Consistent with recent trends, the stock market's "dip" late last week was viewed as a buying opportunity Monday. Aided by short-covering from some participants and wariness of missing the boat among others, modest early gains accelerated as the session progressed, leaving major proxies significantly higher at day's end.

The

Dow Jones Industrial Average

rose 2% to 8471.61 after trading as high as 8501.66. The

S&P 500

gained 1.8% to 914.84 vs. its intraday best of 918.15, and the

Nasdaq Composite

climbed 1.9% to 1462.20 vs. its apex of 1465.40.

Monday's gains recouped nearly all the ground lost last Thursday and Friday, although major averages failed to surpass last Wednesday's intraday highs of 8526.38 for the Dow, 919.70 for the S&P and 1468.08 for the Comp. Surpassing those levels on a closing basis is the market's next short-term technical challenge, one likely to be closely watched in the coming days.

On Monday, however, there was mostly relief about the apparent stabilization of the SARS outbreak in many nations, excluding China, according to the World Health Organization. Similarly, North Korea's apparent offer to suspend its nuclear program, ballistic missile testing and missile exports, as reported by

Sky News

, further fueled bullish sentiment. Finally, crude futures fell another 4% and there was optimism in some circles about the $1.4 billion settlement between 10 Wall Street firms and securities industry regulators (more below).

Elsewhere, better-than-expected earnings from

Procter & Gamble

(PG) - Get Report

and

McDonald's

(MCD) - Get Report

also spurred buyers. Perhaps more impressively,

General Electric

(GE) - Get Report

rose 1.4% despite an article in

The Wall Street Journal

that raised concerns about the firm's potential exposure to asbestos liability.

GE's rally provided evidence of the market's underlying bullish tone. It also suggested computer-driven program-buying of baskets of large-cap stocks was a big factor in the advance on a day in which trading volume receded from recent levels. Almost 1.3 billion shares were exchanged on the

Big Board

vs. last week's average daily volume of 1.44 billion. Advancing stocks bested declining issues by 3 to 1.

Things That Make You Go ... Hmmm

As mentioned above, there are some who believe today's "historic" settlement between Wall Street and regulators will be bullish, as it will put a scandal-ridden era behind the industry. "Our unified action

brings to a close

a period during which the once-respected research profession became nearly unrecognizable to earlier generations of investors and analysts,"

Securities and Exchange Commission

Chairman William Donaldson said in a press conference. (Italics added.)

Donaldson didn't mean to imply that investigations into industry wrongdoing are over -- something New York Attorney General Eliot Spitzer made clear: "This is not the end -- this is very much the beginning," Spitzer said.

In addition to potentially more regulatory scrutiny, Wall Street almost certainly faces more class-action lawsuits from investors who believe they were defrauded by the industry.

Somewhat lost in the discussion is whether or not the deal will really restore confidence to the "average" investor.

I, for one, am skeptical, judging by anecdotal evidence such as this email from a longtime reader: "After getting so burned I'm just so distrustful of the stock market. I ... read all those analyst reports and invested in

WorldCom

,

Motorola

(MOT)

,

AT&T

(T) - Get Report

, etc. Believe me, the analyst reports only had great things to say when I bought these dogs."

For the record, I agree folks like this are mainly looking for a scapegoat to rationalize their own ill-fated greed. Still, that doesn't change the reality of how Main Street is likely to view this deal.

Having said that, sentiment is rising among retail investors. The American Institute of Individual Investors' sentiment poll had a big jump last week, as reported

here. On Monday, UBS Warburg reported its investor sentiment poll had the highest one-month jump ever and to its highest level since June 2002, according to Economy.com.

There remains great debate about at what juncture sentiment becomes a good contrarian indicator (assuming it does), but it's instructive to recall how poorly shares fared last June and July.

On a separate but related note, some observers are musing about the coming seasonal weakness for shares, highlighted by the old saw "Sell in May and go away."

From 1950 through 2002, the Dow posted cumulative losses of 361 points from May through October vs. gains of over 10,100 points from November through April, according to

The Stock Traders Almanac

. (Notably,

Almanac

publisher Jeffrey Hirsch cited this "Best Six Months" timing strategy in making a sell recommendation on

April 11 -- prematurely, as it turned out.)

Not coincidentally to the market's historically desultory performance from May to October, those months also happen to be the "dead zone" for mutual fund inflows, according to Alan Newman, editor of Longboat Global Advisors'

Crosscurrents

.

Since 1984, 62% of all mutual fund inflows have incurred between November and April, with January and April alone responsible for 26.8% of all inflows, Newman reported Monday. In the bear market of 1966 to 1982 -- to which the newsletter writer compares the current environment -- monies invested solely in the May-to-October "dead zone" fell nearly 85% on an inflation-adjusted basis. "Consider that when the folks on Wall Street tell you to be invested all year round," he wrote.

Then again, this settlement is going to markedly increase the public's faith in what Wall Street says, right?

(More) Things That Make You Go ... Hmmm

The economic expansion officially ended and recession began in March 2001, according to the National Bureau of Economic Research. Many quibble with the NEBR's work -- notably, the group hasn't yet officially determined an end date to the recession, despite consistent, albeit modest, GDP growth last year and in the first quarter of 2002 -- but it is the nation's official arbiter of recessions and recoveries.

The salient point here is that 25 months after the recession officially began, the S&P 500 is down between 21% to 27%, depending upon when in March 2001 one starts measuring.

In the nine prior recessions since World War II, "not once was the equity market off" this long after the start of a recession, according to John Lonski, senior economist at Moody's. The median change this long after those prior recessions began is a gain of 16%.

Investors in those prior eras didn't have to deal with 9/11 and concerns about future terrorist attacks, as well as uncertainties leading up to war with Iraq. But investors in past recessions also didn't have to deal with the aftermath of the greatest equity bubble in American (some say world) history.

The difference in stock market performance between past recessions and the most recent one "indicates how overvalued equities became during the previous boom," Lonski said.

Just something

else

to contemplate as the market continues to produce bullish short-term signs, which inevitably lead to more "new bull market" chatter.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.