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Dow component Alcoa will launch the earnings season after the closing bell on Monday in what is expected to be another solid round of corporate results.

The aluminum producer is expected to report quarterly earnings of 27 cents per share on revenue of $6.07 billion, according to Thomson Reuters estimates.

Some top financial names are also expected to report next week, including JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N). Google Inc (GOOG.O) is also due to report.

"Earnings are what the market is all about. Earnings are critical in here, guidance is critical in here, the conference calls are critical in here," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"In terms of earnings and sectors, you basically want to be with those people who have the ability to raise prices or are participating in the commodity price increases," he said. "And you really don't want to be in those people who have the input costs increases and are going to see their margins squeezed by rising commodity prices.

Market analysts have found encouragement for a strong earnings season from the relatively light amount of company preannouncements, leading to the belief that surging commodity costs have yet to compress margins and impact corporate profits.

The Reuters/Jefferies CRB index rose 8 percent in the first quarter and is up 2.6 percent so far in April, and hit its highest level since September 2008.

The S&P 500 .SPX has recouped all of the losses suffered in the wake of the Japanese earthquake on March 11 but has been unable to convincingly muscle past the 1,333.58 level, a technical resistance point representing double the 12-year low hit on March 9, 2009.

The benchmark index was relatively flat for the week, down 0.3 percent, as the prospect of a government shutdown kept the rally at bay.

Investors braced for a possible government shutdown as the White House and Congress scrambled on Friday to break a budget impasse ahead of a midnight deadline. But analysts said that while a U.S. government shutdown, which would idle hundreds of thousands of federal workers, would be short-term negative, the market had managed to rally even ahead of the looming deadline.

"There is an intellectual concern of what it means to shut down the government and there is the uncertainty of how long does the government get shut down and how much of a (hit) do we take on GDP growth," said Phil Orlando, chief equity market strategist, at Federated Investors, in New York.

Many traders circled short-term puts on the SPDR S&P 500 Trust (SPY.P) as the prospect of a shutdown loomed.

Shares of the exchange-traded fund, also called the Spyders, fell 0.3 percent to $132.86 in afternoon trading on Friday. The fund's Weekly $133 puts traded more than 96,000 contracts, surpassing their open interest.

Frederic Ruffy, a strategist at WhatsTrading.com, said the positions likely reflected hedges against weakness due to fears of a shutdown.

The decision, which allows Google to expand into the online travel market, comes as new CEO Larry Page revamped the company's management structure in a bid to accelerate efforts in social networking, mobile and other key businesses.

The Justice Department blessed Google's $700 million deal with the ticketing software company. Google promised to license the software for five years, to continue to upgrade it, and to establish firewalls to protect ITA clients' intellectual property.

The ITA buy is part of an acquisition and hiring spree as Google aims to ensure its online services stay on top as Internet surfers go mobile and turn to services like the wildly popular Facebook.

Now, U.S. antitrust regulators will turn to the question of whether to open a formal antitrust probe into allegations that Google, the world's No. 1 Internet search engine, manipulates search results, a source told Reuters on Friday.

The Federal Trade Commission and Justice Department are both contemplating an investigation but there has been no decision made on which agency may take it up.

There has been a series of complaints made to the agencies -- many from Google rivals that specialize in searches such as price comparison websites -- that Google has made them difficult to find.

A key lawmaker has been critical of Google, and remained so on Friday. "We continue to scrutinize broader questions about the fairness of Google's search engine, and whether it preferences its own products and services to the detriment of competitors," said Sen. Herb Kohl, chairman of the Judiciary Committee's antitrust subcommittee.

The European Commission took up an antitrust probe after complaints from three small companies, one of them owned by Microsoft Corp. Microsoft filed a formal complaint against Google with the commission in Brussels last month.

Microsoft charged that Google hurt competition by "walling off" content on its YouTube site, so other search engines cannot display accurate results. It also said that Google made it hard for Microsoft's mobile phone software to show videos from YouTube, among other charges.

The Justice Department was also aware that Google had an incentive to tweak search results to favor its businesses and was keeping an eye on the issue, said a Justice Department official who requested anonymity.

"There were a variety of complaints about bias in search," the official said. "So, while we're aware of those complaints we did not think they were relevant to this (ITA) transaction."

Analysts said they believed that Google's power in search meant the company had to step carefully, and that a broader probe was a big worry.

"A lot of these new markets that they enter rely heavily on search to drive traffic," said Yun Kim, an analyst with Gleacher & Co. "That's what the government is worried about."

