NEW YORK (CNN/Money) - After being mired in a trading range for weeks, U.S. stock markets cheered the transfer of sovereignty in Iraq on Monday. But few analysts were willing to declare that happy days were here again for the market.

Early Monday, two days ahead of schedule, the U.S.-led Coalition Provisional Authority in Iraq transferred power to an interim Iraqi government. Stock market futures jumped on the news, and then stocks rose, too, in early trading.

"It is too soon to know how the situation in Iraq will unfold in the coming months, and the extent to which the new government can indeed control the country," Abby Joseph Cohen, chair of Goldman Sachs' investment policy committee, wrote in a note to clients Monday morning. "But, for the present, investors seem relieved that the direction is not toward an increased level of U.S. involvement."

That moment was short-lived however, and stocks turned lower in the afternoon.

Though the Iraq war has had little or no direct impact on the U.S. economy or corporate earnings, Iraq also sits on the world's second-largest proven oil reserve and shares a border with Saudi Arabia, the world's biggest oil producer.

If operating at full capacity with secure facilities, Iraqi oil production could go a long way toward keeping global oil prices reasonable, easing inflationary pressures and boosting economic activity. Some observers also still hope that a functioning Iraqi democracy could help trigger reform throughout the Middle East, potentially making the rest of the world more secure.

Unfortunately, such a moment, if possible, is still likely to be many years away. But the handover in Iraq and the agreement by the North Atlantic Treaty Organization (NATO) to help train an Iraqi security force could be steps toward bringing that day closer.

Ignoring the war? Stocks haven't responded much, at least not right away, to key events in Iraq Date  Event  S&P 500 percent change  Aug. 19 2003  Bomb at UN headquarters  +0.3  Oct. 27 2003  Car bomb kills 30  +0.2  Dec. 15 2003  Saddam Hussein captured  -0.6  Feb. 10 2004  Truck bomb kills 50  +0.5  Mar. 31 2004  4 private contractors killed in Fallujah  -0.1  Apr. 21 2004  Car bomb kills 68  +0.5  Apr. 27 2004  Day of intense fighting in Fallujah  +0.2   * Dec. 15 was first day of trading after Hussein's capture  Source:  CNN/Money

Still, though these developments were undoubtedly good news, U.S. troops are likely to stay in Iraq for months to come, potentially inspiring more violence from insurgents, and there is little hope among many analysts that the risks to security in Iraq and the rest of the region will immediately disappear.

"The recent bombing in Turkey, al Qaeda threats against interim Prime Minister Allawi and continued violence in Iraq means that the hand-over may not necessarily be the cathartic event the stock market bulls are looking for," Merrill Lynch chief North American economist David Rosenberg wrote in a note Monday morning.

Other analysts said Wall Street likely recognized the continuing risks, describing Monday morning's rally, in which the major indices rose less than a full percentage point, as fairly anemic -- even before it ended prematurely.

"What we have is a very small marginal edge of a positive view on this," said Jim Melcher, founder and president of Balestra Capital in New York. "Wall Street is cynical."

After jumping some 43 percent between March 2003 and February 2004, the Dow has been in the doldrums. A brief rally in mid-May has been followed by an extended snooze-fest, leaving analysts to wonder what will be enough to jolt the market higher.

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The results of the long-awaited Federal Reserve policy meeting, which ends on Wednesday, may not give the markets much of a lasting pop. Few analysts, if any, doubt the Fed will give a modest boost to its target for a key short-term interest rate, and it will likely seek to keep raising rates, but at a slow pace, for months to come. But hardly anyone on Wall Street sees this as the recipe for a dramatic rally.

In fact, some analysts believe that there will be no immediate catalyst for a market rally, but that the prospect for the U.S. economy and corporate earnings will keep stocks churning steadily upward.

"We're looking at the headline news, but the market is being supported by the girders of the economy, a basic, strong foundation," said Ram Kolluri, chief investment strategist at GlobalValue Investors in Princeton, N.J. "I don't expect a dramatic rally from here, but we are very much on track for a high-single-digit, low-double-digit total return for the year."