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The early fourth-quarter results will set the tone. Any weakness will give traders a reason to pull back from the rally of recent weeks, which stalled on Friday on bank stock losses and lackluster jobs data.

Still, the major indexes finished with a sixth straight week of gains: the Dow was up 0.8 percent, the S&P 500 up 1.1 percent and the Nasdaq composite index ahead 1.9 percent.

Alcoa Inc (AA.N) is set to release results on Monday after the market's close, unofficially launching the quarterly earnings season. Intel Corp (INTC.O) and JPMorgan Chase & Co (JPM.N), also Dow components, will likewise issue their report cards in the week and are expected to do well.

"It will be important to get out of the box with a positive note," said James Dunigan, who helps manage $105 billion at PNC Wealth Management in Philadelphia. "If that's the case, we have a little way to run and can keep rising, but if the results disappoint there will be reason to step back."

The S&P 500 .SPX has climbed 7 percent since the start of December while Alcoa has soared 25 percent and JPMorgan has surged 16 percent. Analysts say that such rapid gains leave the market more vulnerable for a pullback and could limit upside potential.

GOOD, BAD AND UGLY

The S&P 500 has struggled to break above 1,280, though a floor appeared to be developing around 1,260, the 14-day moving average and near the 2010 close.

Jeffrey Friedman, senior market strategist at Lind-Waldock in Chicago, said that if results come in line or miss expectations "we could see as much as an 8 percent pullback." Upside potential is 4 percent to 5 percent "and that's only if earnings beat convincingly," he said.

Friday's December employment report could increase the likelihood of stocks' retreating. While the unemployment rate dropped by a hefty amount in December, far fewer workers were added than expected.

"There's good, bad and ugly in that report," Friedman said. "The good was the unemployment rate, the bad was that we didn't meet expectations, and the ugly is that we don't know whether the good or bad is more right."

Next week will also see retail sales data on Friday, which will be closely watched following soft December comparable sales. On Wednesday the Federal Reserve will release the Beige Book.

The Beige Book, an anecdotal report on the economy by region, comes after Chairman Ben Bernanke gave his first congressional testimony since launching a second round of quantitative easing. Bernanke said that the economy may finally be hitting its stride even if growth remains too weak to put a real dent in the U.S. unemployment situation.

Bank stocks could be pressured further next week after a ruling by Massachusetts' highest court that invalidated the seizures of two homes in foreclosure by Wells Fargo & Co (WFC.N) and US Bancorp (USB.N).

The KBW Banks index .BKX is up 18 percent since the start of December but fell 0.9 percent on Friday.

The ruling could impact bank foreclosures nationwide and "dampen recovery prospects for the real estate sector and banks," said Nick Kalivas, senior equity index analyst at MF Global in Chicago. "Financials have really been a leader in the market in recent weeks; this could close that sector out."

The early fourth-quarter results will set the tone. Any weakness will give traders a reason to pull back from the rally of recent weeks, which stalled on Friday on bank stock losses and lackluster jobs data.

Still, the major indexes finished with a sixth straight week of gains: the Dow was up 0.8 percent, the S&P 500 up 1.1 percent and the Nasdaq composite index ahead 1.9 percent.

Alcoa Inc (AA.N) is set to release results on Monday after the market's close, unofficially launching the quarterly earnings season. Intel Corp (INTC.O) and JPMorgan Chase & Co (JPM.N), also Dow components, will likewise issue their report cards in the week and are expected to do well.

"It will be important to get out of the box with a positive note," said James Dunigan, who helps manage $105 billion at PNC Wealth Management in Philadelphia. "If that's the case, we have a little way to run and can keep rising, but if the results disappoint there will be reason to step back."

The S&P 500 .SPX has climbed 7 percent since the start of December while Alcoa has soared 25 percent and JPMorgan has surged 16 percent. Analysts say that such rapid gains leave the market more vulnerable for a pullback and could limit upside potential.

GOOD, BAD AND UGLY

The S&P 500 has struggled to break above 1,280, though a floor appeared to be developing around 1,260, the 14-day moving average and near the 2010 close.

