The positive momentum that pushed Wall Street to its best week of the year propelled stocks higher again on Monday.
The S&P 500 was up 1.4%, the Dow Jones Industrial Average climbed 1.4%, and the Nasdaq added 1.5%. The S&P 500 and Dow moved out of correction territory, now down less than 10% from their 52-week highs.
Stocks are still on shaky ground, though, with many analysts pointing to a pervasive undercurrent of pessimism on Wall Street that keeps the outlook blurry.
"Many investors remain skeptical about the sustainability of last week's rally since it came without much of a fundamental shift in the negative feedback-loop narrative that has driven financial markets for much of this year," said Bob Doll, chief equity strategist at Nuveen Asset Management. "There is still considerable uncertainty about the near-term, especially since investor sentiment is so depressed and out of line with economic fundamentals."
The outlook for earnings needs to improve before equities can climb with more certainty, argue some analysts.
"The problem for investors is that the basic fundamentals have not changed much," said Russ Koesterich, BlackRock's global chief investment strategist. "Even if the global economy manages to skirt an economic recession, it is clear we're in the midst of a deepening profits recession."
The fourth-quarter earnings season is reaching its end with only 10% of S&P 500 companies remaining. So far, 68% of those reporting have exceeded analysts' estimates. Average earnings are down 3.8% from a year earlier, with the energy sector proving the biggest drag.