Wall Street kept its momentum over the past week with a modest advance, although some analysts are questioning whether the two-month-old rally is running out of steam.
The Dow Jones industrial average eked out a gain of 0.26 percent in the week to Friday to end at 8,604.60 and the broad-market Standard and Poor's 500 edged up 0.36 percent to 933.41.
The technology-heavy Nasdaq added 1.15 percent to 1,520.15.
The Dow blue-chip index has progressed some 14 percent since lows hit in mid-March, with the Nasdaq up 19 percent.
But the markets, while expecting some economic strengthening over the course of 2003, are now sensitive to news about the possibility of deflation after a warning from the Federal Reserve.
The central bank on Tuesday left its key rate unchanged at a four-decade low of 1.25 percent while expressing concern about downward pressure on prices.
Producer prices for April, due to be released in the coming week, are expected to show a 0.6 percent decline, according to economists.
Fed chairman Alan Greenspan "has commented on it before, so the markets will be looking at those sorts of core measures to see if they are continuing to show a slowdown in the core rate of inflation," said Mike Carey, a US economist at Credit Lyonnais in New York.
Still many analysts say investors are increasingly confident that the worst is over for Wall Street after a three-year bear market, and that this may be the start of a new bull market phase.
"We agree with Federal Reserve chairman Alan Greenspan's forecast in his congressional testimony ... that the economy will grow at a `noticeably better pace than it has during the past year,'" said Rod Smyth, a Wachovia Securities market strategist.
"If he is right, we believe the stock market rally of the last two months will have the needed stimulus to break out of what we have called `the box' [780 to 950 on the S&P 500]. This box is the range in which the S&P 500 has traded for the last 10 months."
"I continue to believe that this rally will carry further than most believe," added Barton Biggs at Morgan Stanley.
"My hunch is that it is not too late to play, because we may have traversed only half of it. The enthusiasm could grow. It's the old story. After a long decline, for prices to rise the news doesn't have to be good, much less great; it just has to be less bad than what has already been discounted."
But Bear Stearns' startegist Francois Trahan was far more cautious.
"The equity market rally of the past two months has been largely driven by declining oil prices," he said. "In our opinion, a further oil price decline from these levels is unlikely to carry the stock market dramatically higher. Consolidation is what lies ahead."
Among active shares, Lucent Technologies surged 16.22 percent for the week to 2.15 and Juniper Networks rose 7.62 percent to 12 after the two firms announced a joint effort to help supply Internet firms.
Cisco, a key tech bellwether, advanced 4.45 percent to 15.95 despite issuing a weak outlook for the coming months.
But Electronic Data Systems (EDS) slipped 7.67 percent to 17.58 after it reported disappointing earnings and failed to calm investor jitters about its outlook.
In the retail sector, Wal-Mart edged up 0.62 percent to 55.80 and Target gained 5.85 percent to 35.27 but JC Penney fell 0.46 percent to 17.15 and Sears 2.47 percent to 27.21 after the major chain stores released a mixed set of sales figures for the past month.