Updated from 5:26 p.m. ET to include commentary on initial jobless claims and information on McKesson's move in after-hours action.

NEW YORK ( TheStreet) -- And so ends the first real blip of 2012's bull run.

Any relief about Wednesday's bounce though has to be set against the fact that the major U.S. equity indices closed well off their highs for the day, and volumes remain dismal, totaling 3.77 billion shares on the New York Stock Exchange and 1.54 billion on the Nasdaq. In other words, no one was chasing the tape, and it's premature to give the all-clear signal.

The idea that 2012's market trajectory so far bears an eerie resemblance to 2011 is no comfort to investors who undoubtedly don't see extreme volatility through the summer ending in a another flat year for the S&P 500 as an attractive scenario.

Capital Economics laid out its take on the recent pullback earlier Wednesday with a good news/bad news scenario that argues both upside and downside may be limited for stocks from here.

"Our view is that the US economy will be more resilient this time around, providing some support for US equities despite the mounting problems elsewhere," wrote analyst Julian Jessop. "However, we expect another rollercoaster ride for riskier assets in general, dragged down by recession in Europe, the disintegration of the euro and much slower growth in China."

The good news is that Jessop expects the S&P 500 to ultimately hang on to most of its current year-to-date gain of 9%. The bad news? His year-end target is 1350, which would be appreciation of 7.3% for the year, but represent additional downside of roughly 1.5% from where the index currently resides in the 1370 range.

"The performance of the S&P 500 (in 2011) was typical of the major equity markets last year: a sluggish first half, a dreadful third quarter, and then a final flourish," Jessop said, adding later: "We are forecasting a similarly lackluster performance this year ... There should also be plenty of volatility along the way, triggered in particular by a further escalation of the crisis in the euro-zone."

Scott Wren, senior equity strategist at Wells Fargo, also took a stab at parsing what this pause means for the steady churn higher that stocks have enjoyed all year. He thinks the rapid rise since October has brought the markets to a crossroads.

"In our opinion, a time out is needed to absorb the robust gains and reassess what the future might hold," he wrote.

Wren thinks the macro outlook is still good for stocks, expecting the economy to continue to expand throughout the year and for earnings growth to remain positive, though slower than what was seen earlier in the recovery. He noted that the Federal Reserve has made it clear that more quantitative easing is still possible if the data takes a turn for the worse or the unemployment rate stalls, and said stock valuations "do not appear excessive" at current levels when compared to historical metrics.

"We will be looking for opportunities to add to equity exposure in coming months," Wren stated. "The current pullback probably still needs to run its course, but we do not expect substantial downside. It is true that global events occurring in Europe or the Middle East could always flare up and overwhelm the fundamentals for a time, but we look for the U.S. stock market to trade higher over the coming 12-24 months."

Earnings season is going to dominate the headlines for the next few weeks, and if the major U.S. equity indices are going to make another push higher, companies are likely going to have to earn it from here.

Retail investors remain unconvinced, pulling $4.27 billion out of long-term mutual funds in the week ended April 4, according to the Investment Company Institute, the highest total of 2012. Stay tuned.

Meantime, Thursday's slate of scheduled news will give Wall Street watchers plenty of headlines to chew over. Although the tech sector has provided leadership since stocks came off near-term lows in early October, Google ( GOOG) hasn't participated in the great rally of 2012. The stock is down 2% since the calendar turned with heavy spending on expansion weighing down margins and the completion of the company's $12.5 billion deal to acquire Motorola Mobility ( MMI) still lingering under scrutiny from China.

Google is coming off a disappointing fourth-quarter performance when it came in nearly 10% short of Wall Street's profit expectations and saw a sequential decline in gross margin to 78.8% from 85.4%. A drop in advertising pricing contributed to the miss as the company said average cost-per-click fell 8% on both a sequential and year-over-year basis.

The stock tanked in the wake of the third-quarter report, losing more than 8% on Jan. 20 in the immediate aftermath to sink back below $600, but it's gained back most of that drop since, closing Wednesday at $635.96.

