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Disappointments from Alcoa (AA.N) , Google (GOOG.O) and others in the first week of earnings have dampened some of the enthusiasm about results, ensuring that eyes will be glued to reports in the coming days.

These include top technology and financial company results, including Yahoo (YHOO.O), Intel (INTC.O), IBM (IBM.N), Texas Instruments (TXN.N), Goldman Sachs (GS.N) and Citigroup (C.N). This blitz of numbers will come during a holiday-shortened week. U.S. financial markets will be closed on April 22nd in observance of Good Friday.

Market watchers also will be anxious to hear how much tech companies may have been affected by the disaster in Japan.

"We've all been lulled to sleep here lately. This earnings season will hopefully be a telling point to try to give people conviction to go one way or the other," said Mike Gibbs, managing director and chief market strategist at Morgan Keegan in Memphis.

"There are potential land mines out there that could create a little bit more volatile trading," he said.

The CBOE Volatility Index, a barometer of investor anxiety known as the VIX .VIX, briefly fell on Friday to its lowest level since July 2007. It ended at 15.32, well below its mid-March high of 31.28.

Others agreed that further disappointments could stir up volatility.

"If earnings disappoint greatly from any of the major players next week in the financials or technical sector, this could be a catalyst for a return of volatility into the market," said Joe Kinahan, TD Ameritrade chief derivatives strategist, in Chicago.

For the week, the Dow Jones industrial average .DJI slipped 0.3 percent, while the Standard & Poor's 500 Index .SPX and the Nasdaq Composite Index .IXIC each shed 0.6 percent.

BEWARE OF "DUAL HEADWINDS"

Whether the earnings season will be strong enough to propel the market higher is the question on investors' minds.

The Standard & Poor's 500 index .SPX is up 25.8 percent since the start of September, roughly when the recent rally began.

But sharp gains in the price of oil and other commodities, especially in the first quarter, have fueled worries about the impact on consumers and companies. Moreover, Japan's massive earthquake and tsunami, which triggered a nuclear crisis, have prompted other concerns.

Equity strategists at JPMorgan Chase cut their U.S. earnings estimates by $1 -- but for second-quarter and full-year results -- because of these "dual headwinds."

The S&P 500 fell for a second straight week, and some in the market pointed to strong resistance building around 1,340. The daily chart shows a bearish double top near that level.

In another worrisome sign, investors again favored defensive stocks, which tend to do better in times of waning growth. Utilities .GSPU and healthcare .GSPA were the S&P 500's top-performing sectors.

Disappointing results from Google and Infosys weighed on technology shares, while financials were pressured by Bank of America's results.

"Even while some of the earnings (were not) exactly what the market hoped for, the macro economic data was actually pretty good this morning," said Paul Zemsky, head of asset allocation at ING in New York.

Consumer price inflation remained contained in March while industrial production increased. A separate survey showed improvement in consumer sentiment in April.

Investors have been concerned that higher energy and food costs would slow consumer spending, while at the same time force the Federal Reserve to tighten its very loose monetary policy earlier that anticipated.

The Dow Jones industrial average .DJI gained 56.68 points, or 0.46 percent, to 12,341.83. The Standard & Poor's 500 Index .SPX rose 5.16 points, or 0.39 percent, to 1,319.68. The Nasdaq Composite Index .IXIC added 4.43 points, or 0.16 percent, to 2,764.65.

For the week, the Dow fell 0.3 percent while the S&P 500 and the Nasdaq each lost 0.6 percent.

The CBOE Volatility Index or VIX .VIX dropped 5.8 percent to close at 15.82, its lowest level since July 2007.

The first week of earnings has been a mixed bag, with some bellwether companies unable to excite the market despite some cases of stronger-than-expected profits. Investors have been disappointed with companies' revenues or outlooks.

"If this theme of discouraging reports continues, I'll become more bearish on the season," said Randall Warren, chief investment officer of Warren Financial Service in Exton, Pennsylvania. "But right now, it could go either way, and it looks like the market wants to go up."

Bank of America Corp (BAC.N) reported a steeper-than-expected decline of 37.5 percent in profit and named a new chief financial officer. The stock fell 2.4 percent to $12.82 and was the Dow's bigger percentage loser.

