By Donna Kardos Yesalavich

U.S. stocks eked out tiny gains Friday on weak volume as the market attempted to extend this week's winning streak ahead of the second-quarter reporting season.

The S&P 500 Index and the Dow Jones Industrial Average are on pace for the biggest weekly gain in nearly a year, with each of the benchmarks up about 4.7%.

In a quiet session following data on U.S. wholesale inventories that sent mixed messages, investors turned their focus to expectations for what second-quarter reporting season, which kicks off Monday with results from Alcoa (AA), will show.

The Dow industrials (DJI) climbed nearly 5% this week, thanks in part to investors' hopes that the market's recent drop to 2010 lows may have exaggerated effects anticipated on corporate earnings from the slumping euro and slower global growth. However, investors are hesitant to push stocks up much more before the reports begin.

"Earnings season is really going to determine whether this market continues to rally like the last few days or whether this rally turns around and fades away," said King Lip, chief investment officer at Baker Avenue Asset Management. "The concern is, what is the outlook for Q3 and Q4?"

The Dow edged up 3 points to 10,141 in recent trading.

Among individual blue chips, Alcoa rose 0.8% ahead of the aluminum giant's Monday report, while Caterpillar (CAT) was also strong, up 1.7%, and Chevron (CVX) climbed 1.6% as crude-oil futures climbed to nearly $76 a barrel.

Offsetting the Dow's gainers, Johnson & Johnson (JNJ) fell 1.4%, Pfizer (PFE) slipped 1% and Procter & Gamble (PG) declined 0.8%.

The Nasdaq Composite (RIXF) rose 0.3% to 2,180, bolstered in part by a 1.8% jump in Google (GOOG). The company said the Chinese government renewed a license it needed to continue using its Chinese Web address, marking a compromise between the company and Chinese regulators since Google decided to stop cooperating with censorship requirements.

The S&P 500 (SPX) added 0.2% to 1,072. The materials sector led the measure's gains while consumer-staples and health-care stocks fell.

Data released Friday showed inventories of U.S. wholesalers rose 0.5% in May, in line with expectations, as warehouses were restocked with machinery and other durable goods. However, sales of U.S. wholesalers registered their first decline in 14 months, showing a 0.3% slip.

Investors noted that while the rise in inventories is seen as lifting economic growth, the data also indicates demand is waning.

Overseas, the Bank of Korea unexpectedly raised interest rates from record lows. Markets were surprised by the rate increase, but Seoul shares ended higher on the view that the central bank was sending a vote of confidence in Korea's recovery.

Meanwhile, European Central Bank President Jean-Claude Trichet stepped up his warnings to governments to reduce their borrowing before they lose the confidence of electorates and financial markets.

The euro (CUR_EURUSD) fell to $1.2644, from $1.2692 late Thursday in New York. The U.S. Dollar Index (DXY) edged up 0.2%. Treasurys slipped, pushing the yield on the 10-year note (UST10Y) above 3%, up to 3.06%. Gold futures climbed.

Among stocks in focus, Madison Square Garden (MSGNV) fell 3.7% after basketball star LeBron James late Thursday confirmed reports that he will join the Miami Heat, rather than the MSG-owned New York Knicks.

Lawson Software (LWSN) slipped 3.5%. The business-software maker's fiscal fourth-quarter earnings fell 30% and the company projected first-quarter earnings and revenue below analysts' estimates.

"The market is definitely on edge today," said Paul Larson, equities strategist at Morningstar. "Investors' psyche right now is very fragile because everyone is very sensitive to the possibility that the economy may enter a double dip."

Overseas, uncertainty over Japan's Upper House elections this weekend weighed. If the government loses, the country's recent fiscal discipline could be at stake, putting Japan at risk of a sovereign debt crisis of its own.

The Bank of Korea unexpectedly raised interest rates from record lows. Markets were initially jolted by the rate increase, which only one economist of 15 had predicted in a Dow Jones Newswires survey. Still, Seoul shares ended higher on the view that the central bank was sending a vote of confidence in Korea's recovery.

Meanwhile, European Central Bank President Jean-Claude Trichet stepped up his warnings to governments to reduce their borrowing before they lose the confidence of electorates and financial markets.

The euro fell to $1.2639, from $1.2692 late Thursday in New York. The U.S. Dollar Index (DXY) edged up 0.1%. Treasurys slipped, pushing the yield on the 10-year note above 3%, up to 3.05%. Gold futures climbed.

Among stocks in focus, Madison Square Garden shares (MSGNV) fell 3.5% after basketball star LeBron James late Thursday confirmed reports that he will join the Miami Heat, rather than the MSG-owned New York Knicks.

Best Buy (BBY) declined 1.4% after Jefferies cut its investment rating on the stock to hold from buy and lowered its earnings estimates and price target for the consumer-electronics retailer, citing concerns about "continued softness" in consumer electronic sales.

 
 
Lawson Software, Inc. (MM) (NASDAQ:LWSN)
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