(Bloomberg) -- The Nasdaq 100 Index notched its third straight week of gains, its longest weekly winning streak since April, as investors grow so comfortable buying riskier stocks that on Thursday they almost pushed the tech-heavy index up 20% from its June low.

But this rally is running on shaky ground at best or is borderline “silly” at worst, per Michael Burry of “The Big Short” fame. A good chunk of it is built on the back of plunging oil prices, which are below $90 a barrel for the first time since February. And while corporate earnings didn’t collapse as many investors feared just a couple of weeks ago, forecasts for the future are dropping precipitously. 

Add in “sizzling” jobs data that supports the Federal Reserve’s view that it has to keep raising interest rates to bring down inflation, fueling bets that the central bank will continue to hike sharply this year, and the obstinacy of equity bulls is pretty puzzling. The Nasdaq 100 fell as much as 1.8% after the labor data, but ended the week up 2%.

“The most important thing for markets is that the Fed fights to expunge inflation. The last thing investors want is stagflation,” said Quincy Krosby, chief global strategist at LPL Financial. “That’s part of the reason why the stock market hasn’t completely cratered. Investors have taken comfort in the Fed remaining focused on price stability.”

So are markets creating a durable stock market rebound, or will inflation and aggressive interest-rate tightening derail the comeback? The answer remains murky

One of the fears Wall Street bulls fretted about at the start of the earnings season -- that corporate scorecards will be too weak to sustain a rally -- turned out to be premature. Heading into Thursday, the S&P 500 had rallied 9.3% in the roughly three weeks since JPMorgan Chase & Co. kicked off the reporting cycle. That’s its best start to an earnings season since 1997, data compiled by Bloomberg show.

Read: A Market Bottom May Need More Cuts to Estimates: Earnings Watch

The future, however, looks less rosy. The S&P 500’s earnings-per-share estimates for 2023 have declined 2.7% since the end of first-quarter earnings season, driven by a downdraft in expectations for growth stocks. 

That outlook may be worrying. But a key ingredient for a solid rebound that’s still missing, according to many investors and analysts, is more cuts to earnings estimates.

An indicator known as global earnings-revision momentum has tumbled significantly, reaching levels that have historically been reserved for US stock-market bottoms, according to strategists at Bloomberg Intelligence. But there may be more room for it to fall before it can be used as a contrarian indicator.

“We want to see earnings-revision momentum improve, not necessarily turn positive, but have less downward momentum, before there are long-term rebounds in stock prices,” said Gillian Wolff, BI’s senior associate analyst. “The best bullish signal is once it stops accelerating downward.”

(Updates first and third paragraphs with closing levels.)

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