Stocks staged a sharp rally last week, with the major indexes rising nearly 3% in a holiday-shortened week. The market has rebounded almost 5% from the previous Thursday, when it hit 2016 lows, inspiring hope that at least a near-term bottom is within sight.

While investors welcomed the bullish turn, it was more style than substance. Given that buying was concentrated in the worst-performing stocks, last week’s rally seems more of a knee-jerk reaction to an oversold condition.

Crude prices rose last week, and the lack of bad news from that sector was good news for stocks. In general, U.S. economic data was mixed but leaned positive, a badly needed boost to morale.

The Dow Jones Industrial Average tacked on 418 points or 2.6%, to 16,391.99 last week, while the Standard & Poor’s 500 index rose 2.8%, or 53, to 1917.78. The Nasdaq finished with a 4% gain to 4504.43.
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Looking ahead a few months, there are three factors that would help stocks the most, says Kevin Mahn, chief investment officer at Hennion & Walsh Asset Management. The market needs economic data to be good, but not so strong as to force the Federal Reserve to raise rates in March. The European Central Bank must continue to ease monetary policy, and a real deal on cutting the world’s supply of oil is necessary, he says. If things go the opposite way, however, then pressure on stocks will renew, Mahn adds.

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