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Bulls & Bears
Brenda was joined by: Pat Dorsey, director of stock research at Morningstar.com; Tobin Smith, editor ChangeWave Investing; Scott Bleier, president of HybridInvestors.com; Bob Froehlich, chairman of investor strategy at Scudder Investments; and Chris Russo, “Apprentice” contestant and Senior Vice President of Investments for GunnAllen Financial.
Trading Pit: Rally of the Year?
April has been the best performing month for the Dow over the past 55 years. The blue chips have made an average gain of almost 2-percent each April. Think that’s no big deal? Well, if every month made that gain, the Dow would double, that's right, double, every three years!
So with April right around the corner, is the biggest rally of the year about to begin?
BOB: The biggest rally of the year is indeed about to begin. I think it’s all about earnings. First quarter earnings will catch Wall Street asleep with big surprises to the high side. Economies outside the US are booming which are making export boom. First quarter earnings are reported in April. We have very weak comparables. April will be a month to remember!
TOBIN: April would be the biggest month if Bob were a bear! The concern right now is interest rates. The Fed has said they are going to raise rates to contain inflation. What really scares me is inflation driven interest rates. And then there’s oil, which is actually a larger inflation fear than a concern for overall earnings. The market may make a run in April, but it will be a head fake.
PAT: Inflation is a definite fear for the market right now. But I have to disagree with Bob, because I do not think that comparisons over last year will be easy. There have been some disappointments already. And any company that doesn’t beat expectations by a country mile is going to get crushed. Now I’ve seen more bargains than I have for a couple months, but it’s still nothing too exciting.
CHRIS: Interest rates are going up. The price of oil is heading higher. The deficit is increasing. I see the market making a possible gain of 5 percent, but then the bottom will fall out. The Dow is headed to 10,000, not 11,000.
SCOTT: I think there’ll be a little rally in April. But the interest rate scenario is not built into the market, and the Dow will fall below 10K. The Nasdaq will hold up better, but it’s going to be very tough for the next couple of months. In fact, I’m short Apple (AAPL) and Toll Brothers (TOL) right now.
Are the biggest stocks in the Dow, the best ones to buy now?
First up, Citigroup (C), the largest financial services firm in the world. (Citigroup closed at $44.52 on Thursday.)
Bob: Bull. I think landscape in financial services is going to change. A great dividend payer. Big benefactor from privatization of Social Security.
Scott: Bear. Wait for it to fall under $40 before buying.
Pat: Bull. A great bargain right now.
Tobin: Bear. At $35 it’s a great buy. At this price, it’s not.
Chris: Bear. Rising interest rates is horrible for the financial stocks.