their overall opposition to corporate greed and income inequality.

“We can’t just protest on Wall Street We must also protest Congress directly if we want to have real change,” said Mario Lozada, a protester from Philadelphia who plans to be in Washington next week for the protest.

Though the D.C. protesters have provoked the ire of a Republican congressman, they have been tolerated — with some growing signs of exasperation — by a mayor who forged his political identity as an activist and by a National Park Service that says it’s determined to protect First Amendment rights. Though they’ve dwindled considerably in numbers, the demonstrators, and a few homeless people, have remained despite occasionally freezing temperatures, the holidays and, more recently, rat infestations and health department inspections.

It’s unclear how long they’ll remain or how the situation will end.

Several dozen tents occupy Freedom Plaza and McPherson Square, both just blocks from the White House, though it’s hard to tell how many people are there on any given night. The group at McPherson Square was inspired by the protesters in New York, while the Freedom Plaza site — a generally older crowd — had a war protest that morphed into an Occupy encampment.

In New York, protesters have been holding meetings at various indoor spaces after tents and sleeping bags were banned from Zuccotti Park in mid-November. A police raid evicted protesters who had been sleeping there since Sept. 17.

On Tuesday, metal barricades that had surrounded Zuccotti Park were removed, and about 300 demonstrators “re-Occupied” the park. Most left, though, as the night wore on.

Ned Merrill was one of a handful of protesters around a day later.

“We need to have a symbolic presence,” said Merrill, 52, a blanket draped over his shoulder.

In Seattle, sheriff’s deputies evicted seven people early Wednesday from a vacant house that had been taken over as part of the movement. Deputies said they appeared to be squatters who did not have a political motive. However, the house is covered in graffiti, including “no banks, no landlords” and “capitalism is exploitation.”

Other encampments remain, including in Portland, Me., and in Pittsburgh, where attorneys for the protesters argued in court Tuesday against eviction.

The D.C. demonstrators have been permitted to stay despite a string of recent clashes that might have triggered eviction in cities less accustomed to large-scale protests.

More than 30 protesters were arrested last month in McPherson Square after refusing to disassemble a makeshift wooden building they had erected in the middle of the night as a shed for the approaching winter. The building was torn down and removed.

Days later, a demonstration shut down K Street — home to the nation’s largest lobbying firms — and ended with more than 60 arrests. A U.S. Park Police officer responding to a report of a fight inside a McPherson Square tent was kicked so hard in the crotch last month that he fell to the ground vomiting, court papers said. And on Wednesday, police found a 13-month-old baby alone in a McPherson Square tent and arrested a man who came forward later claiming to be the child’s father.

But unlike other encampments on city or private property, the protesters are in federal parks — and enjoying special First Amendment protections as a result.

The demonstrators at Freedom Plaza have received a permit to stay through the end of next month — some have already moved their demonstration indoors — and under National Park Service regulations, the McPherson Square protestors won’t need a permit if the crowd remains under 500 people.

“There’s a very strong presumption and deference given to First Amendment free speech and, more specifically, political free speech,” said National Park Service spokesman Bill Line.

There are signs of wariness.

District of Columbia Mayor Vincent Gray, who was arrested in April while demonstrating in support of D.C. autonomy, initially supported the protesters, but has asked for federal funds to reimburse the city for Occupy-related costs. He said law-breaking won’t be tolerated and that the protesters’ cause is appearing muddled.

“It certainly has the patience wearing thin of those in the city and, to the extent that they’ve been able to express what their cause is, I don’t think it helps their cause,” Gray said.

U.S. Rep. Darrell Issa, a California Republican and chairman of the Committee on Government Oversight and Reform, has demanded answers from the Interior Department about why the protesters have been permitted to stay so long. He says they have damaged or destroyed McPherson Square upgrades, including new grass and refurbishments, paid for with stimulus funds.

The National Park Service spokesman says Issa’s request is under review, but he followed up with a letter this week accusing the agency of being unresponsive.

