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What the Pros Say:  Time For a Breather

The latest robust market surge is over, and the pros tackled the question of where we are in the rally, and what it's going to take to bring back the bulls on a more permanent basis. Strength in financials and in the consumer sector will be necessary for more substantial recovery, and there was general agreement that although the earnings season that begins tonight will be terrible, it has already been discounted.

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Consolidation under way; earnings likely to disappoint

Alan Gayle of RidgeWorth Capital Management said the market is undergoing a consolidation after four weeks of rallying (25 percent in the S&P 500). With a limited amount of economic data coming out, the focus is on earnings, and there's little question that it will have been a tough quarter. Wachovia's Mark Vitner said he expects that after some encouragement in February, business weakened again in March. It will be a very long road out of the recession. Retail sales were deceptive, because the holiday shopping season was so soft that they didn't have far to fall.

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Financials, consumers must be solid for economic recovery to take place

Kevin Ferry of Cronus Futures Management said the market tried to shrug off last week's dismal jobs report, but a sort of delayed reaction is playing out now, as the market rebalances. Less money has been moved into higher-risk areas than previously believed. On the positive side, the "firewall" that has been built around the financial sector is holding, and it will be revealed in the stress tests now going on. One big question is the consumer: "Is he willing to do the heavy lifting (as the economy recovers)?"

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Global recovery necessary for the next great bull market to start

Barton Biggs of Traxis Partners said this correction in the markets marks a third of the way, or maybe half-way, through a significant rally over a broad trading range, but it is not the beginning of a great new secular bull market. For that to happen, growth has to take place on a global scale, but all current data show it contracting. Investors know that the earnings season is going to be terrible, and Biggs said he sees that as already discounted.

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Blame the market drop on buyers, not sellers

The downdraft in the market does not exactly represent a change in sentiment, according to Art Cashin of UBS. The market is going to have to be allowed "to reveal its own character." The decline that opened the week was more of a buyers' boycott than a sell-off. We're seeing the underside of government assistance, with some banks now saying they're ready to pay off TARP money, and the government saying it won't take it.