Market Outlook: Why Recent Jitters May Offer Buying Opportunity

Investors are coming to grips with the possibility that the Federal Reserve won't be cutting rates anytime soon.

Treasury yields on the benchmark 10-year note rose on Friday, at one point hitting a five-month high, renewing concerns about rising interest rates. Stocks tumbled ahead of next week's Federal Reserve Open Market Committee meeting after stronger than expected durable goods and new-home sales data fueled concern that a Fed rate cut is now unlikely.

"Very simply, the market is unwinding expectations of the Fed easing on the back of the stronger data," Paul McCulley, PIMCO Portfolio Manager, told CNBC. "The bond market was dressed up for an easing party and the band's not going to show."

Good Stocks Still There

So what should an investor do in this type of environment? Some analysts advise looking at the recent pullbacks as a buying opportunity.

"You have to learn to live with volatility, take advantage of it and look for bargains when everyone else gets depressed," Michael Metz, Chief Investment Strategist at Oppenheimer, told CNBC.com.

"I think we are about to see acceleration of consolidation in the energy sector and I think there are stocks there that have limited risk and lots of reward," he added. "I would also concentrate on high quality blue chips. If you like a sector, but you're afraid to pick one name, look at Exchange Traded Funds, which give you a broader range."

Some analysts, who pointed to the strong durable-goods data as evidence of increased capital investment at the corporate level, urged investors to take advantage of that trend.

"I would put cash into technology because business services that support capital investment will do well," Gina Sanchez, Portfolio Manager for The California Endowment, told CNBC. "I would also put cash into large-cap stocks and into growth. As growth stocks start to become more reasonably valued, that's been due for a turnaround."

And some market pros who are bullish on crude oil say investors should not be spooked by recent declines in crude.

Still Looking at Energy

"We're still looking at the energy sector," said Andrew Seibert, Senior Portfolio Manager at Stewart Capital. "We think oil prices are not going to stay in the low range, but move more toward the mid-50's and 60's and these companies are going to make money. Also we like financials and pharmaceuticals and we like tech as well, which would benefit from corporate spending."

One thing investors can expected is continued volatility.

"This market has to go from being an interest-rate driven market to an earnings-driven market," said Jack Bouroudijian, a trader with Brewer Investment Group. "This is why we're seeing all the volatility."

For the week ended Jan. 25, 64% of S&P 500 companies that have reported fourth-quarter earnings beat consensus estimates, 17% were in-line and 19% missed, according to Reauters Estimates. However, positive earnings haven't been enough to quell volatility or uneasiness.

"If you look back over the previous two years, we had very strong earnings and that's symptomatic of an economy that's doing very well," Steve Goldman, Chief Market Strategist at Weeden & Company, told CNBC.com. "When you are working on all cylinders, there's always the possibility that you're overheated."