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But some underperforming investors are being cornered into putting yet more money into U.S. stocks.

The S&P 500 on Friday closed its fourth week of gains and is up more than 13 percent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.

Even though some pullback may be expected next week, the clearer picture after the European deal "should give a green light for many of the funds to get back in risk assets," according to Robert Francello, head trader at hedge fund Apex Capital, which manages about $2 billion in San Francisco.

"Hopefully we'll be able to see some further gains into the year end," he said.

Hedge funds, among the equity market's power players, are on average sitting on losses of 8 percent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 percent.

A JPMorgan note to clients following Thursday's 3 percent rally on the U.S. benchmark index argues for a "strong foundation for an equity rally into year end," with a 1,400-1,475 target.

That's more than the 8 percent gain hedge funds would need to come out of the red for the year.

"If you're a hedge fund manager and you want to put money to work it feels like it has to be on the long side: buying stocks, buying risky assets," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

"For the moment, you've taken away major risk in Europe and you've replaced it with a potential positive in stock valuations and no double-dip."

European leaders reached a long-awaited agreement to boost the region's bailout fund and struck a deal with banks and insurers who will take a 50 percent loss on their Greek bonds.

A more disorderly default from Greece, and the possibility of sovereign defaults spreading in Europe, were part of the reason the S&P 500 closed its worst quarter since 2008 in September.

The market was also relieved after data earlier this week showed the U.S. economy grew at its fastest pace in a year in the third quarter.

A heavy flow of job market data, capped on Friday by the government's monthly report of job payrolls, will be closely watched to confirm the upbeat macroeconomic trend. A Reuters poll of economists shows employers created 95,000 jobs in October.

EARNINGS AND FED TO POWER ON THE RALLY

More than 100 S&P 500 companies will report earnings next week, with Lowes, Pfizer and Kellogg among the highlights.

Among the more than 300 that have already posted earnings for the past quarter, roughly seven out of 10 have reported better numbers than analysts expected.

Some expect the Federal Reserve to announce another round of asset purchases -- similar to the quantitative easing plan set up last year that sparked a year-long rally in stocks.

An equities rally following Fed purchases would most likely be led by commodity-related sectors, said Apex Capital's Francello.

"The Fed is beginning to lay the groundwork for another round of quantitative easing, so that should also put some wind in the back of risk assets," he said.

CHARTS ALSO LOOK BULLISH

The technical picture is also turning bullish, with the S&P moving this week above its 200-day moving average for the first time since early August.

At 1,285 the S&P faces resistance just below 1,300, an RBC Capital Markets note said, but the year-end trend for stocks points higher.

"We're still in a period of high volatility so you can't take anything for granted," said Colas from ConvergEx Group.

"Do you buy the dips? I believe that is the case."

(Reporting by Rodrigo Campos; additional reporting by Svea Herbst; Editing by Kenneth Barry)

But some underperforming investors are being cornered into putting yet more money into U.S. stocks.

The S&P 500 on Friday closed its fourth week of gains and is up more than 13 percent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.

Even though some pullback may be expected next week, the clearer picture after the European deal "should give a green light for many of the funds to get back in risk assets," according to Robert Francello, head trader at hedge fund Apex Capital, which manages about $2 billion in San Francisco.

"Hopefully we'll be able to see some further gains into the year end," he said.

Hedge funds, among the equity market's power players, are on average sitting on losses of 8 percent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 percent.

A JPMorgan note to clients following Thursday's 3 percent rally on the U.S. benchmark index argues for a "strong foundation for an equity rally into year end," with a 1,400-1,475 target.

That's more than the 8 percent gain hedge funds would need to come out of the red for the year.

"If you're a hedge fund manager and you want to put money to work it feels like it has to be on the long side: buying stocks, buying risky assets," said Nicholas Colas, chief market strategist at the ConvergEx Group in New York.

"For the moment, you've taken away major risk in Europe and you've replaced it with a potential positive in stock valuations and no double-dip."

European leaders reached a long-awaited agreement to boost the region's bailout fund and struck a deal with banks and insurers who will take a 50 percent loss on their Greek bonds.

A more disorderly default from Greece, and the possibility of sovereign defaults spreading in Europe, were part of the reason the S&P 500 closed its worst quarter since 2008 in September.

The market was also relieved after data earlier this week showed the U.S. economy grew at its fastest pace in a year in the third quarter.

A heavy flow of job market data, capped on Friday by the government's monthly report of job payrolls, will be closely watched to confirm the upbeat macroeconomic trend. A Reuters poll of economists shows employers created 95,000 jobs in October.

EARNINGS AND FED TO POWER ON THE RALLY

More than 100 S&P 500 companies will report earnings next week, with Lowes, Pfizer and Kellogg among the highlights.

Among the more than 300 that have already posted earnings for the past quarter, roughly seven out of 10 have reported better numbers than analysts expected.

