Wall Street on Track for Positive Week

"The number one driver is technical," says Zafran. "Institutional money is still underweight, trailing the indices and playing catch up. Hedge fund and mutual fund managers are trailing market indices. They've been overly defensive and bearish for the entirety of 2012 so far and they're playing catch up and putting money to work. That's what I think is going on."

"I think that the technical factor is overwhelming whether earnings are good or bad," says Zafran. "And it's overwhelming whether Spain has a debt crisis or not. It's overwhelming whether or not Congress will act like adults and eventually address the fiscal crisis we face. Right now, managers are focused on relative performance versus the index and their hand is being forced to invest."

The major U.S. equity indices finished with respectable gains on Thursday as data showing progress in the housing market offset a handful of high-profile earnings misses and another disappointing read on weekly initial jobless claims.

On Friday, however, the Department of Commerce reported a disappointing advance gross domestic product growth estimate of 2.2% for the first quarter, a slip from the 3% expansion reported for the fourth quarter. Economists polled by Thomson Reuters, on average, expected growth of 2.5%.

The final University of Michigan read on consumer sentiment in April was a much-better-than-expected 76.4, but the markets barely budged at the report.

In Europe, London's FTSE closed up 0.5% and Germany's DAX rose 0.9%. The euro was recovering after a decent bond auction in Italy provided some comfort about the strains on the eurozone peripheral debt markets and Spain's credit rating downgrade by Standard & Poor's.

Italy sold debt due in 2016 and 2019 to yield a respective 4.29% and 5.21%. On the 10-year bonds, Italy was able to sell at the top end of its target of €2.5 billion. All in all, Italy sold €5.95 billion of debt, which did not meet the maximum target of €6.25 billion.

"They got the auction done, which is critical, but I think Italy is slowly moving back onto the radar screen," warned Alan Gayle, senior strategist at RidgeWorth Investments. "It will be competing with Spain, but there is a lot of nervousness around Italy and that's something that's going to continue. And that's why the European Union has to be talking about more pro-growth strategies."