(Repeating column initially transmitted late Friday)
By Ellis Mnyandu
NEW YORK, May 10 (Reuters) - U.S. stocks should rally this week, and push the Dow into positive territory for the year, with bank stress tests out of the way and investors hopeful retail sales will reinforce views the economy is on the mend.
The week may provide clarity on whether the recent signs of stabilization are translating into profits, with Wal-Mart Stores Inc among several big retailers due to post quarterly results.
Although the Standard & Poor's 500 Index is up 37 percent from the bear market closing low of early March and the risk of a pullback is mounting, analysts said renewed confidence about banks' health should be enough to keep the bulls in charge a little longer.
A speech by Federal Reserve Chairman Ben Bernanke about the financial system's condition on Monday will keep the spotlight on what is ahead for banks.
"Now that the stress tests are out, we have some certainty in terms of where banks stand in the spectrum of stronger to weaker," said Richard Sparks, senior equities analyst and options trader at Schaeffer's Investment Research in Cincinnati.
"It seems the path of least resistance is upward. I certainly see the S&P 500 reaching 1,000 as a distinct possibility in the next several weeks."
And as the first-quarter earnings season is winding down, the spotlight will fall on anything that could spark more hopes the recession that started in December 2007 is waning.
CPI AND RETAILERS' 'REPORT CARDS'
Besides Wednesday's data on April retail sales and March business inventories, other key indicators will be readings on March international trade on Tuesday; weekly jobless claims and the April Producer Price Index on Thursday, followed by Friday's May consumer sentiment data and April reports on industrial production and the Consumer Price Index.
A May survey of New York State manufacturing activity is also due on Friday.
A Reuters poll of economists forecasts April retail sales will be flat compared with a 1.2 percent decline in March. Excluding autos, sales are forecast to gain 0.2 percent versus a drop of 0.9 percent in March.
On the earnings front, it is the major retailers, including Wal-Mart, a Dow component, as well as Kohl's Corp, Macy's Inc and Nordstrom Inc that will take center stage.
Their quarterly scorecards will be scrutinized for clues about the financial health of U.S. consumers, whose spending accounts for about two-thirds of U.S. economic activity.
According to Thomson Reuters data, through Friday about 85 percent of the S&P 500 companies had reported their quarterly results, and 65 percent beat estimates, 8 percent came out in line, and 28 percent missed projections.
"The market is going to continue to focus on signs the economy is beginning to stabilize and eventually recover," said Tim Ghriskey, chief investment officer of Solaris Asset management in Bedford Hills, New York. "We still don't know exactly when that recovery will be or how strong it's going to be."
Bernanke is scheduled to speak on banking before the Federal Reserve Bank of Atlanta conference at Georgia's Jekyll Island on Monday at 7:30 p.m. (2330 GMT). Several other top Fed officials are also due to speak at the same event.
HOW DOES WALL ST SPELL RELIEF?
The latest sign of some economic stabilization emerged from Friday's April nonfarm payrolls report. Although the unemployment rate soared to 8.9 percent, the highest since September 1983, the data also showed that U.S. employers cut 539,000 jobs last month, the fewest since October.
Optimism about jobs data, along with relief about the bank stress tests, sent Wall Street sharply higher and helped propel the Nasdaq to its ninth straight weekly advance, the longest winning streak since December 1999.
For the week, the Dow Jones industrial average jumped 4.4 percent, the S&P 500 climbed 5.9 percent, while the Nasdaq added 1.2 percent.
A further advance this week could yield a crucial milestone since the Dow is the only major index that has yet to turn positive for the year. At Friday's close, it was off 2.3 percent for the year to date.
Technically, the S&P 500 is now fewer than 30 points away from breaking above its 200-day moving average, a closely watched gauge of the broad market's strength.
The S&P 500 has not closed above its 200-day moving average since December 2007. It is up 37 percent since the 12-year closing low of March 9, but it is still off 40 percent from its record high of October 2007. (Wall St Week Ahead runs weekly. Questions or comments on this column can be e-mailed to: ellis.mnyandu(at)thomsonreuters.com) (Reporting by Ellis Mnyandu; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)