Google Inc (GOOG.O) unnerved investors late on Thursday with a large jump in first-quarter spending. The Internet company also reported an adjusted profit slightly under expectations. Its stock sank 8.3 percent to $530.70.

Also hurting technology stocks, Infosys Technologies Ltd (INFY.NS)(INFY.O), India's No. 2 software services exporter, sparked worries about the sector's growth after it forecast annual sales lower than expected on slower client spending. Its U.S.-traded shares fell 13.4 percent to $63.21.

Under the agreement, levels of debt and borrowing and trade balances will be used to determine if a country should be put under the microscope and asked to make reforms.

French Finance Minister Christine Lagarde said the Group of 20 countries made "huge progress" on the path to more balanced growth and said seven major economies would automatically be subject to review, possibly along with others.

France is chair of the G20 this year.

Countries representing more than 5 percent of the combined output of the G20 will be subject to a deeper analysis of imbalances in their economy, finance officials said.

The list would include debt-burdened countries such as the United States and others like China that rely heavily on exports for growth. France, Britain, Germany and Japan would also be among the countries undergoing special scrutiny.

"Our aim is to promote external sustainability and ensure that G20 members pursue the full range of policies required to reduce excessive imbalances," the G20 said in a communique issued at the close of a full-day meeting.

One potential shortcoming of the pact is that countries will not be bound to follow any policy recommendations that emerge. Instead, officials hope peer pressure brings change.

Many economists say imbalances caused by big surpluses and deficits contributed to the 2007-2009 financial crisis, which triggered the worst global recession since World War II.

The G20 has become the main forum to prevent the type of boom-bust cycles that preceded the meltdown. Agreeing on how best to do that has grown difficult, particularly now that the darkest days of crisis have passed.

Among the big emerging economies, China has been especially wary about the monitoring process which it fears could be used to add pressure for reform of its currency system.

At a summit in China this week, leaders from the five so-called BRICS countries -- Brazil, Russia, India, China and South Africa -- repeated calls for a monetary system less reliant on the U.S. dollar.

However, Chinese Vice Finance Minister Zhu Guangyao said the G20 agreement on Friday "fully reflects each country's demands," including "reforming the international financial system and strengthening financial regulation."

"We're satisfied with the results," he said.

The G20 said it would take "due account" of exchange rates and monetary policy frameworks when addressing imbalances.

The S&P 500 fell for a second straight week, and some in the market pointed to strong resistance building around 1,340. The daily chart shows a bearish double top near that level.

In another worrisome sign, investors again favored defensive stocks, which tend to do better in times of waning growth. Utilities .GSPU and healthcare .GSPA were the S&P 500's top-performing sectors.

Disappointing results from Google and Infosys weighed on technology shares, while financials were pressured by Bank of America's results.

"Even while some of the earnings data wasn't exactly what the market hoped for, the macro economic data was actually pretty good this morning," said Paul Zemsky, head of asset allocation at ING in New York.

Consumer price inflation remained contained in March while industrial production increased. A separate survey showed improvement in consumer sentiment in April.

Investors have been concerned that higher energy and food costs would slow consumer spending, while at the same time force the Federal Reserve to tighten its very loose monetary policy earlier that anticipated.

The Dow Jones industrial average .DJI gained 56.68 points, or 0.46 percent, to 12,341.83. The Standard & Poor's 500 Index .SPX rose 5.16 points, or 0.39 percent, to 1,319.68. The Nasdaq Composite Index .IXIC added 4.43 points, or 0.16 percent, to 2,764.65.

For the week, the Dow fell 0.3 percent while the S&P 500 and the Nasdaq each lost 0.6 percent.

The first week of earnings has been a mixed bag, with some bellwether companies unable to excite the market despite some cases of stronger-than-expected profits. Investors have been disappointed with companies' revenues or outlooks.

"If this theme of discouraging reports continues, I'll become more bearish on the season," said Randall Warren, chief investment officer of Warren Financial Service in Exton, Pennsylvania. "But right now, it could go either way, and it looks like the market wants to go up."

Bank of America Corp (BAC.N) reported a steeper-than-expected decline of 37.5 percent in profit and named a new chief financial officer. The stock fell 2.4 percent to $12.82 and was the Dow's bigger percentage loser.

