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Stocks at Four-Year Highs, But What's Next?

With stocks hitting four-year highs on Thursday, investors had plenty of reason to feel bullish.

AP

But Wall Street pros, while positive on stocks long-term, were cautious about the near-term outlook.

In interviews on CNBC, most agreed that Mario Draghi, head of the European Central Bank, gave the market what it was looking for on Thursday. But with the August jobs report out Friday and the Federal Reserve meeting next week, these market watchers were mixed about where U.S. stocks go from here.

Steve Grasso of Stuart Frankel, who has been bearish on stocks, said the market basically got the first half of what it was looking for with the ECB’s (learn more) bond-buying program. (Read More:ECB to Buy Sovereign Bonds in New Program to Save Euro.)

The second half would be additional monetary easing (learn more) from the Federal Reserve (learn more) which meets September 12 and 13.

“The truth is the market has been waiting for this, the shorts have been run over so many times and there has been underlying bid at 1,426 in the S&P, the recent high,” Grasso said on CNBC.

Now that the market has moved through that level, Grasso expects a round of buy programs to kick in.

“Above here, to stay consistent with the levels, you can go up another 1 or 2 percent, and I think that is the line in the sand that if we cross over that, then you look at 1,500 (on the S&P),” he said. (Read More:Cooperman: Market in ‘Zone of Fair Valuation’.)

Tom Lee, JPMorgan’s chief U.S. equity strategist, said that investors are missing out if they’re not long stocks even after today's move higher.

He targets 1,475 on the S&P 500 going into year-end. But the index could trade above 1,500 going into the elections.

“Further gains after election day are really dependent on a Romney victory,” Lee told CNBC. “Again, you know the markets could be surprised. I think the market is baking in an Obama victory, but if Romney wins, we could take out easily something north of 1,500.”

Lee said investors should focus on stocks related to a housing recovery. He advises buying financials, energy, basic materials, tech and consumer discretionary.

Scott Wren of Wells Fargo Advisors, who is also bullish on stocks, is looking for a pullback.

“I think we get a few details on the ECB’s bond-buying program, we have a few things that might not go right on Sept. 12 and Sept. 13 and you could be right back down to 1,330 (on the S&P) pretty quickly,” he said.

Wren wants his clients long stocks and long cyclical stocks that are sensitive to the economy. “But it’s hard for me to tell our clients ‘jump in now,’” he said.

His year-end target is 1,450 and “right now given this news we’re not thinking about changing that,” Wren said.

“But I certainly expect lots of volatility the rest of this month and then after that people start thinking about the election and the fiscal cliff," he said. "We’ve got a volatile few months here no doubt.”

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