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Market Update

First Quarter in Stocks: Where Do We Go From Here?

Low-quality rally begins to lose steam, but high-quality equities bide time.

As the first quarter of 2004 drew to a close, the U.S. stock market looked uncertain.

The so-called low-quality rally of 2003, which featured smaller-cap, technology, telecommunications, and Internet companies with dubious balance sheets doubling or tripling in value, seemed to lose momentum toward the end of the first quarter of 2004. However, the long-awaited rotation into the shares of large, high-quality companies with proven records of earnings growth hasn't yet fully materialized.