updated 5/17/2009 2:19:42 PM ET 2009-05-17T18:19:42

The stock market has run out of reasons to rally, at least for now.

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After a two-month surge that saw the Dow Jones industrials average soar 31 percent and the Standard & Poor's 500 index shoot up 37 percent, investors gave up some of those gains last week. As the new week begins, there doesn't seem to be any catalysts that could restart the rally.

The market barreled higher as investors realized that worst-case scenarios in the banking industry weren't going to happen. Indications that the recession was slowing also gave investors reason to buy at a pace not seen in decades.

Now though, with dire forecasts no longer priced into stocks, investors will have to hunt for signs that any economic recovery is beginning to take hold and that earnings are returning to more normal levels. Those signs are likely to come in the form of retail sales and consumer confidence reports as well as quarterly earnings announcements, but few are expected this week.

"My sense is we'll be sideways going into (this) week," said Timothy Speiss, chairman of the Personal Wealth Advisors division at New York-based Eisner LLP. "It's like watching grass grow right now."

Dan Genter, chief executive and chief investment officer of Los Angeles-based RNC Genter Capital Management said the rally helped stocks get back to trading at a fair value, or a price that's based more on the fundamentals of a company's performance than fears of an economic collapse.

"In the near term, it's really hard to break out of that 850 to 950 trading range," Genter said, referring to the S&P 500. The index closed last week down 5.2 percent.

Analysts say the market is also not likely to return to the 12-year lows it hit in early March because investors are more confident now.

Genter said there is still plenty of money waiting to be invested. If the market pulls back further, investors who missed out on the spring rally are likely to get back into the market, which could lend some support to prices.

Big stock moves in the coming week would have to come from a "shock" announcement such as a retailer going out of business or surprises in the Federal Reserve's minutes from its April meeting, said Jeffrey Phillips, chief investment officer at Troy, Mich.-based Rehmann Financial. The minutes will be released Wednesday.

With the bulk of quarterly earnings reports already out, only a few companies will be reporting results this week. Among the largest are home improvement retailers Lowes Cos. and Home Depot Inc., retailer Target Corp. and technology firm Hewlett-Packard Co.

Retail sales and consumer confidence are vital to a rebound in the economy because consumer spending accounts for about two-thirds of U.S. economic activity.

The spring rally stalled last week after a worse-than-expected report on April retail sales had investors rethinking their optimism about an economic recovery. For the week, the Dow fell 3.6 percent and the Nasdaq composite index slid 3.4 percent.

The Commerce Department said retail sales fell 0.4 percent in April, worse than the flat performance many economists had expected. Sales rose in both January and February before retreating in March and April. The gains earlier in the year raised hopes that the consumer sector of the economy might be stabilizing, but the most recent data has raised doubts about a recovery.

Investors also got another disappointing report on weekly unemployment data, though the continued job losses are starting to have a smaller effect on the market.

The Labor Department's weekly data showed more workers filing for unemployment benefits. New claims jumped to 637,000, above what economists had forecast. The overall number of people seeking unemployment benefits also grew faster than expected.

That helped unnerve investors further. But a pullback on Wall Street was also expected after such a strong run in prices.

"The reason why there was a slowdown was a little bit of fatigue," Speiss said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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