Drop in the Bucket

Stocks closed out the week on a decidedly sour note Friday, as buyers made an early exit and profit takers moved in earnestly. Volume on the major indices was on the high side, though not overwhelmingly. The drops on the Dow, S&P and NASDAQ were more of a reality check than indicative of a trend, so there's no need to get out the shovels.

On the day, the Dow lost 56.80 to close at 12.580.83. The NASDAQ failed to breach the 2,500 mark, falling 28.85 to 2,459.82 and the S&P 500 lost 10.25, closing at 1438.06.

What moved the market from inertia was the continued cold weather in the Northeast, prompting crude prices over $60/bbl. during the session. Oil ended the day at $59.89 after hitting a high of $61.00.

Coupled with oil shock fear was the continuing saga of interest rate phobia. A couple of speeches by Fed governors were interpreted as signals for continued tightening and that helped fuel the dour mood after mid-day.

In the final analysis, the market is suffering more from a lack of news than a preponderance of bad news and earnings reports. While the latter - earnings - has been lackluster in most sectors, the economy continues to percolate. It's a double-edged sword at present. Solid growth may induce the Fed to raise rates, so the good must be taken with the bad, and the bad may not be severe.

Today's pullback must be taken in the perspective of an overall long term upward trend. There's going to be a correction - there always is - but it's more likely to be short and not very serious - more along the lines of 7-10% than a 15-25% drop. The best strategy right now is to do what traders did on Friday: take some of the money off the table and see how the following weeks develop.

There's no need to get greedy here. Stocks are still pricey, but many will look a lot more like bargains in months ahead.