Stock market rally pits optimists vs. skeptics; indexes up 4% this week

NEW YORK -- After a brief lull, the young but powerful bull market that began in early March has regained its bullish mojo.

But the recent gains, while welcomed by profit-hungry investors, have left Wall Street wondering: Is the rally the start of a second leg of the bull? Or is the run-up a short-term bear trap that will burn giddy investors?

The resurgent rally has been ignited by a strong start to the second-quarter earnings season and a batch of incoming economic data that suggest the economy is healing.

All three major stock indexes scored a second straight weekly advance, with the Dow Jones industrial average rising 4%, the Standard & Poor's 500 gaining 4.1% and the Nasdaq composite index climbing 4.2%. The Dow climbed back above the 9000 level for the first time since January

But as has been the case since stocks began rallying furiously off of the March 9 bear market bottom — a time when equities were priced for the second coming of the Great Depression — there's no shortage of skeptics who don't believe in the rally and question its longevity.

Richard Suttmeier of ValuEngine.com says the market is moving higher on "momentum" buying, which is a telltale sign of "a blow-off top." He warns that the market is overvalued and that investors' expectations for the economy are too optimistic. A poor profit report from software giant Microsoft after the markets closed shows the risks.

There is a growing contingent on Wall Street that believes the recent run-up is the start of another uptrend. One such optimist is Carmine Grigoli, chief investment strategist at Mizuho Securities USA. In a note titled "A Second Leg for the Bull?" he said the mix of strong earnings, a broad advance that includes stocks in many sectors and huge amounts of cash on the sidelines is "characteristic of a buying stampede that occurs in the early stage of a major new advance." In an interview, he said, "The gloom is lifting. This is not a bear trap."