S&P 500 moves within striking distance of a new record high

Rally by rally the Standard & Poor’s 500 stock index is slowly erasing all of its 12.4% drop during that scary August swoon — and making a run at yet another record closing high.

On the first trading day of November — which kicked off what historically has been the best six-month stretch for U.S. stocks — the S&P 500 rallied 1.2% to close at 2104, its first close above the key 2100 level since Aug. 18.

The benchmark index, which is being driven by better-than-expected third-quarter earnings reports from U.S. companies and plenty of stimulus from central bankers around the globe, is now within 1.3% of its May 21 record close of 2130.82.

Early Tuesday, the market is struggling to extend that rally into the second day of the month. The S&P is down  less than 0.1% to 2103. The Dow Jones industrial average is up 41 points, or 0.2%, to 17,869 after closing Monday in the black for 2015 for  the first time since July. The Nasdaq composite is down less than 0.1% to 5123.

The rebound from the stock market’s first correction, or drop of 10% or more, now totals 12.6% for the S&P. At the lows in late August, few Wall Street pros would have expected such a sharp bounce-back, as the market was weighed down then by fears of a sharp deceleration in China’s economy, a sharp spike in market volatility and uncertainty surrounding interest rate policy in the U.S.

But many of those fears have dissipated. China’s economy has not fallen off the so-called cliff. The Federal Reserve hasn’t increased interest rates yet, and markets around the world have calmed.

So the question is: Will the year-end rally keep chugging along despite a market trading at above average valuations, a potential Fed rate hike in December and a U.S. economy whose growth trajectory has downshifted again?