Google Inc (GOOG.O) unnerved investors late on Thursday with a large jump in first-quarter spending. The Internet company also reported an adjusted profit slightly under expectations. Its stock sank 8.3 percent to $530.70.

Also hurting technology stocks, Infosys Technologies Ltd (INFY.NS)(INFY.O), India's No. 2 software services exporter, sparked worries about the sector's growth after it forecast annual sales lower than expected on slower client spending. Its U.S.-traded shares fell 13.4 percent to $63.21.

Information technology .GSPT was the sole S&P sector to fall. The IT sector's index fell 0.4 percent.

However, the talks were characterized as fragile and could fall apart at any time, one person told the Journal.

Synthes shares closed up 6.2 percent in Switzerland, with traders citing market talk that the diversified healthcare company or U.S. medical device maker Medtronic Inc could be interested in buying the company.

J&J declined to comment on the report. "As a matter of policy we don't comment on speculation," J&J spokesman Bill Price said. A Synthes spokesman in the United States was not immediately available to comment.

J&J owns some 250 separate companies under its corporate umbrella and a Synthes purchase would be among its largest acquisitions. The company attempted to acquire U.S. medical device maker Guidant several years ago, but was outbid by Boston Scientific Corp.

"J&J has developed a strong war chest of cash. They have the ability to do a deal like this from a size and strategy standpoint," Morningstar analyst Damien Conover said.

"This is an area where J&J would like to build strength," Conover said of Synthes, which makes spinal products and screws and plates to repair broken bones.

Medical devices and diagnostics accounted for 40 percent of J&J's $61.6 billion in 2010 sales. But the business has been hit by competition and recalls.

The company's Cypher, the first drug-coated stent to reach the U.S. market, has been eclipsed by Abbott Laboratories Xience, which is by far the market leader in the devices used to prop open arteries cleared of blockages.

J&J's hip and knee replacement division has been hampered by product recalls.

J&J has also been plagued by a series of recalls in its consumer health division with hundreds of millions of bottles and packages of Tylenol, Rolaids, Motrin and other widely used products being pulled from store shelves.

Its consumer products manufacturing practices were deemed to be such a shambles that some of its plants have been placed under government supervision.

Prior to the Synthes report, there had been recent speculation that J&J was interested in buying British orthopedics company Smith & Nephew.

"There have been rumors before that J&J might have been interested in other orthopedic companies," Conover said.

"Synthes is more involved in trauma so the overlap might not be as much as with other companies, like those more focused on hips and knees," Conover said, adding that such a deal would raise fewer antitrust issues .

Synthes' chairman Hansjorg Wyss is the second-richest person in Switzerland with a net worth of $6.4 billion, according to Forbes.

(Reporting by Bill Berkrot and Lewis Krauskopf; additional reporting by Deena Beasley in Los Angeles; Editing by Richard Chang, Bernard Orr)

The euro zone joined the rapidly developing economies this month in raising interest rates to counter mounting price pressures.

In contrast, the Federal Reserve has shown no appetite to raise U.S. rates before unemployment has declined further and until the sluggish recovery is on a firmer footing. As a result the Fed's super-cheap money is taking some of the blame for fueling the commodity boom that is adding to inflation pressures elsewhere.

China and India reported higher-than-expected inflation on Friday. Prices of oil and grains in particular are climbing partly because strong economic growth in emerging market economies has outstripped demand in the developed world since the global financial crisis.

The mounting price pressures reflect the price of some commodities vaulting to record highs, with crude oil this month at $120 a barrel also, stirring investor concerns about inflation.

"The weakness in markets this week is expected after the smart comeback we have seen recently, with inflationary concerns again coming to the forefront," said Jan Lambregts, global head of financial markets research at Rabobank.

Consumer price inflation in China quickened to 5.4 percent in the year to March, the fastest rate since July 2008, from 4.9 percent in the first two months of the year.

In India, the Wholesale Price Index, the main inflation gauge, rose 8.98 percent in the year to March, up from 8.31 percent in the 12 months to February and beating market projections of an 8.36 percent reading.

Economists expect the central banks of both countries to tighten monetary policy further soon to dampen inflationary pressure.

A rise in the proportion of deposits that Chinese banks must hold in reserve, rather than lend out, could be imminent after Premier Wen Jiabao in midweek reaffirmed his determination to keep a lid on prices.

