Morgan Stanley analyst suggest several conditions needed for US stocks to continue rising

Over nine consecutive positive trading sessions by Friday, May 2, the S&P 500 Index had fully recovered from all its losses incurred after President Trump's tariff announcement on April 2.

Earnings per share for the first quarter came in higher than expected. The S&P 500 companies are gearing up to report earnings growth of more than 10% last quarter.

According to Morgan Stanley, two other criteria have to be met to sustain the stock gains. The US and China will need to reach a trade agreement that could reassure investors and businesses that talks of de-escalation are more than just words. In addition, Fed officials need to signal their willingness to cut interest rates to support economic growth.

However, the Federal Open Market Committee is set to wrap up its two-day monetary policy meeting on Wednesday, May 7, and is expected to leave the benchmark rate unchanged. 

Investor attention will focus on the Fed's new estimates of how the tariffs will influence the outlook for the economy and monetary policy.