Wall Street’s gravity-defying rally found new life over the past week, providing optimism for investors heading into what has historically been one of the best periods of the year.

The markets were able to shake off a disappointing report on the US labour market that sparked renewed doubts about the econ-omic recovery.

Some analysts say the market is gaining confidence slowly that an economic recovery will take root soon. Others say the rally, like the recovery, remains fragile.

Over the past week the Dow Jones Industrial Average vaulted 3.2 per cent, as the market rebounded from two weekly losses.

The technology-heavy Nasdaq composite advanced 3.29 per cent and the broad-market Standard and Poor’s 500 index rallied 3.2 per cent.

The market rallied for most of the week in anticipation of Friday’s US labour market report, which turned out to be a disappointment. It showed US unemployment jumped to double digits in October for the first time since 1983, reaching 10.2 per cent, despite narrowing job losses.

Analysts said the report high-lighted slow progress in bringing down unemployment as the economy emerges from recession.

Cary Leahey, senior economist at Decision Economics, said that the stock market has been able to rally on signs of stronger corporate profits, as companies shed workers to boost their bottom line.

“You have a V-shaped recovery in earnings but the V has stalled in employment,” he said.

 “That’s why the stock market can rise even when the situation for many Americans is so bad.”

Linda Duessel at Federated Investors said, meanwhile, she expects “upside surprises that are not yet priced into stocks”.

She said consumer spending is recovering, and this is seen in sales of retail goods as well as automobiles, which have topped most forecasts.

“The jobs picture isn’t as clear, but today’s October report sported a big jump in temporary hiring, which is a key component of the monthly jobs report that we have been focusing on, as it is a reliable indicator that tends to lead cha-nges in payrolls by four and a half months on average,” she said.

Duessel said manufacturing, real estate and credit are all showing positive signs as well.

David Rosenberg, chief economist at Gluskin Sheff and Associates, said the stunning market rally of some 60 per cent since March has been fueled by speculative cash and a recovery supported by extraordinary government stimulus.

“If the overwhelming consensus is correct that the recession is behind us, then what we have on our hands is the mother of all jobless recoveries,” Rosenberg said.

“The stock market has had a history this year of shrugging off weak employment report after weak employment report because the expectation is that we will see further rounds of fiscal stimulus, so it’s hard to say what equity investors will do with this latest piece of data.”

US Global Investors chief executive Frank Holmes said the market has pulled through what is historically the most difficult period of the year and now faces a generally upbeat season.

“November and December [have been] two of the best months over the past 50 years,” he said.

“There are, of course, no assur-ances, that this year will follow the strong November-December historical trend.

“In 2007, for instance, the Dow dropped nearly five per cent in the last two months of the year as the US and other countries slipped into recession.”

Sam Stovall, equity analyst at Stand-ard and Poor’s, said the past week “was a good example of how deter-mined both the bulls and the bears are on their near-term positions”.

“The market may move to a period of digestion and need a new catalyst, whether it’s guidance from companies, news from economic data or any kind of developments in [merger] activity,” he said.