Core inflation, excluding food and energy, was the highest in China in a decade. In India, too, a sharp upward revision to figures for January has led some economists to the conclusion that underlying price pressures are greater than they had thought.

"It seems that inflation trajectory has changed. The expected decline in inflation is just not happening and looks like we have underestimated the underlying pressure on prices," said Ashutosh Datar, an economist at IIFL in Mumbai.

"More monetary tightening is inevitable after today's data and the case for a 50 basis point hike in May is strengthened," he added.

EURO ZONE AND U.S

Final March figures for the euro zone showed inflation jumped to 2.7 percent from 2.4 percent in February, slightly more than a preliminary forecast and the fourth month it has been above the European Central Bank's target of 2 percent.

A government report showed underlying inflation pressures remained contained in March, while a survey showed April consumer sentiment rose more than expected. Investors have been concerned higher energy and food costs would slow consumer spending.

"People were revising their first-quarter growth outlooks lower because of headwinds in the quarter, but this data suggests that maybe the quarter wasn't so bad," said Tom Wirth, senior investment officer for Chemung Canal Trust Co, which manages $1.5 billion in Elmira, New York.

Bank of America reported a steeper-than-expected decline of 37.5 percent in profit and named a new chief financial officer. The stock, a Dow component, fell 0.8 percent to $13.02 in volatile trading.

Google late on Thursday unnerved investors with a large jump in first-quarter spending. The Internet company also reported an adjusted profit slightly under expectations and the stock sank 6.5 percent to $541.25.

The Dow Jones industrial average .DJI was up 25.39 points, or 0.21 percent, at 12,310.54. The Standard & Poor's 500 Index .SPX was up 2.36 points, or 0.18 percent, at 1,316.88. The Nasdaq Composite Index .IXIC was down 9.02 points, or 0.33 percent, at 2,751.20.

The first week of earnings has been mixed, with bellwether companies unable to excite the market despite some cases of stronger-than-expected profits. Investors have been disappointed with companies' revenues or outlooks.

"While expenses at Google point to lower growth there and early results suggest banks are going to continue having a hard time, it's too early to say how the earnings season is shaping up so far," Wirth said.

Charles Schwab Corp (SCHW.N) reported first-quarter earnings that beat expectations by a penny. The broker also said clients had reduced the percentage of their cash assets held in Schwab to pre-crisis levels. The stock rose 1 percent to $18.41.

A gauge of New York State manufacturing rose in April to its highest level in a year, and the state employment index jumped to its highest since May 2004, the New York Federal Reserve said.

(Editing by Kenneth Barry)

The largest U.S. bank lost more than $2.39 billion in its home loan business as revenue fell and expenses rose. The foreclosure mess that began in the fourth quarter of 2010, with borrowers accusing major banks of repossessing homes without having the right paperwork in place, was a key source of higher costs in the quarter.

The bank also announced a new chief financial officer.

The first-quarter results give some inkling of why the Federal Reserve told the bank in March to rein in its plans to boost dividends, even as competitors were authorized to hike their payouts.

"Bank of America is further behind. And the reason they're further behind is because of what's going on with the mortgage business," said Ben Wallace, analyst at Grimes & Co, with $1 billion under management.

The bank said in March that it did not expect its mortgage business to return to normal earnings until 2014 or later, while most of its other businesses are seen recovering by 2013.

Bank of America shares were down 1 percent to $12.99 in morning trading. The shares fell 1.5 percent after JPMorgan Chase & Co's results on Wednesday showed the pressure facing consumer lending businesses.

JPMorgan, the second-largest U.S. bank, said it suffered extraordinarily high losses on mortgage-related issues in the first quarter. "Unfortunately, these losses will continue for awhile," said JPMorgan Chief Executive Jamie Dimon.

Bank of America did manage to earn $2 billion in the latest quarter, its first profit since the second quarter of 2010. It faced big mortgage and card-related losses throughout the second half of last year.

Its Merrill Lynch brokerage business provided a bright spot in the quarter, reporting sharply higher revenue and client assets as well as a net increase of nearly 200 financial advisers.

Bank of America, built through a series of acquisitions over decades, made an ill-fated purchase in 2008 when it bought mortgage lender Countrywide Financial Corp as the financial crisis was intensifying. The purchase gave Bank of America more subprime mortgages, home equity loans, and other assets that have generated big losses. The bank needed two government rescues during the financial crisis; it has repaid the money it received.

