NEW YORK, US, May 29, 2009 (AFP) - Wall Street investors face a battery of economic news and the looming bankruptcy of auto giant General Motors in the coming week, testing the nerves of investors after a strong week.

US stocks ended a volatile holiday-shortened week on an upbeat note as investors preferred a not-so-bad outlook on mixed economic and company news. The Dow Jones Industrial Average rose 2.69 percent in the week to Friday, to 8,500.33. The tech-dominated Nasdaq leapt 4.85 percent to 1,774.33 while the broad-market Standard & Poor's 500 index surged 3.61 percent in the week to 919.14.

The three major indices notched up their third straight month of increases with robust gains. The blue-chip Dow surged 4.1 percent for May, the Nasdaq 3.32 percent and the S&P 500 by a hefty 5.31 percent.

Despite the bullish market, analysts cautioned that bumps lurk on the road to recovery from a prolonged recession that began in December 2007.

'Maybe it is simply the shortened holiday week, but volume has fallen off,' said Mike O'Rourke, chief investment strategist at BTIG brokerage.

'In the past few sessions, the equity market has become enamored with the bond market, looking for it to lead to the big move that has yet to materialize,' he said.

The market came back to business Tuesday after the Memorial Day holiday welcoming an unexpected jump in consumer confidence that left the Dow 2.37 percent higher.

Trading was choppy the rest of the week as investors kept their eyes glued to the deteriorating bond markets amid concerns about the mushrooming US government debt.

Tensions on the bond market eased and bonds ended the week mixed. The yield on the 10-year Treasury bond rose to 3.465 percent Friday, compared with 3.448 percent a week ago, while the yield on the 30-year bond fell to 4.338 percent against 4.392 percent. Bond yields and prices move in opposite directions.

The government's slight revision of first quarter gross domestic product, showing a 5.7 percent contraction, was a backward-looking indicator investors shrugged off, preferring to see glimmers of hope in the current quarter.

However, overhanging the market is the impending implosion of General Motors, which has a Monday deadline imposed by President Barack Obama's administration to submit a suitable restructuring plan or file for bankruptcy protection.

The largest US automaker and once the world's largest is widely expected to enter a government-backed bankruptcy restructuring, but the implications of the fallout on the fragile economy are unclear.

'The GM bankruptcy filing is now viewed as inevitable on June 1, and this process will probably raise more questions than it answers,' said Brian Bethune at IHS Global Insight.

'Which plants will be shut down, what brands will survive, which dealers will have to fold up operations, and what will be the impact on the supplier base - which is already reeling from recessionary conditions in the industry?'

All eyes will be on Friday's employment report for May. Analysts expect the report to show a loss of another 550,000 jobs and a jump in the unemployment rate to 9.2 percent.

Sherry Cooper at BMO Capital Markets said that even some leading employment indicators have improved, although the net number of new jobs was still falling. 'But it does appear that the pace of decline is slowing,' she added. 'These bearish sentiments are healthy,' Cooper said.

'But pent up demand and enormous liquidity, coupled with mammoth global stimulus, will turn the economy around sooner and more dramatically than most people now think.'

Avery Shenfeld at CIBC offered a note of caution on the markets' sudden veer away from fear of depression to anticipation of economic recovery. 'We, too, see the economy reviving before year end, but the rally looks a tad early and more vigorous than what we typically see when there's only limited evidence of a turning point,' he said.

'We could see a breather or partial pullback on soft economic news, but there's enough medium-term upside to warrant keeping a normal portfolio weighting in stocks, he said.