By Ellis Mnyandu

NEW YORK (Reuters) - Wall Street is likely to make a strong showing in the final week of 2009 as the bulls gear up to toast the first annual advance for U.S. stocks in two years on hopes of more economic stability in 2010.

The U.S. stock market's resiliency since the March bottom has put investors in the mood to celebrate. The trading week will be cut short by the New Year's Day holiday on Friday, when U.S. financial markets will be closed.

The S&P 500 is poised for what could possibly be its best year since 2003 -- in sharp contrast to a year ago, when stocks plummeted in the fallout from the mortgage crisis and panic rocked investors as 2009 got under way.

Even though no "all clear" has been sounded for the U.S. economy, equity strategists said stocks were poised to add to recent gains this week and build a base for a solid start to 2010 as optimism about the recovery grows.

There is an expectation now that economic indicators will keep showing improvements in key areas like housing and the labor market.

"There's an upward bias," said Alan Lancz, president of Alan B. Lancz & Associates Inc, an investment advisory firm, based in Toledo, Ohio. "Economic numbers have been good. It's been an ideal situation for equities as there aren't that many other alternatives. I think the smarter money is going into equities."

The benchmark Standard & Poor's 500 <.SPX> started out November in a tight trading range. But by Christmas Eve, when stock trading ended early for the holiday, the S&P 500 had climbed to a 14-month closing high as investors bet the recovery would be strong enough to justify loftier stock valuations. U.S. markets were closed on Friday for Christmas.

DOUBLE-DIGIT GAINS FOR 2009

The S&P 500 is up 66.5 percent from a 12-year closing low set on March 9. Its trading levels now imply a forward price/earnings ratio of 15.5, according to Thomson Reuters data.

And oh, what a difference a year makes. The S&P 500 ended 2008 down 38.5 percent.

But for 2009, the S&P 500 is up 24.7 percent -- a gain that puts the broad market index on track for what could be its best year since 2003. An even stronger advance this week could put the S&P 500 in position for its best year since 1998.

For 2009, the Dow is up 19.9 percent and the Nasdaq is up 45 percent.

"The market is telling us that the economy is a lot stronger than people are giving it credit" for, said Cleveland Rueckert, a market analyst at Birinyi Associates in Stamford, Connecticut.

Although there might be some profit-taking in the final days of the year, the stock market's underlying tone should still be positive, Reuckert added.