US stocks are on their longest winning streak in 2 years – but the Fed and an earnings slowdown still linger as threats, analysts warn

• Stocks have been on a tear since late October, after a rough couple of months.
• The S&P 500 and the Nasdaq Composite indices have notched their longest winning streaks in two years.
• Some on Wall Street think the rally can last - but others are still fretting about a potential correction.

Stocks have been on a tear since the tail-end of spooky season. Now, Wall Street is wondering whether the rally can last.

The benchmark S&P 500 gauge has climbed 6% since October 27, while the tech-heavy Nasdaq Composite is up 8% over the same period. Both indices have also notched their longest winning streaks since November 2021.

As has so often been the case this year, those market movements have been driven by investors' shifting view of the Federal Reserve.

Policymakers have carried on signaling that they'll keep interest rates high well into 2024 in a bid to kill off inflation - but investors were cheered by a jobs report last week that showed the unemployment rate ticking up slightly, fueling hopes the central bank will soon call time on its tightening campaign to protect the US economy.

The rally has been a welcome development for investors after a rough couple of months for stocks. Between the end of July and October 27, the S&P 500 dropped 10% as the first-half AI craze faded, bond yields soared, and investors made rates their primary focus once again.

Some analysts believe stocks can cling onto their recent gains until the end of the year, with November typically being a strong month for the market and around four-in-five S&P 500 companies beating Wall Street's forecasts this third-quarter earnings season.

"Given the softer-than-expected jobs report, investors gained confidence that the Fed is indeed done," Macro Hive CEO Bilal Hafeez said in a recent research note. "Other pluses remain in place - the economy is rolling along, unemployment is low, companies are mostly beating earnings forecasts by comfortable margins, and the earnings outlook is positive."

"If those perceptions last, equities should hold last week's gains, but any further rally will likely be a grinding affair," he added.

Others are more pessimistic, though.

Morgan Stanley's chief US equity strategist Mike Wilson - who called last year's slump and has stayed bearish ever since - said earlier this week that the rally has been driven by a recent cool-off in bond yields, and cautioned that listed companies' profits are likely to slow significantly over the coming quarter.

"This year's earnings recession continues to play out," he told the bank's "Thoughts on the Market" podcast Monday. "Such an outcome suggests last week's rally should fizzle out over the coming week or two as it becomes clear the growth picture does not support either Fed cuts or a significant acceleration in EPS growth in the near term."

Meanwhile, some on Wall Street are neither endorsing nor rejecting the view that the rally can last - instead focusing on the idea that uncertainty around the Fed's move is going to drive up volatility and make wild swings in stock prices the norm until the end of 2023.

"While last week was a good one for the equity market, it will not always be that easy," CIBC Private Wealth US CIO David Donabedian said in e-mailed comments Tuesday. "We expect the rest of the year to be volatile, going through manic depressive swings based on where interest rates are headed."

It's hard to say whether stocks will carry on rallying, give up their recent gains, or enter that "manic-depressive" phase - meaning nothing is certain as an already-perplexing year for the market heads into its final stretch.