Stock Market: Q1 Was One for the Record Books, So What's Next?

The U.S. stock market logged an impressive first quarter.

Shrugging off budget cuts, tax hikes, and more Eurozone misery, U.S. stocks climbed to record territory on several occasions.

On March 5, the Dow broke through its record close of 14,165, previously hit Oct. 9, 2007. Meanwhile, the S&P has been flirting with its 1,565 record high for weeks.

The most recent milestones came Thursday when the Dow Jones Industrial Average closed at yet another record, and the Standard & Poor's 500 Index finally closed above its all-time high.

Thursday closed out Q1 with the Dow adding 52.38 points, or 0.36%, to close at 14,578.54. The S&P tacked on 6.34, or 0.41%, to close at 1,569.19.

Here's a look at the quarter's biggest gains and losses, as well as what investors should do now as we head into April.

The Stock Market Q1: Winners and Losers

The top 10 Q1 individual performers in the S&P 500 and the Dow were mostly rebounding stocks that sold off in 2012.

Leading the way was Netflix Inc. (Nasdaq: NFLX), up 104.4%.

The rest included the following:

  • Best Buy Co. Inc (NYSE: BBY), 86.9%
  • Hewlett-Packard (NYSE: HPQ), 67.3%
  • H&R Block (NYSE: HRB), 58.4%
  • Micron Technologies (Nasdaq: MU), 57.43%
  • Celgene Corp (Nasdaq: CELG), 47.7%
  • Tenet Healthcare Corp. (NYSE: THC), 46.5
  • Safeway Inc. (NYSE: SWY), 45.7%
  • Avon Products Inc. (NYSE: AVP), 44.4%
  • Marathon Petroleum Corp (NYSE: MPC), 42.2%

The best performing Q1 sector, consumer discretionary, should continue to reward shareholders.

Up 234% since March 9, 2009, these defensive stocks are not the most exciting, but they offer stable up-trends and healthy dividends. A few names to consider are Campbell Soups Co. (NYSE: CPB), the Procter & Gamble Co. (NYSE: PG); and the Clorox Company (NYSE: CLX).

Laggards included JC Penney Co Inc. (NYSE: JCP) down 23%, Peabody Energy Corp. (NYSE: BTU) down 22%, First Solar Inc. (Nasdaq: FSLR) down 13%, Coach Inc. (NYSE: COH) down 10%, and Monster Beverage Corp ( Nasdaq: MNST) down 10%.

Stock Market Q1 Surprises

Research In Motion Ltd.'s (Nasdaq: BBRY) Q1 performance was a pleasant surprise for investors. The BlackBerry maker ended the quarter up 22%.

However, the smartphone maker lost 3 million of its 76 million subscribers in the quarter-its biggest three-month loss. Subsequent quarters will tell if it's time to hang up on this fallen giant.

Apple Inc. (Nasdaq: AAPL) sat out the Q1 rally, closing down 17%, at $442.66. It was the second consecutive losing quarter for the tech giant. The same concerns that plagued the company in Q4 grew more pronounced in the recent period: waning demand and increasing competition for its devices.

Stock Markets in Spring: Bloom or Swoon?

The stock market's record gains have investors mulling what's next.

Scott Wren, senior equity strategist at Wells Fargo told the USA Today, "I don't think the market can keep up this kind of pace."

But he is not calling for a plunge; Wren advises buying the dips.

"Right now pullbacks are opportunities," said Wren.

If history is a guide, Wren may be right.

Looking at the ten best years for Q1 performance for the S&P 500, the index went on to post full-year gains a whopping 80% of the time. The average return was 17.3%, according to S&P Dow Jones Indices shows.

But that doesn't mean a pullback won't come first.

Jim Baird, chief investment strategist for Plante Moran Financial Advisors told The Wall Street Journal Thursday was a symbolic day, "but I don't think anyone should look at today's move and think it suggests an all-clear, and that there are no worries in the market going forward."

Jeffry Kleintop, chief market strategist at LPL Financial, shares a similar sentiment. In a note to clients, Kleintop noted that in each of the past three springs, the S&P 500 kicked-off months-long slides in April ranging from 10% to 19%.

Data shows the Dow was also dragged lower. The benchmark slumped 13.6% in 2010 on Eurozone angst; it sank 16.8% in 2011 when the U.S. lost its AAA rating; and the index slipped 9% in 2012 on recession fears.

But fear not: there's an easy way to protect your Q1 gains and buy "insurance" against a major pullback.

Money Morning Capital Wave Strategist Shah Gilani has recommended this strategy to his subscribers already. Just go here to learn how to get protected.

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