Will stocks keep rising?

Associated Press

NEW YORK

Investors cast aside worries of another recession last week and bought stocks by the bucketful. This week brings hard evidence of whether they were right.

A new earnings reporting season kicks off today with Alcoa Inc., followed by dozens of other companies over the next few days. A question on everyone’s lips: Will these second-quarter reports show that companies are feeling better about the future, too?

“We’ll find out soon enough what the reality is,” says Howard Silverblatt, a senior analyst at Standard & Poor’s.

After dumping stocks since late April, investors last week drove the Dow Jones industrial average up 5.3 percent, its best weekly performance in a year. Some analysts say stocks had simply gotten too cheap for investors to resist. Others point to an International Monetary Fund report that the world economy could grow faster than projected. That took some of the fear out of the market.

“The economy is running on two cylinders, but the risk of a double-dip recession” has fallen, says Peter Buchanan, senior economist at CIBC World Markets. “The market could go higher.”

Certainly, that is the view of professional stock pickers. When investors were selling stocks week after week, eventually driving shares down 13.6 percent from their April peak, Wall Street analysts never lost faith in the future.

They’re projecting that second-quarter operating earnings of S&P 500 companies rose 42 percent, according to S&P’s Silverblatt.