March 30, 2012, 4:27 p.m. EDT

U.S. stocks notch best first quarter since 1998

In first quarter, Dow gains 8.1%, Nasdaq Composite up nearly 19%

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — U.S. stocks on Friday snared their biggest first-quarter gain in more than a decade, after a better-than-anticipated rise in consumer confidence and spending boosted views of the economy.

The S&P 500’s 12% rise in the first quarter would represent “a stunning year, and is even more so as a quarter,” said Marc Pado, U.S. market strategist at DowBull.com.

“But I do think it’s a comeback from an underexposed level for institutions; they were so scared they were hiding in defensive issues, and are now looking for opportunities to make money and not just hide. That shift alone has also helped move markets higher,” he said.

Up 8.1% for the quarter, the Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.50% rose 66.22 points on Friday, or 0.5%, to 13,212, sealing its best first-quarter point gain in its history.

“There is a general sense that we’ve gotten past the worst of the European crisis and the U.S. economy is gaining momentum,” said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

“People are embracing the idea that maybe it is safe to go back into the stock market again,” he added. Read about how stock market’s rise left many behind.

Click to Play Week ahead: FOMC, March jobless rateThe first week in April will bring March retail data, new data on the jobless rate and March U.S. car sales, Polya Lesova reports on Markets Hub. (Photo: Reuters/Shannon Stapleton)

The S&P 500 /quotes/zigman/3870025 SPX +0.37% climbed 5.19 points, or 0.4%, to 1,408.47, garnering its biggest first-quarter advance since 1998.

Energy, healthcare and consumer staples rose the most among its 10 major industry groups, with the latter two “indicating a somewhat defensive tone,” said Michael Sheldon, chief market strategist at RDM Financial.

“Today is the last day of the quarter, so there are the cross currents between under-invested portfolio managers and those taking profits after a fairly decent runup in the market so far this year,” Sheldon said on the end-of-quarter positioning.

“There’s often a lot of selling of positions that didn’t quite work out, and end-of-quarter window dressing, with some shelling out a major position in Apple /quotes/zigman/68270/quotes/nls/aapl AAPL -1.69% of course,” said Cornerstone’s Skrainka. “A lot of managers have a lot of egg on their face since they didn’t own the stock,” he added of the technology company’s 48% climb so far this year.

Shares of iPhone and iPad maker Apple dropped 1.7% on Friday.

The tech-heavy Nasdaq Composite /quotes/zigman/123127 COMP -0.12% fell 3.79 points, or 0.1%, to 3,091.57, leaving it up 18.7% for the first quarter.

For every share declining more than two rose on the New York Stock Exchange, where 966 million shares traded. Composite volume topped 3.6 billion.

Oil prices finished at $103.02 a barrel on the New York Mercantile Exchange. Gold futures for June delivery /quotes/zigman/661661 GCM2 +0.88% gained $17, or 1%, to end at $1,671.90 an ounce on the Comex division of the Nymex.

Safety wall
Euro-area finance ministers agreed on Friday to raise their financial firewall to 700 billion euros ($934 billion) in their latest effort to contain the region’s debt crisis. Read more about move.

“Europe has lent banks a trillion euros, which should provide a backstop over the next several quarters. That has taken a certain amount of systemic risk off the table, at least for now,” noted Sheldon.

Friday’s economic reports had the Commerce Department reporting spending rose 0.8% in February as income climbed 0.2%. Read story on rise in purchases.

And, the University of Michigan and Thomson Reuters said consumer sentiment in March climbed to its highest level in more than a year, as Americans gained more confidence about their economic conditions. See full story on sentiment.

Separately, a read on business activity in the Chicago area decelerated in March, but remained above 60% for a fifth consecutive month.

“There’s a general sense that we’ve gotten past the worst of the European crisis and the U.S. economy is gaining some momentum. We’re seeing more confidence on the part of investors, and that’s why they are coming into the market,” said Skrainka.

U.S. stocks notch best first quarter since 1998 - NewsWatch - MarketWatch