The territory into which Friday's rally brought the stock market can hardly be called new.

Three times before, the

S&P 500

has climbed into the rarified air around 1270. Each time it has fallen. The latest ascent has again raised hopes that the market will break its range. This, then, will be the theme of the coming week: Can stocks break their ceiling? It will not be an easy thing -- skeptics abound.

"I don't think it has very far to go," said Christine Callies, U.S. investment strategist at

Credit Suisse First Boston

, of the stock market. "It might go to a nominal new high, but we wouldn't chase the rally."

For Callies, it comes down to interest rates. Despite the Treasury market's huge move after the February employment report came in weaker than the market expected, yields remain substantially higher than what they were a few months ago. She expects to see them rise again. The U.S. economy remains buoyant and Asia is recovering. "That is marginally more bearish for bonds," she said. "We don't think there will be a major rally in bond prices anytime soon." So unless profits accelerate, Callies doesn't expect to see stocks go anywhere soon.

Nor does Hugh Johnson, chief investment officer at

First Albany


"I don't think we're going to break out of the trading range," he said. "The market started at a level that was overvalued and has become more overvalued. Although the level of optimism or bullishness declined recently, it is likely that it is higher again. I am uncertain whenever there is widespread optimism and overvaluation." Within that context, Johnson suspects that any run for new highs will be met with profit taking.

Now then, if everyone was of a mind with Callies and Johnson, the market wouldn't be knocking on the door of new highs again. It would be flatlining until yields came down. Or earnings prospects started getting better. Or




returned to the mortal coil to say they'd made a big mistake on that whole valuation thing.

Morgan Stanley Dean Witter

U.S. investment strategist Peter Canelo liked the jobs number and the resulting move in the bond market enough to raise the stock allocation in his model portfolio to 70% from 65% Friday.

As Canelo sees it, the real story of the last couple of months has not been that stocks were trapped in a range. "What's really been happening is bonds have been collapsing and stocks have been holding up," he said. Now bonds aren't collapsing anymore. Time for stocks to go up.

The part about bonds not collapsing, at least, is a commonly held view after the employment report. The psychology of the market has changed. "We've eliminated the possibility of the bond market heading to 6% in the near future," said Kevin Flanagan, money market economist at Morgan Stanley Dean Witter. "What we're dealing with is the same economic scene: solid growth with no inflationary consequences."

Nevertheless, Flanagan emphasized that there is some risk in the bond market heading into Thursday, when the February

retail sales report

gets released. "That could be another strong referendum on consumer spending," he said.