Tags: stock | market | poised | correction

Experts: Stock Market Poised for Correction

By    |   Friday, 20 December 2013 12:29 PM

While major stock indices hit record highs again Friday, some experts think a correction is coming soon.

Pedro de Noronha, managing partner at hedge fund Noster Capital, says it doesn't make sense for stocks to keep rising while bond yields are ascending at the same time.

"I'm not entirely convinced this move is going to last," he told CNBC. "The natural reaction when yields go higher is also for stock markets to go lower."

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The 10-year Treasury yield has surged to 2.89 percent from 1.78 percent at the end of 2012. Meanwhile, the Standard & Poor's 500 Index has generated a total return of 30.3 percent this year.

"Investors need to realize that almost 50 percent of the earnings growth in the S&P 500 from 2009 to date came from lower interest rates," Noronha said. "That tide has now shifted, and those tailwinds turned into headwinds, making 2014 a tougher year for the equity markets."

Sandy Jadeja, chief market strategist at SignalPro, also sees trouble ahead for stocks.

He tells CNBC that the Dow Jones Industrial Average may lose 4,700 points. The Dow traded at 16,267 at mid-day Friday.

But many investors are enthusiastic about stocks, especially after Friday's news of a 4.1 percent gain in U.S. GDP for the third quarter.

"It’s encouraging as an investor and consumer to see GDP get up to these levels," Robert Pavlik, chief market strategist at Banyan Partners, told Bloomberg. "GDP reaching 4 percent makes you feel good about the economy and where we’re headed."

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2013-29-20
Friday, 20 December 2013 12:29 PM
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