Chief Executive Brian Moynihan, who took the helm in early 2010, is trying to fix the bank by cutting costs and selling more products to retail customers, but he faces as uphill battle.

Bank of America's results are closely tied to the health of U.S. consumers, who have been reducing their debt as they wrestle with stagnant wages and high unemployment. The Charlotte, North Carolina-based bank does business with one of every two U.S. households.

The bank's loan book fell 8.5 percent in the first quarter from the fourth quarter, to $932.43 billion, due mainly to a decline in consumer loans.

Moynihan has put new people in charge of many areas of the bank, but changes are already underway in the executive suite. On Friday the bank said Bruce Thompson, its chief risk officer, will become chief financial officer by the end of the second quarter. The current CFO, Charles "Chuck" Noski, will become vice chairman of Bank of America.

Bank of America reported a steeper-than-expected decline of 37.5 percent in profit and named a new chief financial officer. The stock, a Dow component, rose 0.8 percent to $13.24 after a volatile premarket session.

Google Inc (GOOG.O) late on Thursday unnerved investors with a large jump in first-quarter spending. The Internet company also reported an adjusted profit slightly under expectations and the stock fell 6.1 percent to $543.

Losses in stocks were limited after a government report showed underlying inflation pressures remained contained in March, though rising food and gasoline prices lifted the overall Consumer Price Index 0.5 percent. Investors have been concerned about how higher energy costs would impact consumers.

The Dow Jones industrial average .DJI was up 13.20 points, or 0.11 percent, at 12,298.35. The Standard & Poor's 500 Index .SPX was up 2.05 points, or 0.16 percent, at 1,316.57. The Nasdaq Composite Index .IXIC was down 9.79 points, or 0.35 percent, at 2,750.43.

The first week of earnings has been mixed, with bellwether companies unable to excite the market despite some cases of stronger-than-expected profits. Investors have been disappointed with companies' revenues or outlooks.

Charles Schwab Corp (SCHW.N) reported first-quarter earnings that beat expectations by a penny. The broker also said clients had reduced the percentage of their cash assets held in Schwab to pre-crisis levels. The stock rose 2.1 percent to $18.62.

A gauge of New York State manufacturing rose in April to its highest level in a year, and the state employment index jumped to its highest since May 2004, the New York Federal Reserve said.

(Editing by Kenneth Barry)

The largest U.S. bank lost more than $2.39 billion in its home loan business as revenue fell and expenses rose. The foreclosure mess that began in the fourth quarter of 2010, with borrowers accusing major banks of repossessing homes without having the right paperwork in place, was a key source of higher costs in the quarter.

The bank also announced a new chief financial officer.

The first-quarter results give some inkling of why the Federal Reserve told the bank in March to rein in its plans to boost dividends, even as competitors were authorized to hike their payouts.

"Bank of America is further behind. And the reason they're further behind is because of what's going on with the mortgage business," said Ben Wallace, analyst at Grimes & Co, with $1 billion under management.

The bank did manage to earn $2 billion in the quarter, its first profit since the second quarter of 2010. It faced big mortgage and card-related losses throughout the second half of last year.

Its Merrill Lynch brokerage business provided a bright spot in an otherwise dismal first quarter, reporting sharply higher revenue and client assets as well as a net increase of nearly 200 financial advisers.

Bank of America's results are closely tied to the health of U.S. consumers. The Charlotte, North Carolina-based bank does business with one of every two U.S. households.

Bank of America, built through a series of acquisitions over decades, made an ill-fated purchase in 2008 when it bought mortgage lender Countrywide Financial Corp as the financial crisis was intensifying. The purchase gave Bank of America more subprime mortgages, home equity loans, and other assets that have generated big losses. The bank needed two government rescues during the financial crisis.

On Wednesday, Bank of America rival JPMorgan Chase & Co, the second-largest U.S. bank, said it suffered extraordinarily high losses on mortgage-related issues in the first quarter.

"Unfortunately, these losses will continue for awhile," said JPMorgan Chief Executive Jamie Dimon.

Bank of America Chief Executive Brian Moynihan, who took the helm in early 2010, is trying to fix the bank by cutting costs and selling more products to retail customers, but he faces as uphill battle.

