Wall Street appears to have shaken off its worst fears about the US economy after a market-friendly outlook from the Federal Reserve, as it turns to corporate America's pending earnings news for fresh direction.
US shares received a major boost in the past week after the Fed announced it was keeping its key short term interest rate anchored at 5.25 percent and stepped back from hints of future interest rate hikes.
The Dow Jones Industrial Average surged 3.06 percent over the week to Friday to end at 12,481.01.
The broad-market Standard & Poor's 500 soared 3.54 percent to 1,436.11 and the tech-dominated NASDAQ composite spiked 3.52 percent to close the week at 2,448.93.
The turning point for Wall Street over the past week, following volatility in recent weeks linked to worries about a Chinese stock bubble, was a somewhat ambiguous statement from the Federal Reserve on Wednesday that nonetheless eased concerns about rate hikes.
Some analysts said the statement may have set the stage for a future cut in interest rates as US economic growth continues to slow.
Investors like lower rate environments, as cash is cheaper to borrow.
With its usual cryptic style, the Fed statement dropped a reference to "firming" or hiking rates, substituting the phrase "future policy adjustments" that would depend on economic data.
Joel Naroff at Naroff Economic Advisors said the Fed made a major shift in its stand.
The Fed panel "has moved from talking about the next move being higher rates to a more neutral stance," he said.
"Since to get from forward to reverse you have to go through neutral, this action implies the possibility of a rate cut at one of the next few meetings. This was a critical and surprising change in stance," he said.
But, Marc Pado, an analyst at Cantor Fitzgerald, said the stock market "got a little bit overexcited about the Fed admitting the obvious."
Pado said that based on the latest message from the Fed, "They're not going to cut rates in May, unless something dramatic happens."
Fred Dickson, a chief market strategist at DA Davidson & Co, said Wall Street may consolidate in the coming week after its hefty gains as investors assess prospects for corporate earnings for the quarter to March 31.
Investors are likely to take cues from the latest set of corporate earnings, which could act as further stimulant to sentiment or depress optimism if earnings disappoint.
"Wall Street seems to be settling down after Wednesday's [Fed] meeting," Dickson said.
"Near-term, the stock market looks a little extended and could be ripe for a very small pullback. We are entering earnings warning season. With the [Fed] sending a message that current economic growth is mixed, some portfolio managers may show some restraint on the buy-side until we get well into earnings season."
In the coming week, investors will be pouring over fresh reports on new home sales, consumer confidence and consumer spending among other releases.
Tomorrow's new home sales report is likely to attract particular attention amid the current housing downturn.
Most analysts expect new homes sales to have improved last month to 995,000 units, compared with sales of 937,000 in the prior month.
Bond prices dropped over the week as investors moved back into stocks.
The yield on the 10-year Treasury bond rose to 4.613 percent from 4.545 percent a week earlier and the 30-year bond yield climbed to 4.799 percent against 4.695 percent. Bond yields and prices move in opposite directions.