If Wells Fargo's strong first-quarter preliminary performance is any sign, stocks could rally further this week on any reassuring news when three other big banks post quarterly results.

The earnings season starts in earnest, with banks Goldman Sachs , JPMorgan and Citigroup set to report their latest scorecards. Both JPMorgan and Citigroup are Dow components.

General Electric , another Dow component, will report earnings on Friday. GE, whose businesses range from broadcasting to making jet engines, is closely watched because its results and outlook may shed light on the broader economy's health.

Hopes that the economic slump may be abating and some stability may be returning in the banking sector have helped underpin a month-long recovery in stocks from 12-year closing lows hit in early March.

The market is looking like it wants to continue the rally, said Andre Weisbrod, president and chief executive officer of STAAR Financial Advisors Inc in Pittsburg, Pennsylvania.

But again, so much of this depends on the news of the day. It looks like we're going to see the banks showing some improved cash flows, and that's certainly better than the opposite situation.

The benchmark Standard & Poor's 500 Index <.SPX> scored its fifth straight weekly gain at Thursday's close, when trading ended for the short holiday week. On Thursday alone, both the S&P and the Nasdaq jumped almost 4 percent, while the Dow industrials climbed 3 percent.

The latest rally was triggered by Wells Fargo, the fourth-largest U.S. bank, which surprised Wall Street by saying it expected to post a record $3 billion profit for the January through March quarter. Wells Fargo will report earnings on April 22.

Investors are hoping that more banks will sing the same positive tune when their results roll in.

Goldman Sachs Group Inc, which will report earnings on Tuesday, converted from an investment bank to bank holding company status last September after Lehman Brothers collapsed.

On Good Friday, Goldman Sachs was said to be considering a multibillion-dollar stock offering to help repay money borrowed from the U.S. government, according to the Wall Street Journal.

Looking ahead, JPMorgan is due to report results on Thursday and Citigroup on Friday.

OBAMA'S OPTIMISTIC

President Barack Obama said on Friday that despite the recession's heavy toll, the U.S. economy is showing glimmers of hope. He didn't mention the stress tests being performed at 19 big U.S. banks. The financial markets anxiously await those results, due at the end of April.

But the president expressed confidence that his administration was addressing the problems of both troubled banks and non-bank financial institutions.

U.S. financial markets were closed for Good Friday.

For the short holiday week, the S&P 500 rose 1.7 percent, the Dow Jones industrial average <.DJI> gained 0.8 percent and the Nasdaq composite index <.IXIC> climbed 1.9 percent.

For the year, the Nasdaq is up 4.8 percent, while the Dow is down 7.9 percent and the S&P 500 is down 5.2 percent.

ARE BANKS LENDING?

The banking sector's health has been a major worry after fallout from the financial crisis led the U.S. government to pump billions of dollars into such troubled institutions as Citigroup, which gave Wall Street a surprise last month when it said it was profitable in January and February.

With the economy mired in a protracted recession, investors are eager to see if banks have begun lending again to consumers and businesses, whose spending would serve as a crucial underpinning to an economic recovery.

The banking sector has been in focus for Wall Street for the last six months, so next week sharpens that a little bit more, said Paul Nolte, director of investments at Hinsdale Associates in Hinsdale, Illinois.

On Friday, the Federal Deposit Insurance Corporation said U.S. regulators closed Cape Fear Bank of Wilmington, North Carolina, and New Frontier Bank of Greeley, Colorado, which became the 22nd and 23rd U.S. banks to fail this year.

EARNINGS, CPI AND HOUSING STARTS

Investors may need to keep the eyedrops handy this week as they sift through torrents of earnings reports and some major U.S. economic indicators for March, including the Producer Price Index, the Consumer Price Index and housing starts.

For the full economic diary, click

Besides bank earnings, earnings are expected from other bellwethers, particularly in the tech sector, which was mostly spared most of the pain in the market's recent fall to 12-year lows.

Chip maker Intel Corp is set to report first-quarter earnings on Tuesday, while Google Inc , the Web search leader, reports results on Thursday -- both after the bell.

Earnings are also on tap from Dow component and health-care company Johnson & Johnson on Tuesday; transportation companies CSX Corp and AMR Corp on Wednesday; motorcycle maker Harley-Davidson Inc on Thursday and toymaker Mattel Inc on Friday.

NO TIME TO GET COCKY

When U.S. stock trading resumes on Monday, investors will assess whether the economy is improving and the rally is likely to continue -- or whether bears still have the upper hand.

The S&P 500 is up 26.6 percent from its March 9 bear market closing low, but it is still down 45.7 percent from its record high of October 2007.

The short-term momentum is still bullish. This move off the March lows probably has more legs to it, said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston.

But what we're telling our clients is that once you start to get above the 860 area in the S&P 500, and 8,200-8,300 in the Dow, we want to start getting out of speculative long positions and paring back our equity exposure.

Mindful of the fragility of previous rallies, including one after the November lows, strategists advocate some caution.

Worth noting: The CBOE Volatility Index <.VIX>, or VIX, commonly known as Wall Street's fear gauge, slid on Thursday to its lowest close since September 2008.

In our opinion, this is still a bear market move, Strazzullo said. So you've got to be careful. It's been a great run over a short period of time, but we don't see it as a bigger picture change in trends, so I don't want to get careless -- not at these levels.

(Additional reporting by Leah Schnurr and Edward Krudy; Editing by Jan Paschal)

(Wall St Week Ahead runs weekly. Questions or comments on this one can be e-mailed to: ellis.mnyandu(at)thomsonreuters.com)

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