There are health concerns too.

A growing rat concentration at the sites caused McPherson Square protesters to shut down their kitchen and alarmed health officials, who lack jurisdiction but are consulting with other agencies, said department spokesman Najma Roberts. She said the department had no immediate plans to recommend eviction unless there was an outbreak of an illness or an advancing snowstorm.

Organizers of Tuesday’s Occupy Congress event expect thousands of demonstrators.

“Any dwindling that happened over the holidays is reversing,” said Lozada, the Philadelphia-based protester. “If we can successfully pull off a massive protest in the middle of January, I just see nothing but further growth happening in the spring.”

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Associated Press writer Karen Matthews in New York contributed to this report.

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Follow Tucker on Twitter at http://www.twitter.com/etuckerAP

*By Rodrigo Campos

NEW YORK (Reuters) – Stocks rose in the first week of 2012, even though news that the U.S. jobless rate neared a three-year low did not whet interest in equities on Friday.

The U.S. market came into the new year revisiting familiar themes, with signs the U.S. economic recovery was gathering speed taking some of the focus off of lingering concerns about the euro zone's debt crisis.

"The news coming out of Europe was negative all week and we're going to finish up, and I think that's a real good performance in light of the background," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

The Dow rose 1.2 percent, the S&P gained 1.6 percent and the Nasdaq added 2.7 percent for the week, with most gains coming from cyclical sectors tied to growth.

Among the week's largest gainers the KBW bank index (.BKX) jumped 5.7 percent, in contrast with the 2.7 percent fall in the top gauge of European bank stocks (.SX7P).

Data this week painted a rosier picture on the labor, housing and retail markets, auguring a recovery in growth in 2012. The government's report on non-farm payroll jobs for December earlier on Friday was the latest in a list of economic numbers that were stronger than anticipated.

On Friday the Dow and S&P edged lower. Worries about higher bond yields in Italy and Spain, as well as potential oil supply disruptions in the Middle East, were cited as giving investors a pause.

Next week brings bond sales by Italy and Spain. Caution ahead of those auctions sent Italian benchmark yields above 7 percent while yields in Spain's 10-year paper also edged up to end the week at 5.758 percent.

Worries on Wall Street over rising borrowing costs in some euro zone countries kept buying in check on Thursday and Friday.

"There were a lot of fireworks earlier in the week and perhaps there's a little bit of nervousness going into the weekend with Europe and Iran as concerns," said Jim Russell, regional investment manager for U.S. Bank Wealth Management in Cincinnati. "It feels like a tired market."

On Friday, the Dow Jones industrial average (.DJI) dropped 55.78 points, or 0.45 percent, to 12,359.92. The S&P 500 Index (.INX) fell 3.25 points, or 0.25 percent, to 1,277.81. The Nasdaq Composite (.IXIC) gained 4.36 points, or 0.16 percent, to 2,674.22.

Volume remained weak, with about 6.3 billion shares exchanging hands on the New York Stock Exchange, the Nasdaq and Amex, compared with last year's daily average of 7.84 billion shares.

Investor angst receded and the CBOE volatility index (.VIX) fell almost 12 percent this week.

Best Buy Co (BBY.N) shares rose 3.3 percent to $24.22 as the company stood by its profit outlook for the financial year.

Amazon (AMZN.O) and Netflix (NFLX.O) helped boost both the Nasdaq Composite and the discretionaries sector of the S&P 500 (.GSPD). Amazon added 2.8 percent to $182.61 while Netflix gained 8.8 percent to $86.29 and was up nearly 25 percent this week.

Alcoa Inc (AA.N) fell 2.1 percent to $9.16 after the largest U.S. aluminum producer said it will cut global smelting capacity amid a steep drop in metal prices. The Dow component is expected by many Wall Street analysts to post a fourth-quarter loss next Monday.

Roughly eight stocks fell for every seven that rose on the NYSE, while on the Nasdaq slightly more than six issues declined for every five posting gains.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)