CONDITIONS PLACED ON GOOGLE BUY OF ITA

In comments that reflect the majority view at the Fed -- including Chairman Ben Bernanke -- Atlanta Fed President Dennis Lockhart said it was unlikely that recent spikes in commodity costs will lead to runaway increases in prices.

"With longer-term inflation expectations remaining stable -- and predicting that commodity price growth will stabilize -- my view is that current monetary policy is appropriate," Lockhart told the Knoxville Economics Club in Tennessee.

Richard Fisher, president of the Dallas Fed and a self-proclaimed inflation hawk, took a divergent view, saying that prolonged easy monetary policy could compound what might otherwise be transitory inflationary pressures.

Warning of "unpleasant" U.S. inflation data ahead, Fisher called on the U.S. central bank to stop "spiking the punch bowl" with more accommodative policy and said the Fed may even need to end its $600 billion bond-buying program early.

"No amount of further accommodation by the Fed would be wise," he told the Society of American Business Editors and Writers in Dallas. "Indeed, it may well be that we should consider curtailing what remains of QE2," he said, referring to the Fed's second round of quantitative easing, which is slated to end in June.

The prices of oil and other commodities have spiked, sparking inflation fears, hit by both strong demand from rapidly growing emerging economies and fears of supply disruptions amid a wave of pro-democracy protests in the Middle East and North Africa.

U.S. crude has been trading at the highest prices since September 2008, rising above $110 a barrel, and the average price of gasoline stands around $3.70 a gallon.

But Lockhart said that while costly fuel is putting a dent in household budgets, the overall effect on inflation is likely to be muted.

In part that's because high unemployment -- at 8.8 percent in March -- is keeping wage-driven inflation under wraps, he said.

Conceding that point as "reasonable," Fisher -- who holds a voting seat this year on the Fed's policy-setting panel -- nevertheless said the Fed should not compound the risk of fueling inflation by adding more liquidity.

Several other hawkish Fed policy makers have pushed noisily in recent weeks for the central bank to heed signs of incipient inflation and to begin to think about raising rates, as the European Central Bank did on Thursday for the first time since 2008.

But Bernanke and other core members of the Fed's policy-setting Federal Open Market Committee have said the recovery is too fragile to withdraw support yet.

Given the still-fragile nature of the recovery, Lockhart said Fed officials should avoid discussing their exit strategy in too great detail, lest they send the wrong signal to the public and financial markets about the direction of interest rates.

In response to the deepest recession in generations, the Fed slashed interest rates to near zero and also committed to buy more than $2 trillion in government bonds and mortgage debt.

U.S. gross domestic product expanded at an annualized rate of 3.1 percent the fourth quarter, a rebound which is less robust than normally seen after a steep downturn.

(Reporting by Pedro Nicolaci da Costa in Knoxville Tenn., Chris Baltimore in Dallas, Ann Saphir in Chicago; Editing by Leslie Adler)

A second source said that a deal was "looking likely."

Google, the world's No. 1 Internet search engine, said in July it would buy ITA Software for $700 million in cash. The announcement sparked concerns that travel websites such as Kayak and TripAdvisor could be deprived of ITA's software.

ITA's QPX is used by leading airlines and travel distributors like Alaska Airlines, American Airlines, Microsoft's Bing and Hotwire, among others.

Kayak.com, for example, asked for assurances that Google would extend its software licenses when they expire, that the software would be upgraded, and that a firewall was placed around the companies' proprietary software -- which ITA can now see -- to protect their intellectual property.

One condition from the Justice Department would touch on licensing of ITA products to Google rivals, said a third source, who spoke privately to protect relationships with the agency.

The ITA buy is part of an acquisition and recruiting spree as Google aims to ensure its online products remain popular as surfers go mobile and turn to new services like the wildly popular Facebook.

But it was not immediately clear if any consent decree would touch on how Google treats potential competitors in search results.

Foundem, a British price comparison website, is one of several companies that have accused Google of manipulating results so that Foundem and other rival websites show up lower in search results. Users overwhelmingly tend to click on the first few results.

Google could not be reached for comment on this story but has said previously that since it does not compete against ITA Software, the deal would not affect competition in the online travel industry and, thus, is legal.

The Federal Trade Commission and Justice Department are reportedly contemplating investigating Google on the issue of search fairness, but any probe would be moot if the issue were resolved as a part of the antitrust assessment of the Google/ITA deal.

European regulators are also looking into Google's search practices.

