The end of March brought on the last trading of the quarter, with the S&P Index hitting new all-time closing highs in what felt like a very choppy couple of weeks. While we still have not raised our official 14,590 price target for the Dow Jones Industrial Average as the peak for 2013, we will be adjusting that number by the end of the first week of April. 24/7 Wall St. has laid a blueprint and road map for what you should watch for in the month of April as the bull market continues despite the woes in Europe.
We evaluated many key market and economic issues for this April bull market road map. Companies raising dividends, the lists of stocks to buy and stocks to sell, the top merger trends, activist investors, gold and oil, tax issues, quantitative easing, the best bank stocks to buy, the earnings season on the way and many more key issues were considered.
In case you missed the last trading day of the quarter, here is the closing bell report for March 28. There are generally two sides of a story, and so it is with the bullish case for stocks. It is interesting that some of the financial media already has started discussing whether investors should take the “sell in May and go away” strategy in 2013 when April’s trends are not even set or determined. We wanted to review a few key statistics so far year-to-date (YTD), now that the first quarter has officially ended.
- After a 52-point gain to 14,578.54, the DJIA is up 11.2% YTD.
- After a six-point gain to 1,569.19, the S&P 500 Index is up 10.0% YTD.
- Gold ended up 1% in March at $1,596, but is down about 5% YTD.
- The 30-year Treasury yield was 2.95% at the end of 2012 and closed at 3.10% at the end of the first quarter.
- Risk-On: The S&P Speculative Composite Spread (junk bonds over Treasuries) was about 566 basis points at the end of 2012, but was down to 509 basis points at the end of March.
Watch for dividend news. International Business Machines Corp. (NYSE: IBM) should be just one of the five big cap dividend hikes we expect in April, and watch for more share buyback news from the company as well. Also on the dividend and tax front, UBS gave a list of closed-end funds that are tax-free municipal bond funds.
The Boeing Co. (NYSE: BA) woes may not be fully behind it, but the 787 Dreamliner tests are being expanded, and by the end of April the market should have a very clear picture about the battery situation on the new planes. The stock is challenging 52-week highs, but there is another $14 or so of upside before the stock chart is back at all-time highs.Biogen Idec Inc. (NASDAQ: BIIB) is leading the biotech wave to all-time highs on the heels of a new FDA approval for yet another solid multiple sclerosis drug. Analysts are going to have play catch up or they will be forced to downgrade the stock on valuation. This stock hit new all-time highs in both of the final two trading days of March. A group called PropThink has offered up a list of its favorite biotech ideas to buy, and we would note that most of the big biotechs are at or close to all-time highs.
Verizon Communications Inc. (NYSE: VZ) is going to be one to watch. The short interest has risen sharply, likely on the growing pressure that Vodafone Group PLC (NASDAQ: VOD) wants to do something with its 45% stake in Verizon Wireless.
Here is a list of stocks to buy from the Merrill Lynch core portfolio holdings. Another very important list of stocks is the Deutsche Bank A.G. (NYSE: DB) list of 20 continued winning stock picks for the secular bull market. Secular bull market? That means very long term.
If you think that quantitative easing is about to end and that interest rates are due to scream higher, the speech from Fed President Evans shows internal support for keeping the genie in the bottle for well through the end of 2013 and perhaps much longer.
One thing to watch is a growing bubble in dividend stocks. It seems that some of these juicy dividend yields are getting a bit overbought as short sellers are really going on the offensive here against these high-quality high-yield dividend stocks. The biggest bubble looks to be forming in American Electric Power Co. (NYSE: AEP), unless it raises its payout again.Japan remains key to the quantitative easing measures. If you want to know if all of that quantitative easing effort in Japan really will get rid of all the historic 20-plus year trend of stagflation and no growth, all you have to do is watch the WisdomTree Japan Hedged Equity (NYSEMKT: DXJ). This tracks Japanese stocks but eliminates the yen-weakening risk. That exchange traded fund is up a sharp 17.1% year-to-date,while its unhedged counterpart is up 10.7% year-to-date.
Also, watch out for the trends following activist investors and mergers. The Dell Inc. (NASDAQ: DELL) merger bidding war against (or with) Michael Dell is just one small tip of this activist investor iceberg. We have warned of an activist investor bubble influencing hundreds of billions of dollars worth of companies. This may keep taking shape throughout April, May and as long as the bull market keeps supporting attacks on management to milk out slightly better returns. Merrill Lynch also gave a list of the next leveraged buyout candidates of stocks to buy.
And there is just so much more to consider.