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Liquidity Driving the Market, Analysts Say

Frederick Dickson, chief market strategist for D.A. Davidson & Co., told CNBC’s “Closing Bell” that the market’s performance in 2007 is beating expectations -- and it's because of liquidity and upside earnings.

“Earnings were a little stronger in the first quarter than most people thought,” Dickson said Friday. “The second quarter sets up to have some positive surprises. I think we’ll end up with earnings for S&P companies up 8% to 10% -- a better year than we expected coming into 2007.”

He likes international ETFs, healthcare, technology, financials and large-cap growth stocks.

“We have a worldwide economic expansion going on,” Dickson said. “We’re riding on a sea of liquidity. It’s going to be liquidity that’s going to take the market higher. We have merger mania that seems to be hitting all sectors of the market. But we’d avoid a lot of the consumer durable stocks.”

Andrew Burkley, market strategist, Brown Brothers Harriman, said he liked energy, beverages and semiconductors.

“The big driver of the market right now is liquidity,” Burkley said. “Any time you get a P/E expansion like we’re getting right now, you’ll have a pretty good year.”