Stocks ended April on a high note, extending their monthly winning streak to two. Despite this excitement, they entered May with the S&P 500 average still down 4% for the year. Two trading days later, it pulled ahead for 2009. The Dow needs a couple hundred more points as of May 5 to join it in positive ground, an event that should draw much media attention.

This attention should fire up those investors who are wearying of the skimpy returns on their money market funds. Despite inevitable dips for profit taking, the current run has enough momentum to take the Dow above 9,000, perhaps even 10,000 before the air begins to get too thin.

There are two elements making up the current rally. The first was a reaction to the grossly oversold conditions that developed last fall when many adopted panicked selling as an investment strategy. The second is a developing anticipation of global economic recovery with accompanying improvement in corporate earnings. As the recovery advances, investors will again begin to focus on stocks of companies that will be true business leaders rather than mere subsidized survivors.

Tech stocks have led the bounce back, as they usually do. Large cap stocks Google (GOOG-$403 on 5/5) and Apple (AAPL-$132) have been particularly strong. Typically, tech stocks pause at this stage in a comeback but I am still buying Google. The company has $22 billion in sales rising at 71%, no debt and unchallenged scope. Mr. Buffett recently complimented it on the “moat” it has built around its business. It remains reasonably valued on 2009 earnings estimates of at least $18.00 a share.

Apple is a remarkable company and has been one of my favorite stocks for years. Like Google, much of its success has come with its visionary outlook. Apple’s future seems linked to Steve Jobs, whose health is questionable. Although the company has reaffirmed that it expects him to return as its CEO, I no longer feel comfortable making new purchases of the stock. In regard to both his health and his visionary philosophy, Mr. Jobs made a wonderful commencement address at Stanford in 2005, which is well worth revisiting. http://news-service.stanford.edu/news/2005/june15/jobs-061505

In other sectors, medical stocks have lagged but may be showing some backbone. AstraZeneca (AZN-$36) is still down 13% this year despite a nice increase in its first quarter earnings accompanied by a reaffirmed forecast of its earnings in a $5.15 to $5.45 range for 2009. This is an absurdly low valuation for a global drug company investing over $5 billon of its $32 billion sales in research. While there may not be dramatic drug news at the moment to excite the financial media, its 8% yield will help reward the more patient.

Healthcare insurers and the government continue to push the use of generic drugs. Tel Aviv’s Teva (TEVA-$44) is the world’s largest generic provider. It reported strong earnings for the quarter, reaffirmed its 2009 forecast of $3.20-$3.45 earnings and sees 30-35% gains in 2010. More locally based Watson Pharmaceuticals (WPI-$30) is also quite reasonably valued. Its recent quarterly report also exceeded analyst estimates.

Neither is an income stock but the closed end funds I have been advocating address that need. ING Global Real Estate Income (IGR-$4.25) is paying over 12%. To pick up the beat, I am buying its smaller domestic-oriented cousin, ING Real Estate Income (IIA-$3.55), which currently yields a bit more and whose Board has approved a merger at net asset value into the larger fund. If this goes through as it should, the current 2%-3% greater discount from asset value of the smaller fund will disappear to the advantage of IIA shareholders.

Energy prices are beginning to sense the first fumes of economic recovery but related stock prices remain dormant. Schlumberger (SLB-$53) is best of breed in the oil service industry. Earnings look flat for 2009 at around $2.60 but the resulting P/E ratio of 20 is below its usual range with resurging earnings due by 2010. Shaw Group (SGR-$31), a leader in nuclear power plant construction, just raised its 2009 sales forecast. Other favorable forecasts will encourage the current rally