After a week that saw the Dow Jones Industrial Average trade above 13,000, many analysts believe the stock market will continue to power forward to the next milestone - a new record level for the S&P 500.
The S&P 500 is within throwing distance of its closing peak of 1527 reached in March 2000.
"We believe that the recent strength in stocks is very likely to continue," Jason Trennert, chief investment strategist at Strategas Research Partners, told CNBC.com. "Earnings are coming in better than expected and there is clearly a private equity put on this market, which makes us believe the 13,000 level for the Dow will hold and we think it's just a matter of time, really a couple of weeks, before the S&P breaks to a new high."
"I think it's more important to note the year-to-date returns on the S&P 500," said Arthur Hogan, managing director at Jefferies & Company. "We are up about 5 1/2% on all of the major indices. Taking out the old high would be psychological. Sure, we're in good shape to do that and it would be nice, but it's not necessary."
When Good News is Good
In the week ahead, analysts will begin shifting their focus from earnings to economic data. The most important report will be the monthly employment data, which the Labor Department will release next Friday.
In the past, robust economic data has not always been good for stocks as investors worried that it could reduce the likelihood of an interest rate cut from the Federal Reserve. However, some analysts believe the market may be changing its take on "good" news.
"Given some of the weakness that we saw in the GDP report, we think equity investors are actually going to start wanting to see good news," said Trennert. "So far bad economic news has been good for stocks. We believe we're getting to a point where good news will be good for stocks."
Hogan believes that will be the case with the employment report, saying he doesn't see much risk to an upside jobs number.
"I don't think we can get a number that is too high," he said. "The only risk to this number is something that's significantly low. I would say anything 85,000 and above would be real positive."
"I think the jobs data is key because what has kept the consumer strong is that really strong job market," said Bob Nunn, managing director at Cohen Specialists. "Any weakening in the job market may show signs of weakness in consumer spending."
Even analysts who are optimistic the market will move higher say hurdles remain which could make the ride up bumpy.
"I look for a pullback here in May before a very strong summer and a problematic fall," said Harry Clark, CEO of Clark Capital Management. "Whenever you see housing decline this much in the past, it's caused a recession every time. When wage pressures went to 23-year highs as they are now, a recession every time. I believe we may avoid recession, but it will be by the skin of our teeth."
Geopolitical concerns also resurfaced after authorities in Saudi Arabia arrested 172 Islamic militants, foiling a plan to attack the kingdom's oil fields.
"As we've seen with the news from Saudi Arabia, the world is still a dangerous place," said Michelle Clayman, chief investment officer at New Amsterdam Partners. "If we have a geopolitical instance and there is a supply shock with oil, that could be a problem."
Riding an Earnings Tailwind
Many investors are facing the potential pitfalls with an optimism that has been bolstered by stronger-than-expected corporate earnings. So far 61% of the S&P 500 companies have reported earnings, with an aggregate 7.2% year-over-year increase, according to Thomson Financial. That's more than double the 3.3% analysts were expecting on April 10th when Alcoa kicked off the earnings season.
So far, even weak economic figures have failed to scare away the bulls for long and that could continue next week.
"The VIX (CBOE Volatility Index) only showed some weakness Thursday with all of the strength the major averages have shown this week," said Nunn. "That tells me investors at this stage are reluctant to take profits, that they are using the VIX as a way to hedge their long portfolios. That makes me a little nervous when investors aren't willing to take profits at very lofty levels."
"I think this market continues to surprise," said Steve Chapman, chief investment officer at Weiss Capital Management. "When you think about the amount of bad news that this market has taken - recession fears, subprime, weak dollar, higher oil - and it takes a licking and keeps on ticking."
Phyllis Burke Goffney is a news editor for CNBC.com. She can be reached at firstname.lastname@example.org.