Midday Report: Signs of a Spring Correction for the Stock Market

Produced by Drew Trachtenberg

Is the stock market headed for another spring swoon?

It's happened in each of the past three years, and a growing number of market watchers say it's likely to happen again in 2013.

The warnings are piling up that market is due for a pullback, probably in the range of five to 10 percent.

Here's the recent history: last year the Dow fell 8.8 percent from its early spring high. In 2011, it dropped more than 7 percent, and in 2010 it slid nearly 13 percent from April 26th through the end of the second quarter.

But the Dow ended higher in each of those three years, including a 19 percent gain in 2010. This year, the Dow is coming off of a huge 11 percent gain in the first quarter.

So what are the warning signs we're seeing?

Let's start with the fact that the stock market has become front page news as it's soared to record highs, which has prompted mom-and-pop investors like you and me to jump back into the market.
NEW YORK, NY - APRIL 02:  Traders work on the floor of the New York Stock Exchange at the end of the trading day on April 2, 2013 in New York City. The Dow Jones Industrial average and the S&P 500 rose to new record highs on April 2, with the Dow finishing at a record close of 14,662. All three major indexes are up between about 10 percent and 12 precent for the year.  (Photo by Spencer Platt/Getty Images)
Spencer Platt, Getty Images

A lot of pros think that's a bad sign, at least in the near term. We're considered a contrary indicator. In general, we tend to buy after the market has already jumped, because we don't want to miss out on the rally. The problem is, the typical investor has terrible timing.

There are a number of other concerns as well.

For technical investors, there's worry that the Dow Transportation Index has been selling off in recent days. Many pros consider it to be a leading indicator that's now flashing a warning sign.

There's also concern that the upcoming earnings season will be even more sluggish than expected. Thomson Reuters expects earnings growth of just 1.5 percent, and companies that disappoint could get punished.

And the wild card for the market is the increasingly bellicose rhetoric coming from North Korea. Any real hostilities could take a toll on markets around the world.

Now all of this comes with a big grain of salt: Most forecasters still expect the market to end the year with solid gains.

An Iron Throne for Your Golden Years: Our 'Game of Thrones' Stock Picks
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Midday Report: Signs of a Spring Correction for the Stock Market
Stock: Goldman Sachs (GS)
As the Master of Coin on the Small Council in King's Landing, Petyr is in control of the kingdom's finances. And while the ruling Lannister family has a wealth of gold, the kingdom's expenses are many. So it's no surprise that Petyr would prefer investing in a large investment banking and securities company such as Goldman Sachs. Not only does Goldman Sachs profit from various financial services, but the company seems to always be profitable regardless of what happens in the stock market, housing market, or broader economy.
Stock: Zynga (ZNGA)
Even a child ruling a kingdom needs to blow off steam once in a while. That makes Zynga, a company focused on building social and casual games, the perfect pick for Joffrey Baratheon. Zynga also watched many of its executives leave the company and its stock price plummet, similar to the situation that Joffrey faces in King's Landing as the kingdom unravels. Yet Zynga's stock structure provides its CEO, Mark Pincus, 70 votes per share. That means that as of the end of 2012, Zynga's CEO owned 59 percent of the total voting power. Take that, mere commoner! It's not bad to be the head of Zynga... unless your stock's awful performance costs you a spot on the Forbes billionaire list.
Stock: Yahoo! (YHOO)
The Queen Regent and mother of Joffrey Baratheon, Cersei Lannister would admire a bold female CEO such as Marissa Mayer of Yahoo! Joining Yahoo! less than a year ago, Mayer is determined to turn around the struggling company, and is focused on building Yahoo!'s employees and changing the internal culture. Bold leadership is something that Cersei would identify with, although the two have quite different perspectives on how to get results.
Stock: LinkedIn (LNKD)
Tyrion Lannister is often underestimated by those around him given his size and appearance. But time and again his intellect is what wins the day. Tyrion understands the value of building an intelligence network throughout King's Landing, which is why he would invest in LinkedIn. In the social media realm, LinkedIn is also oftentimes overlooked due to Facebook's much larger user base -- over 1 billion monthly active users, compared to its own roughly 200 million total registered users (not monthly active users). Although Facebook towers over LinkedIn, LinkedIn's revenue per user was 20 times that of Facebook as of this summer.
Stock: Apple (AAPL)
Having lost his father, Eddard Stark, Robb is trying to lead his father's men to the best of his ability. While he lacks experience on the battlefield, his father taught him many lessons in leadership and duty. That's why Apple would catch Robb's interest as an investor. When Tim Cook became CEO of Apple, outsiders wondered whether he was capable of leading the giant tech company. While the company has had its challenges since then (e.g., Apple Maps), its position as one of the most influential tech companies has not been usurped by any of its rivals.
Stock: Caterpillar (CAT)
As a steward of the Night's Watch, Jon Snow must protect the Wall. He knows that winter is coming -- and the Wall might need some fortification. That would make Caterpillar, which focuses on construction and building infrastructure, top on his investing list. Since some of Caterpillar's products are used for snow removal, Jon Snow would also be demonstrating a Peter Lynch mentality of buying what you know.
Stock: Garmin (GRMN)
Living in exile hasn't been easy for Daenerys, as she's never found a true place to call her own. But as she establishes her identity as the Mother of Dragons, she's determined to return to Westeros. As someone seeking direction and a way home, Daenerys would likely buy shares of Garmin for her investing portfolio. The GPS technology company creates navigation products for every mode of transportation, including air and sea. And if she's ever to return to Westeros, one of Garmin's marine products would sure be useful.
Stock: Berkshire Hathaway (BRK-A; BRK-B)
As a eunuch, Varys demonstrates his power through a (spider)web of contacts that feed him information. He uses information to gain a personal advantage, creating an insurance policy of sorts. Therefore Varys would be a fan of the insurance model and invest in Berkshire Hathaway. Berkshire Hathaway is a large conglomerate holding company, owning stakes in or even whole companies across many different industries. Similarly, beyond his network of information-sharing contacts, Varys seems to have a hand in structuring deals or alliances across the kingdom.
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