Wall Street looks for more evidence to justify a rally

There's been a steady stream lately of decent earnings reports and mostly benign economic data, and there's a sense that the credit crisis that pummeled stocks since last fall is nearing an end. For the first time in weeks, there's optimism that the government might have actually staved off a deep recession.

The U.S. consumer clearly isn't that cheerful, judging from consumer confidence figures released last week, but traders and portfolio managers on Wall Street often get ahead of themselves, looking past any bad news and toward future profits.

Analysts are a little more cautious.

"The market has cleared its hurdles, but the race isn't over yet we haven't crossed the finish line," said Chris Johnson, president of Johnson Research Group. "You'll now start to see lots of money that will be migrating sector to sector because everyone has been waiting for this momentum."

Johnson has a very bullish stance for stocks in the near term, calling for up to a 10 percent rise within the next four to six weeks. But, he's also realistic "markets have a tendency to be overbought really quickly." That was one reason the Dow Jones industrials pared some of its gains Friday, gaining 48 points after being up more than 100 earlier in the day and shooting up 190 in the previous session.

The Dow gained 1.29 percent over the course of the week, the Standard & Poor's 500 index ended up 1.15 percent, and the Nasdaq composite index rose 2.23 percent.

Johnson points out there are still some big obstacles that could stand in the way of the market extending its gains. Chief among them is the health of the consumer, whose spending habits account for more than two-thirds of the U.S. economy.

That means economic data and upcoming quarterly earnings from retailers will take on even bigger significance than usual. For example, investors are likely to focus on Walt Disney Co.'s earnings report Tuesday to determine the strength of sales at its U.S. amusement parks and of Disney products.

But they'll also be looking at results from Cisco Systems Inc., which makes Internet routers and other wireless devices, when it posts results Tuesday. And they'll be looking for comments Tuesday from global bank UBS AG on the state of the credit markets. Fannie Mae, the government-sponsored mortgage finance company, might give some perspective on the housing market.