Stocks rally to second best performance of the last year

• Then S&P surged 6.5%.
• The Nasdaq jumped 7.5%.
• The Russell 2000 small-cap index rose 6%.

Why it matters: The upswing is a welcome change for investors in 2022, which had been the worst first half for the S&P 500 since the Kennedy Slide of 1962. (This was not one of the era's nifty dance crazes.)

The big picture: Investors seemed to feel slightly more optimistic about several of the issues that have been bedeviled shareholders this year.

Interest rates: Rising rates have killed stocks this year. But last week they went the other way, as signs of economic slowdown make people think the Fed might not hike as hard as they had thought just a couple of weeks ago.

• Interest-rate-sensitive stocks — often tech companies with super high valuations and no profits — soared last week, supercharging the Nasdaq.

COVID: Virus deaths continued to remain low, relatively speaking. And shots for the youngest Americans are now available, suggesting, at least to some, that we're effectively nearing the end of the pandemic era.

• Share prices of airlines, hotels, casinos, cruise lines, retailers and restaurants — the most exposed to virus-related issues — went gaga. For instance, airlines in the S&P 500 rose roughly 5%, the best weekly showing this month.

China: Indications that China's gradual easing of lockdowns coaxed some investors into shares of firms with significant sales and/or supply chains in China.

• Goldman Sachs' custom baskets of stocks of companies with large customer or supply chains in China were up roughly 7% and 6%, respectively, last week.

The bottom line: While it's nice to get a bit of a bounce, bear markets are notorious for short-lived rallies. And remember, the S&P 500 is still down 18% this year.