April has been called the "cruelest month," but in the past two years, it`s when the stock market made its highs for the year.
So investors start the second quarter with that on their minds, and head into a holiday shortened week, where the most important piece of data will be released when the stock market is closed. The March jobs report is released Good Friday, when just the bond market and some electronic futures markets are open for trading in the US. Besides the monthly jobs report, there is a steady stream of important data all week long that will paint a fresh picture of the manufacturing environment and the consumer. The important headlines will be March auto sales, chain store sales, the ISM manufacturing survey, weekly jobless claims, plus the contents of minutes of the Fed`s last meeting. The Dow finished the past week at 13,211.96, up 1% for the week and closing the first quarter with a 8.14% gain, its best first quarter since 1998. The SandP 500 was at 1,408.45, for the week and up 12% for the quarter. The sharp rise in the stock market since October has had analysts predicting a pullback as stock indices hit each new level, and they are still expecting to see that as the second quarter begins. "We`ll get a pullback but I don`t think we`ll get anything disastrous," said Citigroup chief equities strategist Tobias Levkovich. He said he expects to see a five to seven percent reversal. "Maybe it`s the pause that refreshes, barring some exogenous event," he said. He expects to see a selloff in "the next few months. I think it`s hard to pin point." Levkovich said the market decline should not be like the 22 percent the SandP lost last year from late April through early October. At that time, the global economy was dealing with a sudden oil price rise, after the Arab spring; the Japanese earth quake and tsunami aftermath, and the tightening of financial conditions from the European debt crisis. Barclays Capital US equity portfolio strategist Barry Knapp said the recent weaker-than-expected data could be a signal. Six of the last seven pieces of housing data were shy of expectations. "The markets are running a little bit ahead of reality right now," said Knapp. "It just means they`re vulnerable." Some analysts say the market could follow its seasonal history, and investors could "sell in May," as they did last year. They also are watching gasoline to see if the steep price rise stings consumers and starts to become a setback for the economy. "Where is the pullback? I`m still waiting. I just think the longer it takes, maybe the more painful it will feel but I still think it will be pretty shallow," said JP Morgan chief US equities strategist Thomas Lee. As for next week, he said the bias could start out positive. "Usually the first day (of the quarter) does have inflows. I don`t really have any expectations except that seasonally speaking, markets are going to have a positive bias through May. I still think you`re going to have a pretty good tone to the market. I think the concerns about China, quarterly earnings and interest rates-they don`t really occur until the summer," said Lee. _PAGEBREAK_ "Seasonals have played a big role. They`ve been increasingly important, and maybe because the fundamental trends haven`t been so prevalent," he said. "...A correction definitely seems way overdue, but it`s really keeping everyone at home waiting for this thing." Analysts expect to see investors buy the dips, as many are still underinvested in US equities and have lost out on recent gains.- 17 High-Flying Stocks Under $10
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