Selling Pressure Drops Market 2.5%!

It was a volatile week for the stock market in light of significant news activity. By the end of the week, the selling pressure overwhelmed the bulls and the market dropped 2.5%. The market may have needed a sell off as the rise has been a bit fast over the first four months of the year. What was the catalyst? The selling pressure appears to have come mostly from fears over a European debt crisis and concerns over Goldman’s legal troubles. Frankly we think both of these catalysts are just noise in the market. The more important factors to consider are corporate earnings, GDP growth, consumer confidence, and interest rates, all of which delivered positive news. The vast majority of first quarter earnings reports have been positive with many reports also topping revenue expectations. GDP figures showed growth for the third straight quarter as the economy continues to improve. Consumer confidence rose to its highest level since August 2008 and the CaseShiller index reported its first year over year increase since 2006. These are strong signs that the bull market that has begun will indeed have the legs to continue. Furthermore, the FED reconfirmed its commitment to keep interest rates low to ensure that the recovery is not hampered. No doubt last week investors got spooked and sold to cash in on gains. The market has risen sharply already this year, and probably needed a pullback. However, we view this pullback as a buying opportunity and fully expect the market to end the year at higher levels than where we sit today.