(Additional reporting by Jeremy Pelofsky; Editing by Dave Zimmerman and Steve Orlofsky)

* The Commerce Department releases wholesale inventories for February at 1400 GMT. Economists in a Reuters survey forecast inventories to rise 1.0 percent, a repeat of the January increase.

* Facing a midnight deadline, the White House and Congress were working furiously on Friday to break a U.S. budget deadlock and avoid a government shutdown, after President Barack Obama and congressional leaders failed to reach a deal in late-night talks.

* At 1430 GMT, Economic Cycle Research Institute (ECRI) releases its weekly index of economic activity for April 1. In the prior week the index read 130.0.

* Goldman Sachs (GS.N) has bought a 12 percent stake worth more than $900 million in China's Taikang Life Insurance Co Ltd, giving the Wall Street giant a foothold into the world's biggest insurance market.

* Resource-related stocks will be in focus after copper rose more than 1 percent on hopes of improving demand for raw materials and crude prices rose 1 percent to a fresh 32-month high on supply cuts in Libya. Gold hit a record high and silver rose to its strongest in 31 years.

* Euro zone finance ministers will discuss Portugal's bailout plea on Friday, including how much it needs and what reforms it could apply in return, but no firm decisions are likely yet, euro zone sources said.

* The FTSEurofirst 300 .FTEU3 index of top European shares rose 0.6 percent as the European Central Bank's decision to raise interest rates on Thursday helped fuel optimism over the health of the euro zone economy.

* Japan's Nikkei average .N225 jumped 1.9 percent to close on Friday at the highest level since the March 11 earthquake as a 24 percent gain in Tokyo Electric Power Co (9501.T), the operator of a stricken nuclear plant, became a factor in encouraging active short-covering.

* On Thursday, the Dow Jones industrial average .DJI was down 17.26 points, or 0.14 percent, at 12,409.49. The Standard & Poor's 500 Index .SPX was down 2.03 points, or 0.15 percent, at 1,333.51. The Nasdaq Composite Index .IXIC was down 3.68 points, or 0.13 percent, at 2,796.14.

(Reporting by Atul Prakash; Editing by Hans Peters)

"I'm not prepared to express 'wild optimism,' but I think we are further along today than we were yesterday," Obama told reporters late on Thursday following a meeting with House Speaker John Boehner and Senate Majority Leader Harry Reid.

Without an agreement on spending for the next six months, money to operate the government runs out at midnight on Friday (0400 GMT on Saturday) and agencies such as the Internal Revenue Service would have to begin a partial shutdown.

A government closing would continue until Republicans and Democrats either resolve their differences or pass a temporary funding bill.

Vital services such as national defense, law enforcement, emergency medical care and air traffic control would continue.

Obama, who has held four face-to-face meetings with the Republican and Democratic congressional leaders over three days, said a few "difficult issues" still had to be resolved. He did not provide details.

Repeatedly over the past few days, optimism over prospects for a deal have been dashed, prompting the two sides to accuse each other of acting to shut down the government for the first time since the mid-1990s.

But Boehner, the top Republican in the House of Representatives, and Reid, a Democrat, managed to issue a joint statement after their latest meeting with Obama.

"We have narrowed the issues, however, we have not yet reached an agreement. We will continue to work through the night to attempt to resolve our remaining differences," they said.

Obama's Democrats have been blaming the impasse on a Republican push for policy provisions that would block public funding of birth control and stymie environmental protection efforts.

Republicans say they need to lock in the biggest spending cuts possible now to begin bringing down budget deficits that some economists say have reached dangerous levels -- a projected $1.4 trillion just this year.

The high-stakes negotiations have aimed to cut spending in the range of $33 billion to $40 billion for the rest of this year in an overall federal budget of about $3.7 trillion.

A government shutdown would idle hundreds of thousands of workers, potentially put a crimp on the U.S. economic recovery, and carry political risks for both Democrats and Republicans who would be seen by voters as failing to make compromises.

Boehner is under pressure to stand firm in the talks from Tea Party conservatives who helped fuel last year's big Republican election gains with promises of deep spending cuts and reduced government.

He likely could ram a spending-cut deal through the House without the support of the dozens of Tea Party freshmen. In doing so he would rely on support from a coalition of more moderate Republicans and moderate Democrats.

But no House Speaker likes to abandon any wing of his or her political party in a legislative fight. It's also unclear whether Tea Party activists would try to remove Boehner from power sometime down the road if he got on their wrong side.

(Additional reporting by Patricia Zengerle, Kim Dixon, Donna Smith, David Alexander, Andy Sullivan, Thomas Ferraro and David Morgan; editing by Mohammad Zargham)