NEW YORK (CNN/Money) - It's worth remembering that just over two months ago, when the stock market rally was first building up a head of steam, one of the big arguments given for buying was that by now the economy would be busting out all over.

With the conclusion of the war in Iraq, the thinking went, much of the uncertainty that has been holding back businesses and consumers would be wiped away, prompting a general loosening of America's purse strings. Economic recovery would be at hand.

Well, here we are, heading into a brand new month, and although the economy certainly has a bit more color to it than back in, say, March, one can hardly say that it's jumped off the gurney and started dancing. In the coming week, we're going to see the big economic reports for May -- the Purchasing Managers Index on Monday and the jobs report -- and chances are they're going to show that economic conditions are still weak. (For a lineup of the week's key events, click here.)

So, is the stock market going to crash when these reports come out, since the whole reason for buying back in April will have been taken away? Of course not -- investors have found a bunch of new reasons to be bullish now. Washington has passed a huge tax cut that's going to start hitting the economy within the next couple of months. The Federal Reserve has indicated that it's going to keep the fed funds rate nice and low for the foreseeable future. This gives financial institutions a near-guarantee that they don't have to worry too much over their cost of money. The dollar is drifting lower, helping U.S. exporters and lending a hand in the fight against potential deflation.

The real issue now, said Morgan Stanley chief U.S. economist Richard Berner (who, like most economists pooh-poohed the notion of a post-war boom), is not whether the economy can start flourishing as quickly as a Lotto winner, but whether it can keep on registering steady improvement.

Berner believes that it can. By his lights, the two major impediments to economic growth over the past year were the increased energy costs that came as the United States began to gear up for war with Iraq and the lingering effects of the corporate governance shock that began to hit in full force just under a year ago.

Now energy costs have come down -- perhaps not so much as many hoped, but down. After coming to within a whisker of $40 a barrel, crude oil now goes for just under $30. The U.S. average for a gallon of gas has gone from a high of $1.72 to $1.48. And much of the worry spurred by the big corporate scandals of last year has eased, and with it the high interest rates on corporate debt that put many companies into tenuous positions.

The easing of worries on the corporate front has manifested itself in another way as well -- through the stock market. The Nasdaq has risen back above the levels where it stood last June when WorldCom headed into bankruptcy, and is on the cusp of hitting a 52-week high for the first time since it peaked on Mar. 10, 2000.

More important, the S&P 500 has risen to the high it reached on Aug. 22, the very top of a range that it has struggled to break through for nearly a year. This level, it turns out, was also its closing low in the days following Sept. 11.

"People who are good technicians are saying that if we break past this level, this is a new bull market," said Bill Rhodes, chief investment strategist of Rhodes Analytics.

Seeing the market break past highs it has not been able to surmount previously can be a big boost for confidence -- it means that investors have decided a level that used to be THE place to sell isn't any more. And so traders that are short stocks cover; money managers who have been sitting on the fence come back to the market, and the public appetite for mutual funds is once again whetted.

"Once you've pulled all that in, you've had a pretty good rally," said Rhodes. "But then you're going to have to look around and consider, hey, are these valuations justified?"

And the answer will probably be "No," thinks Rhodes. Already the S&P 500 is trading at about 30 times earnings on a GAAP basis -- quite high historically -- and its dividend yield is just 1.7 percent. So while many of the economic factors that are in place right now seem like just the sort of fuel we need to get a bull market going, Rhodes thinks that it will end up just being more like a bull run.

• Through the day on Monday, automakers will report May sales. Economists surveyed by Briefing.com expect an annualized 13 million cars and trucks for the month, even with April levels.
• Monday the Institute for Supply Management releases its Purchasing Managers' Index. Economists expect the key read on manufacturing rose to 47 from 45.4, but given the strength of the Chicago-area index, it could come in better than that. Any number below 50 indicates contraction.
• April construction spending figured come out Monday. Economists expect spending was flat, compared with a 1 percent decline in March.
• The Institute for Supply Management's services index comes out Wednesday. Economists expect it rose to 51 in May from April's 50.7.
• April factory orders, due out Thursday, are expected to show a 0.9 percent decline. In March they rose 2.2 percent.
• The European Central Bank meets Thursday, with most market participants expecting a it to cut its key overnight rate from either a quarter or half point from the current 2.5 percent.
• The Labor Department releases May employment figures Friday. The economy is believed to have lost another 25,000 jobs during the month, helping to push the unemployment rate to 6.1 percent from the current 6 percent.