By Martin Baccardax
That was a close one.
U.S. stocks avoided a technical correction, defined as a 10% pullback from a recent high, by the merest of margins this week, and Wall Street is both breathing a sigh of relief and doubling down on bets that the long bull market will continue charging well into the end of the year and beyond.
The S&P 500, the broadest measure of U.S. blue-chip stocks, hit its lowest closing level of the year on Monday, and was marked around 9.1% from the record high it reached on Jan. 27. That put the benchmark just a whisker away from correction territory, and firmly south of its 200-day moving average. A combination of both would have likely pushed stocks even deeper into the red at the close of the first quarter.
However, a series of headlines that suggested a near-term end to the U.S. war in Iran, stronger-than-expected jobs and activity data, and the start of a new trading month -- traditionally the strongest of the year, according to the Stock Trader's Almanac -- lifted stocks more than 3.77% from their Monday closing to the end of trading on Thursday.
That's a massive surge that gives the S&P 500 a great deal of breathing room from correction territory heading into the unofficial start of the first quarter earnings season on April 14.
Fundstrat's head of technical strategy, Mark Newton, also noted that two of the market's most important sectors, technology and financials, held up well over the month of March.
"They've all been down about 4% but better than the S&P and much better than many other sectors," he said. "These both got their head start on the downside, so the fact that they now appear to be stabilizing, I view to be a good sign."
It also reflects the market's broader resilience, which could set the stage for a solid spring and an even better run over the back half of the year.
"The bull market deserved the benefit of the doubt, while reminding investors to expect curveballs," said Keith Lerner CIO and chief market strategist at Truist, noting the wave of issues from artificial intelligence disruption, private credits concerns, and soaring energy prices that it had to navigate over the first quarter.
He also argued that markets tend to outperform following a pullback, with the S&P 500 higher over the 12 months following a 10% correction around 88% of the time.
"Periods that failed to rebound typically coincided with recessions, which isn't our base case," he added. "Pullbacks are the admission price for participating in the potential of long-term growth."
Wall Street also seems to be betting on that ticket being punched, as few of the major banks and investment firms have trimmed their end-of-year price targets of around 7700 points for the S&P 500.
That would require a near 20% gain from current levels -- a move that on face value seems unlikely but set against the 35% rally witnessed last year from the depths of the market's tariff chaos, certainly isn't out of the question.
Especially now that stocks are cheaper and earnings growth is stronger.
The first-quarter pullback has compressed the S&P 500's forward multiple by around 17%, taking it under the 20 mark for the first time since last April.
LSEG earnings forecasts for the year, meanwhile, have improved by around 3 percentage points since the start of the first quarter and now project a collective advance of around 19%.
JPMorgan will kick things off later this month, and investors will be acutely attuned to commentary on the impact of soaring energy prices and the Iran war on corporate outlooks, but analysts still expected collective S&P 500 profits to rise 14.4% from last year to around $608.2 billion.
"Although there is market and yield volatility, it appears there still exists a belief that the economy can look through the events in the Middle East and pick up where it left off in February," said Victoria Fernandez, chief market strategist at Crossmark Global Investments.
"Our theme for this year is 'high-risk bull market' and earnings seem to be telling us that the 'bull' component of that statement is holding true," she added.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 03, 2026 09:50 ET (13:50 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments