Q1 - S&P 500 advanced 5.6% - Best First Quarter Gain Since 1998

(Bloomberg) -- U.S. stocks swung between gains and losses at the end of the biggest first-quarter rally in 13 years as higher oil and metal prices drove commodity producers up, while consumer and financial companies slumped.

The Standard & Poor’s 500 Index gained less than 0.1 percent to 1,328.59 at 3:10 p.m. in New York. The Dow Jones Industrial Average fell 7.11 points, or less than 0.1 percent, to 12,343.5. Equity index futures retreated before the open of exchanges after first-time claims for unemployment insurance topped economists’ estimates.

The S&P 500 advanced 5.6 percent in this quarter through yesterday and is poised for its biggest gain in the January- March period since 1998. An earthquake and tsunami in Japan and concern that uprisings in the Middle East and northern Africa will curb global growth dragged the S&P 500 as much as 6.4 percent lower from its high for the year on Feb. 18 through March 16. The gauge has recovered most of that loss, trimming its drop from its 2011 high through yesterday to 1.1 percent.

S&P 500 - 2011 Q1 performance

First-Quarter Gains

The S&P 500 usually climbs further following first-quarter gains similar to this year’s, according to Birinyi Associates Inc. The index rises about 7.1 percent in the final three quarters of years following January-March gains of 5 percent to 7 percent, Birinyi data dating back to 1928 show.

The benchmark gauge of U.S. stocks is trading for about 13.7 times its companies’ estimated operating earnings, compared with an average multiple of 18.1 times reported profits over the last decade, data compiled by Bloomberg show.

Jobless claims fell by 6,000 to 388,000 in the week ended March 26, the Labor Department said. The median forecast of economists in a Bloomberg survey was for a decline to 380,000 claims. The report comes before tomorrow’s monthly government report on non-farm payrolls, expected to show that the economy added 190,000 jobs in March.

S&P 500 - 3-year performance  (2008-2011)

S&P 500 Rebound

The rebound in the S&P 500 isn’t over, according to Bay Crest Partners LLC. When the S&P 500 slipped to 1,249.05 on March 16, the weekly survey from the American Association of Individual Investors showed the next day that the ratio of bulls to bears fell to 0.71, the lowest since Aug. 26, Bloomberg data show. Christian Bendixen, director of technical research at Bay Crest, said the increase in pessimism may reverse and help the S&P 500 climb to 1,425, or 7.3 percent above yesterday’s close.

“We have some good reasons to want to own stocks,” said Perry Piazza, director of investment strategy at Contango Capital Advisors in San Francisco, who helps oversee about $3.3 billion of assets. “We know the energy and materials sectors are doing really well, we know the dollar is weak, we know that individual investors are interested again in coming back to the stock market. I don’t think it’s time to take your chips off the table yet.”