NEW YORK — Call it a power play.
Investors last week heard that the US economy looks more powerful than it has in decades.
And they responded with one of the most powerful rallies Wall Street has ever seen.
The news couldn't have been better for the market, including government reports showing:
*The strongest economy in nine years, a 5.6 percent annual growth rate in the first quarter.
*The lowest unemployment in 25 years, 4.9 percent.
*Virtually no sign, for now, of wage inflation, which would lead to higher interest rates.
*A budget deal, between the White House and Congress, to eliminate the deficit in 2002.
Investors responded with a stampede back into the stock market, stopping just a short walk from a new record.
On Tuesday, they hustled the Dow Jones industrial index to its second biggest point gain, 179.
Then up again Wednesday, followed by a modest 32-point loss Thursday and a gangbuster Friday - up 94 points. For the week the Dow gained 332 points, about 5 percent and a decisive victory for the bulls over the bears.
Technology stocks generated even more of a charge, ahead almost 8 percent for the week.
Chip-giant Intel, for example, jump-started shareholders with a 9 percent gain for the week.
"I'm very impressed by the market's recent performance," says Alan Ackerman, market strategist at Fahnestock & Co.
"We're seeing fast growth, but we're not seeing inflation accelerate," he says.
"What looked like a definite certainty" for a rate hike from the Federal Reserve May 20, "may now be a toss of the coin," Mr. Ackerman says.
Recent reports suggest a tame economy in the second quarter, reducing the likelihood of more rate hikes, he says.
The Index of Leading Economic Indicators, released by the Conference Board, rose 0.1 percent in March, suggesting modest economic expansion, despite the high-powered first quarter.
Those numbers, says Peggy Farley, of AMAS Securities, call into question the first rate hike, a quarter-percentage point nudge on March 25.
Nonetheless, "I'd still be very cautious," says Robert Dickey, of investment house Dain Bosworth in Minneapolis.
"I don't trust this market. Investors are looking at the (recent) 10 percent correction, thinking, 'that's it.' "
"It usually takes several months to get that 10 percent back." Dickey calls the shortened turnaround worrisome.
His outlook: the Dow will fall back to around 6400 in coming months.
"Once the Fed embarks" on an interest rate change, he says, it usually follows through.
In 1994, the Fed delivered seven rate hikes. The average sequence for the Fed, he says, is five. Dickey believes the Fed will boost rates not only on May 20 but several times this year.
But he also sees a market with new opportunity. One beneficiary of last week's gains, he says, are "small caps," the stocks of small companies. Dickey thinks the group may have "hit bottom."
He advises investors to keep a fairly large cash position, 20 percent to 30 percent, to take advantage of buying opportunities.