Moynihan has put new people in charge of many areas of the bank, but changes are already underway in the executive suite. On Friday the bank said Bruce Thompson, its chief risk officer, will become chief financial officer by the end of the second quarter. The current CFO, Charles "Chuck" Noski, will become vice chairman of Bank of America.

Bank of America posted first-quarter net income of $2.0 billion, or 17 cents per share, down from $3.2 billion, or 28 cents per share, in the same quarter a year ago.

Analysts on average had forecast earnings of 27 cents a share, according to Thomson Reuters IBEX. It was not immediately clear if the results were comparable.

The largest U.S. bank lost more than $2.39 billion in its home loan business as revenue fell and expenses rose. A settlement with a bond insurer over mortgage bonds gone bad cost it $1.6 billion.

The results give some inkling of why the Federal Reserve told the bank in March to rein in its plans to boost dividends, even as competitors were authorized to hike their payouts.

"Bank of America is struggling with the mortgage mess and cleaning up what is going on there," said David Morrison, market strategist at FT Global Markets in London.

The bank did manage to earn $2 billion in the quarter, its first profit since the second quarter of 2010. Bank of America faced big mortgage and card-related losses throughout the second half of last year.

Net income was $2.0 billion, or 17 cents per share, down from $3.2 billion, or 28 cents per share, in the same quarter a year ago.

Analysts on average had forecast earnings of 27 cents a share, according to Thomson Reuters IBEX.

The loss in its residential mortgage unit of more than $2.39 billion compared with a loss of $2.07 billion a year earlier.

The bank said Bruce Thompson, chief risk officer, will also take on the role of chief financial officer at the end of the second quarter. Chuck Noski, current CFO, will become vice chairman of Bank of America.

The bank's shares were little changed in premarket trading.

(Reporting by Joe Rauch, additional reporting by Dan Wilchins in New York; editing by John Wallace)

* Corporate earnings are expected to dominate the trading session, with some caution prevailing over the strength of U.S. corporate earnings this season.

* Shares in technology firm Google fell more than 5 percent in extended trading on Thursday as the firm reported a surge in spending in the first quarter.

* Banks will be in the spotlight as Bank of America reports quarterly earnings, with analysts expecting the lender to post a 9 percent drop in first-quarter profit.

* Consumer price data for March will be eyed at 1230 GMT for an indication of the effect of energy and food prices on inflation numbers. Although core inflation figures are expected to record the same gain as in February, up 0.2 percent, any move higher could put pressure on the Federal Reserve's monetary policy.

* In China, inflation jumped to a 32-month high, reinforcing the view that the government will have to do more to rein in prices.

* Other data scheduled for release include the New York Fed's Empire State manufacturing index for April at 1230 GMT and the Thomson Reuters/University of Michigan consumer sentiment report at 1355 GMT.

* Stocks on the Dow Jones industrial average and the S&P 500

pared earlier falls to eke out marginal gains at the close on Thursday, with concerns about faltering growth and inflation prompting investors to seek out less volatile names.

* In company news, the U.S. securities regulator is in talks with Wall Street banks including JPMorgan Chase, Citigroup Inc, Morgan Stanley, Merrill Lynch and UBS, to settle fraud allegations relating to the sale of toxic mortgage bonds, the Wall Street Journal reported.

* Ford Motor Co will bring 15 new vehicles to China by 2015, its China chief said on Friday, as it accelerates expansion in the world's largest auto market.

* Groupon is likely to pick Goldman Sachs and Morgan Stanley to lead a second-half initial public offering that could value the fast-growing daily deals site at $15 billion to $20 billion, a source familiar with the matter said on Thursday.

* Transocean Ltd, the world's largest offshore drilling contractor, has pulled three rigs off the market due to lack of demand, while putting two older shallow-water rigs up for sale.

* Chrysler Group LLC is close to launching a debt refinancing package to repay its U.S. and Canadian government loans and has selected four banks to lead the deal, people familiar with the matter said.

* In Europe, the FTSEurofirst 300 index of top shares was flat in early trade, with financials featuring among the top decliners as concerns about the euro zone debt crisis resurfaced after Moody's cut Ireland's sovereign rating by two notches.

(Reporting by Harpreet Bhal, Editing by Mark Potter)