Wall Street is likely to make a strong showing in the final week of

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2009, as the bulls gear up to toast the first annual advance for US stocks in two years on hopes of more economic stability in 2010.

The US stock market’s resiliency since the March bottom has put investors in a good mood.

The S&P 500 is poised for what could possibly be its best year since 2003 — in sharp contrast to a year ago, when stocks plummeted in the fallout from the mortgage crisis and panic rocked investors as 2009 got under way.

Even though no “all clear” has been sounded for the US economy, equity strategists said stocks were poised to add to recent gains next week and build a base for a solid start to 2010 as optimism about the recovery grows.

“There’s an upward bias,” said Alan Lancz, president of Alan B Lancz & Associates, an investment advisory firm. “Economic numbers have been good. It’s been an ideal situation for equities as there aren’t that many other alternatives. I think the smarter money is going into equities.”

The benchmark Standard & Poor’s 500 SPX started out November in a tight trading range. But by Christmas Eve, when stock trading ended early for the holiday, the S&P 500 had climbed to a 14-month closing high as investors bet the rec-overy will be strong en-ough to justify loftier stock valuations. US ma-rkets are closed on Friday for Christmas.

The S&P 500 is up 66.5 per cent from a 12-year closing low set on March 9. Its trading lev-els now imply a forward price-earnings ratio of 15.5, according to Tho-mson Reuters data. The S&P 500 ended 2008 down 38.5 per cent.

But for 2009, the S&P 500 is up 24.7 per cent — a gain that puts the broad market index on track for what could be its best year since 2003. An even str-onger advance next week could put the S&P 500 in position for its best year since 1998. For 2009, the Dow is up 19.9 per cent and the Nasdaq is up 45 per cent.

“The market is telling us that the economy is a lot stronger than people are giving it credit for,” said Cleveland Rueckert, market analyst at Birinyi Associates. Although there might be some profit-taking in the final days of the year, the stock market’s underlying tone should still be positive, Reuckert added. “In our view, the market is going to go higher.”

“The fact that it’s year-end is going to cause a fair amount of volatility on probably relatively light volume,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. “I would expect the bias would be to the upside toward the end of the week.” Volatility may be enhanced in a holiday-shortened week, when the US stock market will be open for only four days. And volume may be exceptionally light, with many market participants taking time off through New Year's Day. Economic and corporate calendars are light next week. But there are a few items worth keeping an eye on, including the US Treasury's auctions of $118 billion of two-year, five-year and seven-year notes.

On Wednesday, the Institute for Supply Man-agement-Chicago’s December index of business activity in the US Midwest region is set for release. The median forecast of economists polled by Reuters puts the ISM-Chicago index at 55.0 in December, down from 56.1 in November. A reading above 50 indicates expansion.

The government report on weekly jobless claims is set for release on Thursday. Reports on the labour market are being scrutinised closely as investors seek to determine when job growth might resume.

November’s surprisingly upbeat non-farm payrolls report showed the US unemployment rate dipped to 10 per cent from 10.2 per cent. But to keep the fledgling recovery going, the Fed pledged again on December 16 at the end of its last policy meeting to keep interest rates low for an extended period of time. The Fed is hard-pressed to prevent the economy from sliding back into a slump, which would result in a double-dip recession.

The policy of near-zero interest rates has let investors borrow dollars cheaply in order to invest in higher-yielding assets like stocks.