STOCKS SNAGGED JUST THEIR second gain in 10 weeks, but the 12% rise from their 12-year lows was enough for depression to give way to debate: Is this yet another bear-market bounce, or the start of something more meaningful?
Given its track record of flubs — four premature, hope-inducing rallies so far this bear market, none of them lasting — the burden is squarely on the market to show why it deserves our attention (and our money). But even the skeptics are watching for signs of gathering momentum that could turn this bounce into a more promising and sustained rally.

As always, the reasons behind the surge seem less compelling than an oversold market's impetus to correct its recent grim excesses. In yet another sign that not bad is the new good, General Motors (ticker: GM) rallied hard after it proclaimed it may have enough cash to survive through March without further government grease. Bank stocks jumped after executives declared their basic lending operations still viable — if not for asset losses. Even a spate of drug deals, including Merck's (MRK) $41 billion bid for Schering Plough (SGP), was hailed not as a stab at consolidating weak pipelines but as a return of merger appetite.

The Dow Jones Industrial Average snapped a four-week losing streak to advance 597, or 9%, to 7224. Its four-day run from Tuesday to Friday was its longest advancing streak since late-November- incidentally when stocks embarked on a 24% run that unraveled eventually and dramatically.

What are the knocks against this rally? Silenced for so long, the bottom-callers surfaced quickly and eagerly. The descent to a 12-year low was orderly and the turnaround abrupt, with little of the customary panic and surrender that mark stock-market bottoms. One Wall Street technical market analyst, flagged "the structure of the decline so far in 2009 and the lack of a high-intensity washout prior to the advance" as causes for circumspection. He thinks this S&P 500 rally could fizzle between 740 and 795, before sinking to a new low below 666.

But even bear-market bounces ought to be respected. Four prior rallies during this bear market have generated average gains of 17%, which suggests this pop, should it follow precedent, might have legs.

The rally has also energized the cottage industry of "second derivative" watchers who scrutinize the velocity of economic decline for signs of deceleration. Glum for so long, they were abuzz last week when consumer sentiment ticked up, and when non-auto retail sales rose 0.7% in February to register their first back-to-back gains since last July.

There were other mildly encouraging signs: S&P finally downgraded General Electric 's (GE) triple-A credit rating only to see the stock jump 13%, which bulls hail as evidence that bad news is fully priced in. Even as stocks dipped below their November lows on Monday, some measures of market strength — like the crop of stocks plumbing fresh year lows — didn't deteriorate drastically. Stock markets in China and Latin America continue to improve, and only a third of the 42 global benchmarks have recently skidded below their November lows. Says a well known Wall Street chief investment strategist: "This carries a message that the global stimulus will have more of an economic impact than is suggested by the dropping Dow and S&P 500."

THE EXCUSE BANK STOCKS seized for their levitation was the widely (and conveniently) circulated memo that Citigroup 's (C) chief executive sent, telling employees the bank was on track for its best quarter since 2007. Not to be outshone, the heads of JPMorgan Chase (JPM) and Bank of America (BAC) loudly declared their profitability.

This isn't an all-clear signal, however, since these operational profits do not count potential write-downs from asset losses that could still surface. And the threat of such losses won't abate until real-estate prices stabilize, and defaults from credit cards or consumer loans begin to wane.

Nonetheless, it was a reminder that banks' basic lending operations can still make money. "If you can borrow at near zero and lend at much higher rates, how can you not make money?" says a market analyst. He counted nine peaks in the yield curve since 1962, defined as a wide spread between the yield on 10-year and three-month Treasuries, and financial stocks have rallied every single time after the yield curve peaked to produce returns averaging 24% a year later (source: Barrons Online).