The Internet search giant is now due to report its first-quarter results after Thursday's closing bell, and the current average estimate of analysts polled by Thomson Reuters is for a profit of $9.65 a share on revenue of $8.14 billion in the March-ended period.

The sell side is mostly believers with 34 of the 41 analysts covering Google at either strong buy (15) or buy (19), and the 12-month price target sitting at $725, implying potential upside of 14% from current levels.

Think Equity previewed Google's numbers late last week, saying it sees the company getting back to its winning ways. The firm, which reiterated a buy rating and $714 price target on the stock, is expecting above-consensus earnings of $9.91 a share on revenue of $8.15 billion.

"Based on our checks, we believe search trends have been solid in 1Q12 and we believe Google's newer businesses like Mobile and Display continue to take share," Think Equity said. "While there could be continued headwinds around CPC cost-per-click declines, risks around the pending MMI acquisition and regulatory concerns, we continue to believe Google remains exceptionally well positioned across most every key Internet growth driver."

Google shares sport a forward price-to-earnings multiple of 12.6X, which is in line with Apple ( AAPL), and cheaper than Yahoo! ( YHOO) at 15.9X, so a blowout quarter could get the stock going again.

Birinyi Associates, however, points out that Google usually doesn't fare too well in the wake of its quarterly reports. The firm says that the shares have closed down 63% of the time in the next trading session, regardless of whether Google beats or misses expectations.

Check out TheStreet's quote page for Google for year-to-date share performance, analyst ratings, earnings estimates and much more.

Other companies reporting their quarterly results on Thursday include Fastenal ( FAST), JB Hunt Transport Services ( JBHT), Rite Aid ( RAD), and Talbots ( TLB).

Expect a lot of jockeying around the big banks on Thursday as well with JPMorgan Chase's ( JPM) quarterly results on tap Friday morning. The stock is up 32% for the year, so Wall Street won't be very understanding if Jamie Dimon's juggernaut -- often considered the best of the money center banks -- doesn't knock the ball out of the park. Keefe, Bruyette & Woods thinks JPMorgan could make life hard for its counterparts.

" W e expect JPM to set a high bar for the industry this quarter by reporting strong results driven by improved trading, strong mortgage banking, and continued loan growth in its commercial book," the firm said Wednesday. "We expect a return on tangible common equity near 15% this quarter, which we anticipate to be well above universal bank peers."

More commentary on the financials should be forthcoming from the sell side on Thursday.

Apple, meanwhile, will still be dealing with questions related to Justice Department's civil antitrust suit related to e-book pricing on Thursday. The stock is down in the past two sessions with Wednesday's weakness marking a drop of nearly 3% from Tuesday's all-time high of $644. Sterne Agee boosted its price target on Apple to $750 on Wednesday, saying its worries about slowing iPad momentum appear to be misplaced.

Thursday's economic calendar features weekly initial and continuing jobless claims at 8:30 a.m. ET; the producer price index data for March at 8:30 a.m. ET; and the Census Bureau's trade balance report for February at 8:30 a.m. ET.

The expectation is for initial claims of 355,000, according to Briefing.com, a slight tick down from last week's total of 357,000. The overall producer price index is seen up 0.4% for last month with the core number, which excludes the impact of food and energy costs, projected to rise 0.2%.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, is expecting initial claims to come above-consensus at 370,000 because the Easter holiday came a bit early this year, and he thinks the market reaction to that number could get a bit messy.

" T he seasonal factor for this year 'assumes' claims will rise 48K, or our analysis points to the headline adjusted number rising to about 370K, the highest level in five weeks," he wrote. "This would be of no economic significance at all, and claims will in due course revert to the trend, but the markets are jumpy after the disappointing payroll report, so another 'bad' labor market number would likely play quite badly."

And finally, McKesson ( MCK) was up in after-hours action after the company snared a two-year contract to be the primary pharmaceutical supplier for the Department of Veterans Affairs.

The San Francisco-based company didn't provide an estimate of the value of the contract. Its shares were last quoted at $91.78, up 4.1%, on volume of more than 55,000, according to Nasdaq.com.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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