NEW YORK, May 17 (Reuters) - A rebound that has taken

the U.S. stock market to record highs this week may have further

to run, if history is any guide.

Fresh signs of a cooling economy calmed inflation worries in

May, helping all three major U.S. stock indexes rise to records

this week. The benchmark S&P 500, which fell over 4% in

April, is now up 11% year-to-date.

Market strategists who track historical trends say stocks

tend to build momentum when recovering from similar-sized

pullbacks, often continuing to rally even after making up lost

ground.

Should the current bounce conform to that pattern, more

gains could be in store. Past rebounds in the S&P 500 from 5%

pullbacks have been followed by a median gain of 17.4%, said

Keith Lerner, co-chief investment officer at Truist Advisory

Services. As of Friday, the index was up nearly 7% from its

April lows.

"Once you find the low, the market typically has further to

go than what we've seen so far," said Lerner, who studied data

going back to 2009.

Broader historical comparisons also suggest more upside

ahead for the current bull market. Lerner's study showed a 108%

median climb for bull markets since the 1950s, compared to the

nearly 50% the S&P 500 has gained since October 2022.

At the same time, the median length for a bull market in

that period has been just over 4.5 years compared to slightly

more than 1.5 years since the start of the current one, Lerner's

data showed.

Investors have pointed to renewed optimism that the economy

is heading for a so-called soft landing and projections for

strong earnings as factors that stand to fuel more gains in

stocks.

The market's momentum will get a test on Wednesday when

semiconductor giant Nvidia ( NVDA ) - whose shares have soared

on enthusiasm over artificial intelligence - reports quarterly

results.

Investors are also watching durable goods and consumer

sentiment data next week for further signs of whether growth is

cooling enough to support the case for interest rate cuts this

year.

LET 'WINNERS RIDE'

Momentum can also be a factor in how various areas of the

market perform following a rebound, said Sam Stovall, chief

investment strategist at CFRA.

S&P 500 sectors that led as stocks rebounded from a pullback

outperformed the broader market 68% of the time as equities

continued running higher, said Stovall, who studied 35 market

rebounds since 1990.

The main takeaway: "Following recovery from a pullback, you

want to let your winners ride," Stovall said.

Technology, utilities and real estate

have been the top sectors in the market's most recent

rebound, rising 11.3%, 10.1% and 7.9% respectively.

Investors who study chart patterns to spot market trends

also see evidence that strong momentum could keep stocks

buoyant.

All 11 S&P 500 sectors are currently above their 200-day

moving averages, said Willie Delwiche, an independent investment

strategist and business professor at Wisconsin Lutheran College.

When at least nine of the sectors are above those

trendlines, the average annual return for the S&P 500 from that

point has been 13.5%, Delwiche found.

Of course, a range of factors could throw stocks off their

trajectory. While recent data have shown calming consumer prices

and a moderate slowdown in labor markets, signs that the cooling

trend is not gaining traction could renew worries about an

overly strong economy that forces the Federal Reserve to keep

rates elevated or even raise them again.

Despite encouraging data, Fed officials have not openly

shifted views yet about the timing of rate cuts that many

investors are convinced will start this year.

Plenty of stocks are also at lofty valuations: the S&P 500

trades at a forward price-to-earnings ratio of 20.8, well above

its historic average of 15.7, according to LSEG Datastream.

Political uncertainty from U.S. presidential elections as

well as risk from conflicts in the Middle East and Ukraine could

also spur volatility this year, Deutsche Bank analysts said in a

Friday note.

"The playbook is for sharp but short-lived sell-offs, with

the economic context eventually dominating," wrote the bank's

strategists, who nevertheless believe the S&P 500 could rise

another roughly 4% to 5,500 this year.