Some expect the Federal Reserve to announce another round of asset purchases -- similar to the quantitative easing plan set up last year that sparked a year-long rally in stocks.

An equities rally following Fed purchases would most likely be led by commodity-related sectors, said Apex Capital's Francello.

"The Fed is beginning to lay the groundwork for another round of quantitative easing, so that should also put some wind in the back of risk assets," he said.

CHARTS ALSO LOOK BULLISH

The technical picture is also turning bullish, with the S&P moving this week above its 200-day moving average for the first time since early August.

At 1,285 the S&P faces resistance just below 1,300, an RBC Capital Markets note said, but the year-end trend for stocks points higher.

"We're still in a period of high volatility so you can't take anything for granted," said Colas from ConvergEx Group.

"Do you buy the dips? I believe that is the case."

(Wall St Week Ahead runs every Friday)

(Reporting by Rodrigo Campos; additional reporting by Svea Herbst; Editing by Kenneth Barry)

MF Global has reached out to major banks including Barclays PLC, Citigroup Inc, Deutsche Bank, Jefferies Group Inc, JPMorgan Chase & Co, Macquarie Group Ltd, State Street Corp and Wells Fargo, according to the source.

Private equity firm J.C. Flowers, which has a stake in MF Global, is also in talks about possibly taking it private, the Wall Street Journal reported.

"If it gets done, it needs to get done by Monday," the source said. "Whether it gets sold in parts or pieces, they are in good shape to orchestrate this process."

MF Global has declined to comment on its troubles.

Barclays, Citigroup, Deutsche, Jefferies and Wells Fargo also declined to comment, while the other banks and Flowers could not be reached immediately for comment late on Friday.

Pressure mounted on MF Global -- run by former Goldman Sachs Chief Executive Jon Corzine -- to sell after a week in which it posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

The brokerage, which under Corzine increasingly used its own capital to trade, is paying the price for investments made on bonds of countries in the euro zone, and it is emerging as one of the hardest-hit U.S. firms in the fallout from Europe's sovereign debt crisis.

When a broker's credit rating drops to junk, it erodes confidence in its credit worthiness and can then restrict its ability to borrow -- the bedrock of any financial institution -- and fund day-to-day operations.

The firm's position in the repurchase market -- a vital place for short-term funding -- is under intense scrutiny because of the weakness in European debt.

MF Global is now scrambling to reassure sometimes skittish clients about its stability. But it told at least one fund that a number of clients are withdrawing money.

Its troubles become "a self-fulfilling prophecy," said Perry Piazza, director of investment strategies at Contango Capital Advisors in San Francisco. "The end game here is not good," he said.

MF Global stock dropped as much as 31 percent in early trading to 99 cents, its lowest ever, but later rebounded to $1.29. It was the second most actively traded stock on the New York Stock Exchange.

The company's bonds were trading in the mid-40s, which implies a high likelihood of default, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70. MF Global had offered the notes at par in August.

SALE PROCESS

The company tapped Evercore Partners Inc to advise it on strategic options including a possible sale, said a source familiar with the situation. A second source, who was briefed on the matter, said the company did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients. "However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity."

MF Global's history dates back over 200 years, to a sugar broker that started in London. For years, MF Global focused on futures brokerage. In 2005, the company, formerly known as Man Financial, acquired Refco's U.S. futures business after that broker collapsed in an accounting scandal.

The company's futures business is in a cyclical downturn, but when interest rates rise, its income could surge and its clients could help boost another bank's broader sales and trading franchise.

Potential bidders are, however, unlikely to pay up for a business like the Futures Commission Merchant, in part because customers can take their relationships elsewhere, industry sources said.

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear.

A source at one of the firms that MF Global has reached out to said they wouldn't rule out their interest in some sort of a deal, but it would have to be something that involved taking on little risk.

A source at a different firm said it was difficult to buy the business because it is hard to evaluate the company's customers quickly, and the best customers could leave soon.

Some potential buyers said they would look at the business if MF Global offered it for cheap, a third source said.

CORZINE AND EUROPE'S FALLOUT

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating, meanwhile, could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

MF Global's bank loans were lower Friday amid rumors the company drew down its revolving credit lines, separate sources said. The extended revolver due 2014 is quoted 60-65 on Friday after a large piece of the paper is said to have changed hands on Thursday at 70, the sources said.

European Union leaders struck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio, Paritosh Bansal, Dan Wilchins, Richard Leong, Karen Brettell,Jeanine Prezioso, Herb Lash in New York, and Charmian Kok in Singapore; Editing by Matthew Lewis, Phil Berlowitz, Gary Hill)

The company run by former Goldman executive Jon Corzine has shed 63 percent of its market capitalization this week. That could hamper MF Global's dealmaking ability, while at the same present possible buyers with assets at big discounts.

Goldman Sachs Group Inc, State Street Corp and Macquarie are all eyeing MF Global or parts of it, The Wall Street Journal reported.

