After a mostly blah week, stocks staged a respectable rally Friday to cruise solidly into the black, up 1% last week. The main impetus was a concurrent rise in crude prices, but more monetary easing announced by the European Central Bank lent support.

With little in the way of important U.S. economic news, eyes were focused on the global oil market and the ECB. Crude oil rose 7% last week to $38.50 per barrel, after the International Energy Agency said it saw signs of a price bottom and talk of a production freeze from some oil producers.

This fourth week in a row of rising energy prices bolsters the idea that oil is finally stabilizing after the precipitous drop of the past 20 months. It’s perhaps no surprise then that stocks rose four weeks in a row, too.

The ECB whipsawed markets. A big move up Thursday was the initial market reaction to the ECB’s new rate cuts and other stimulus moves. However, that excitement dissipated when ECB President Mario Draghi noted that he didn’t anticipate further rate reductions. Equity investors didn’t like that, and the euro rose quickly against the U.S. dollar, but the oil rally came to the rescue.

The Dow Jones Industrial Average added 207 points or 1.2%, to 17213.31 last week, while the Standard & Poor’s 500 index gained 22, to 2022.19. The Nasdaq increased 0.7% to 4748.47.

For the past few years, when monetary stimulus is applied, “it’s been risk on,” says Richard Weeks, managing director at Hightower Advisors. The situation is more nuanced now, and the market has reached a “no man’s land” level. It’s a spot where some funds are ready to re-short the market, but where recent good U.S. economic news belies the growth scare that drove down stocks in February, he says.

After Draghi’s comments, central-bank credibility will hang in the balance, adds Jack Ablin, chief investment officer at BMO Private Bank. Investors are weighing whether the stimulus will work, as some fear Draghi has “thrown in the kitchen sink,” and that there isn’t much else he can do to stimulate Europe’s lethargic economy.

The U.S. economic backdrop seems positive, but market fundamentals are lousy, he adds. Market valuation is a head wind that could make it hard for stocks to rally, while profit growth continues to slide, he says. The market’s price/earnings ratio is nearly 17 times analysts’ 2016 consensus earnings-per-share estimates.

Investors shouldn’t get too comfortable when it seems that oil moves and central-bank maneuvers are the main reason stocks go up or down, not earnings and economic growth.

(Source: Barrons Online)