Analysis-'Overdue' pullback in US stocks to test dip-buyers' resolve

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The S&P 500 is down more than 5% from its March 28 closing high, its biggest retreat since October. The factors that drove the S&P 500 to a 10% gain in the first quarter remain in place and will support stocks over the long term. Sellers have had the upper hand for the last week, with the S&P 500 falling for its sixth straight session on Friday. Some investors are buying on weakness, while others are waiting for more clarity on inflation, geopolitical tensions, and corporate earnings. A pullback is 'long overdue' and could fall by as much as 10% from its March 28 high. Strong starts to a year are often followed by sizable retreats, after which the stock market typically rights itself and continues higher. Clients of BofA sold $800 million in U.S. equities in the latest week, the third straight week they were net sellers. Some volatility-sensitive funds that bought equities as markets marched higher have already started selling and could dump more stocks if markets grow more turbulent. Investors are also watching the level of the Cboe Volatility Index. The coming week’s earnings from some of the market’s biggest names could offer support to stocks or further exacerbate the selloff. Investors will also focus on Friday's release of the monthly Personal Consumption Expenditures Price index, a crucial piece of inflation data before the Fed's April 30-May 1 meeting. Stronger-than-expected inflation has eroded a key driver of the bull market. Tim Ghriskey, senior portfolio strategist for Ingalls & Snyder in New York, said he has been 'doing some buying on the dip in very aggressive portfolios' but remains concerned about incoming inflation data.

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