In the last few days, the brokerage posted a quarterly loss and two ratings agencies cut its debt rating to junk -- underscoring the bad bets MF Global made on bonds of countries in the euro zone, which is now battling a debt crisis.

MF Global stock dropped as much as 31 percent in early trading to 99 cents, its lowest ever, but later rebounded to $1.35. It was the second most actively traded stock on the New York Stock Exchange.

"The MF Global team has no choice but to quickly shrink its balance sheet to raise cash and then to sell the cash into the market to show 'strength'," Brad Hintz, a senior analyst at Bernstein Research, wrote to clients.

"These events play out in days."

The company's bonds were trading at distressed levels in the mid-40s, after touching a morning low of 38 cents on the dollar. That was down from Thursday when the bonds, maturing in 2016 with a 6.25 percent coupon, were at 70.

MF Global, which is emerging as one of the hardest-hit U.S. firms in the fallout from Europe, had offered the notes at par in August.

The company tapped Evercore to advise it on strategic options including a possible sale, said a source familiar with the situation. A second source, who was briefed on the matter, said the company is "focused on doing a smart deal, a fair deal," and that it did not enter the talks with "specific targets and objectives."

"We believe MF could generate proceeds from sale of its customer asset portfolio or Futures Commission Merchant which frees up capital," Keefe Bruyette & Woods analyst Niamh Alexander wrote to clients. "However, we cannot quantify the cost of wind down or exiting broker positions that could offset those proceeds and wipe out equity," she wrote.

MF Global has declined to comment on its troubles.

CORZINE AND EUROPE'S FALLOUT

Some customers are diverting money from the New York-based brokerage, according to hedge funds, rivals and analysts, though the extent of the outflows remained unclear. (Graphic of MF Global's market share among futures commission merchants: link.reuters.com/syz64s )

MF Global's bank loans were lower Friday amid rumors the company drew down its revolving credit lines, separate sources said. The extended revolver due 2014 is quoted 60-65 on Friday after a large piece of the paper is said to have changed hands on Thursday at 70, the sources said.

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

But its bets on bonds from euro zone countries, including those issued by Italy, Spain, Portugal and Ireland, have gone bad, prompting regulators to press it to boost capital and ratings agencies to issue their warnings.

The loss of its investment grade rating could hasten the exodus of customers away from MF Global.

"Given the uncertainty around timing of the agencies' next move, management needs to move quickly in order to avoid client defections and either work on strategic options or work with the agencies to get back to stable status," Deutsche Bank analyst Michael Carrier wrote to clients.

European Union leaders stuck a deal this week to relieve the continent's sovereign debt crisis -- potentially good news for MF Global -- but many details of the EU deal still need ironing out.

In Asia, the Singapore Exchange said MF Global's unit in the city state is meeting its financial obligations as a clearing member. That echoes assurances Thursday by U.S. clearers CME Group Inc, IntercontinentalExchange Inc and options clearinghouse OCC.

(Reporting by Jonathan Spicer, John Balassi, Philip Scipio, Paritosh Bansal, Jeanine Prezioso and Herb Lash in New York, and Charmian Kok in Singapore; Editing by Matthew Lewis and Phil Berlowitz)

The second largest U.S. bank is likely to allow many customers to avoid the fee by taking measures such as maintaining minimum balances, having paychecks direct deposited, or using Bank of America credit cards, the person said.

Under earlier plans, customers might have needed balances totaling $20,000 across all their Bank of America accounts to avoid the fee.

Bank of Americas unleashed a firestorm of criticism from customers, consumer advocates and politicians last month when it disclosed plans to charge customers $5 per month for using their debit cards, starting sometime next year. The goal was to make up revenue lost to a law that slashes the fees banks charge retailers when consumers swipe their cards.

Some other major banks have quietly pulled back on the charges. After testing a $3 per month fee in two states since February, JPMorgan Chase & Co decided not to charge customers, a person familiar with the situation said on Friday. The test will end next month and will not be extended or expanded, the person added.

Wells Fargo & Co started testing a $3 per-month fee in five states on October 14. The bank has not had time to evaluate results and has not made any changes in the program, Wells spokeswoman Lisa Westermann said.

Charlotte, North Carolina-based Bank of America is not abandoning the fee now and will likely include it in new account types the bank is testing in three states. The bank plans to roll out these packages nationwide next year.

The $5 per-month fee may still remain an option for customers, the person said.

The bank has said the purpose of the new account types is to provide customers with upfront pricing, instead of hitting them with penalties after the fact. Customers can pay monthly fees of between $9 and $20, or avoid the charges by keeping minimum balances, using their credit cards or having a minimum amount deposited to their account.

While some banks have disclosed plans to apply similar fees, many banks and credit unions decided not to institute the charge and have encouraged customers to switch banks.

(Reporting by Rick Rothacker in Charlotte, North Carolina; editing by Andre Grenon)