Analysts say the move in stocks is not necessarily signaling the start of a much bigger correction.
Ed Keon, portfolio manager at Quantitative Management Associates, said the market is experiencing a rolling correction. "To me, that's a sign of a healthy, functioning market."
"When I look at the kind of things that lead to bear markets, I just don't see them. The economy looks to me like it's getting stronger, not about to fall into recession. Fed policy is clearly going to be on hold for quite a while," he said, adding Ukraine and Chinese growth remain concerns in the background.
"I don't see anything that's about to blow up. I don't think we're going to have a bear market, but could we see a 10 percent correction? Sure, but the chances of that are low," he said.
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Keon said one positive for the market is that the earnings for the first quarter, expected to be flattish, came in 5 percent higher and forecasts are improving for the rest of the year. "I think the fundamentals are still quite good," he said.
"With this rally in the bond market and small drop in stock prices, you have bond yields now down to 2.5 percent and the dividend yield on the S&P is just south of 2 percent," Keon said. "If you buy stocks, you're giving up a mere 50 basis points in yield and you get the potential for growth that stocks represent."
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With the 10-year yield at 2.51 percent Thursday morning, there were 148 stocks in the S&P 500 yielding more, according to Howard Silverblatt, index strategist at S&P/Capital IQ.
Paulsen said bond investors may use the strength to sell.
"I think if the bond yield went north a little while, people would calm down," he said.
What else to watch
St. Louis Fed President James Bullard speaks at 11:50 a.m. in Arkansas on the economy.