Wall Street rallies on; S&P 500 now is up 15% from its low

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It’s getting safer to peek at your 401(k) account.

Wall Street today rallied for the fifth time in six sessions, leaving some key indexes up 15% or more from their recent lows and reversing another chunk of this year’s damage.

The Dow Jones industrial average rose 178.73 points, or 2.5%, to 7,395.70. The blue-chip Dow has gained 848 points, or almost 13%, since it hit a 12-year closing low of 6,547 on March 9.

The broader Standard & Poor’s 500 index jumped 3.2% to 778.12, bringing its gain since March 9 to 15%.

While the American International Group bonus fiasco is stealing the headlines, it’s having no damping effect on the stock market’s improved mood.

As I noted here, Wall Street had been primed for at least a short-term bounce after the deep dive in February and the first few days of March.

But some buyers may be responding to glimmers of hope that the economy has stopped getting worse.

Investors seem to be encouraged by economic data that have been ‘horrible, but less horrible’ than previous numbers, said Fred Dickson, market strategist at brokerage D.A. Davidson & Co. in Lake Oswego, Ore.

The government today said construction of new homes and apartments jumped 22% in February, though that was from extremely depressed levels in January.

The market’s rebound last week was fueled in part by signs that consumer spending had stabilized in January and February after diving in the last four months of 2008.

Technology stocks, a classic bet on economic growth, have been leading the advance from last week’s lows. The Nasdaq 100 index has risen 14.2% since March 9. It got a boost today from Apple Inc., which gained $4.24, or 4.4%, to $99.66 after the company unveiled an updated operating system for its iPhone.

Not surprisingly, many Wall Street pros remain skeptical that this market upturn has staying power. Michael Nasto, senior trader at U.S. Global Investors in San Antonio, Texas, said trading volume has been unimpressive over the last week.

‘I’d have to see more volume to believe this rally is for real,’ he said.

Still, investors’ mood has been so grim, the ‘contrarian’ view is that the market is likely to continue disappointing the bears and the cautious, for a change.

A weekly Bloomberg News survey of strategists at major brokerages asks them for their recommended portfolio allocations to stocks, bonds and cash. In last week’s survey, the mean recommended stock allocation was 51.5% -- the lowest since 1997, and far below the peak reading of 72% in spring 2001.

The survey covers just a relative handful of strategists, so it can be skewed if one is particularly bearish. Even so, not one of the strategists in the latest survey recommends holding more than 61% in stocks at this point.

The mean recommended allocation to bonds is 39.1%, and the cash recommendation is 8.1%. Those have been great hiding places this year, but they’ll lose their appeal to some investors if confidence rises that the stock market has, at last, hit bottom.

-- Tom Petruno