Bear market still grips stock and credit markets

By Jennifer Ablan and Doris Frankel

NEW YORK (Reuters) - If history is any guide, the bear market in stocks is still in its infancy.

Recent huge gains in the Dow Jones industrial average .DJI and the Standard & Poor's 500 .SPX indexes, coupled with a run-up in corporate bond prices have sparked debate about whether the "animal spirits" are back.

The benchmark S&P 500 surged 28.5 percent from a 12-year closing low on March 9 to April 17.

That six-week rally came as bond investors also signalled they saw fewer signs of risk in the credit markets, a key component in a recovery from the financial crisis that has gripped the country.

During that period, the spread of corporate yields over the yield of comparable U.S. Treasuries -- considered a benchmark measure of perceived risk -- dropped to 532 basis points on April 17, when the yield was about 7.6 percent, from 597 basis points on March 9, when the yield was about 8.3 percent, according to Merrill Lynch & Co. data.

Still, the only animal that many investors and analysts see roaming these markets is a big, ugly bear.

"I don't think we are getting out of this for a long while," said Jim Bianco, president of independent firm Bianco Research in Chicago, which tracks and analyzes macroeconomic and market trends.

"We've done this twice in the last six months -- huge rally of 20-plus percent in stocks -- only to give it back to have a new low in the markets."