Jeffrey Friedman, senior market strategist at Lind-Waldock in Chicago, said that if results come in line or miss expectations "we could see as much as an 8 percent pullback." Upside potential is 4 percent to 5 percent "and that's only if earnings beat convincingly," he said.

Friday's December employment report could increase the likelihood of stocks' retreating. While the unemployment rate dropped by a hefty amount in December, far fewer workers were added than expected.

"There's good, bad and ugly in that report," Friedman said. "The good was the unemployment rate, the bad was that we didn't meet expectations, and the ugly is that we don't know whether the good or bad is more right."

Next week will also see retail sales data on Friday, which will be closely watched following soft December comparable sales. On Wednesday the Federal Reserve will release the Beige Book.

The Beige Book, an anecdotal report on the economy by region, comes after Chairman Ben Bernanke gave his first congressional testimony since launching a second round of quantitative easing. Bernanke said that the economy may finally be hitting its stride even if growth remains too weak to put a real dent in the U.S. unemployment situation.

Bank stocks could be pressured further next week after a ruling by Massachusetts' highest court that invalidated the seizures of two homes in foreclosure by Wells Fargo & Co (WFC.N) and US Bancorp (USB.N).

The KBW Banks index .BKX is up 18 percent since the start of December but fell 0.9 percent on Friday.

The ruling could impact bank foreclosures nationwide and "dampen recovery prospects for the real estate sector and banks," said Nick Kalivas, senior equity index analyst at MF Global in Chicago. "Financials have really been a leader in the market in recent weeks; this could close that sector out."

(Wall St Week Ahead column appears every Friday and Sunday)

Even with the decline, however, the S&P 500 and Dow recorded their sixth straight week of advances. The market has proved resilient despite expectations that stocks were due for a pullback.

Wells Fargo & Co (WFC.N) and US Bancorp (USB.N) lost a ruling by Massachusetts' top court, which said the banks failed to show they held the mortgages at the time they foreclosed.

The court decision is the latest on the validity of foreclosures conducted without full documentation, and the ongoing mortgage fiasco could prove costly for the banks. The news turned the market lower but some said the reaction was overdone.

"Financials have really been a leader in the market in recent weeks -- this could close that sector out," said Nick Kalivas, senior equity index analyst at MF Global in Chicago.

Wells Fargo shares gave up 2 percent at $31.50 and US Bancorp eased 0.8 percent to $25.09. The KBW Bank index .BKX lost 0.9 percent.

The S&P financial index .GSPF rallied more than 10 percent in December as investors searched for bargains at the end of the year.

On Friday the Dow Jones industrial average .DJI slipped 22.55 points, or 0.19 percent, to 11,674.76. The Standard & Poor's 500 Index .SPX was off 2.35 points, or 0.18 percent, to 1,271.50. The Nasdaq Composite Index .IXIC declined 6.72 points, or 0.25 percent, to 2,703.17.

For the week, the S&P 500 rose 1.1 percent, the Dow gained 0.8 percent and the Nasdaq climbed 1.9 percent.

Investors treaded lightly after the employment report, which showed non-farm payrolls rose a less-than-expected 103,000. But overall employment for October and November was revised upward to show 70,000 more job gains than previously reported.

The Labor Department report showed a surprisingly large number of people gave up searching for work, tempering the positive news of a big drop in the unemployment rate.

Analysts said that while the data showed steady, if slow, progress, it did not meet expectations that had risen through the week.

The mortgage issue has been overhanging banks, prompting an uproar last year that led lenders such as Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and Ally Financial Inc to temporarily stop seizing homes.

On the upside, the energy sector capped declines as Diamond Offshore (DO.N) rose 4.9 percent to $70.57 after Goldman Sachs upgraded the driller. Goldman also upgraded Baker Hughes Inc (BHI.N) , sending its shares up 3.2 percent at $56.60.

The S&P 500 found support at its 14-day moving average, which is around 1,262. The index briefly broke below that before popping back up.