Can U.S. Stocks Still Finish 2011 With a Big Rally?

U.S. stocks have taken a beating in the past few months.

The vicious declines took major stock indices deep in negative territory for the year and briefly took the S&P 500 down over 20 percent from the May 2 high (which puts the index in bear market territory).

Starting late Tuesday, however, the market staged a rally on news that Europe was finally hashing out a plan to recapitalize banks and quiet fears from the European debt crisis.

On Tuesday, the rally continued on the back of benign U.S. economic data that slightly exceeded expectations.

The S&P 500 Index rallied 9.41 points, or 0.84 percent, to trade at 1,133.36 at 3:04 p.m. ET. The Dow Jones Industrial Average climbed 40.00 points, or 0.37 percent, to trade at 10,848.71. The Nasdaq Composite jumped 1.62 percent.

A big question is if this rally can continue and whether or not U.S. stocks can eventually finish 2011 with an upswing.

Currently, investor sentiment is decidedly bearish. However, Scott Wren, senior equity strategist at Wells Fargo Advisors, still believes stocks could finish higher for the year.

He told Bloomberg TV that the S&P 500 could actually end the year between 1,250 and 1,300.

All it would take is “some good news out of Europe,” which he believes will come soon.

First, Greece must receive its bailout cash so that it will not default and potentially devastate the European financial system.

Then, it would help if Eurozone authorities recapitalize weak European banks, he said.

Wren acknowledged that giving Greece and European banks more money is just kicking the can down the road and that the U.S. economy is still sluggish.

Still, he thinks “band-aid” solutions from Europe will be good enough to spark a year-end rally.