March was a strong month overall for the market – the S&P 500, Dow and NASDAQ climbed about 3.1%, 2.1% and 1.8%, respectively. However, these gains are just a drop in the bucket compared to the major indices’ performance for the first quarter. The S&P 500, Dow and NASDAQ rallied 10.2%, 5.6% and 9.1%, respectively. This also marked the S&P 500’s best performance since the first quarter of 2019. I should also add that the S&P 500 reached 22 record all-time highs in the first quarter, while the Dow came in less than 0.5% from 40,000. In other words, the first quarter was incredible. What’s great about the first-quarter rally is that it wasn’t just led by artificial intelligence and technology stocks. In fact, 10 of the 11 S&P 500 sectors “melted up” in the first quarter, and small-cap stocks staged a solid comeback in February and March. I should also add that crude oil and natural gas stocks soared higher in March, as energy prices ticked higher. In other words, the market rally has broadened – and that’s great news for stocks overall. So, it’s no surprise that the broader market is taking a breather now. In fact, in the first two trading days of April (and the second quarter), the S&P 500 is down about 1.2%, the Dow has lost 1.8% and the NASDAQ has slipped by 1%.

Will the Rally Continue in April?

The good news is that I do expect the rally to ramp back up again soon. The month of April is historically a seasonally strong month for the stock market. The S&P 500 has posted gains in April during 16 of the past 18 years – and April has been the strongest month for the overall stock market since 1950. It’s also worth noting that in years where the S&P 500 rallied 8% or more in the first quarter, it tends to rally over the next three quarters. Since 1950, the S&P 500 has tacked on an average of 9.7% in the following three quarters, with gains 94% of the time. Now, it’s good to have seasonality on our side. But what will ultimately determine the success of the market is earnings. The first-quarter earnings announcement season will kick off in mid-April, so, in today’s Market 360, I’ll share the stocks that you might not want to own heading into earnings season. I’ll also tell you which group of stocks I expect to perform the best… and where you can find them.

This Week’s Ratings Changes

I took a fresh look at the latest institutional buying pressure and each company’s financial health and revised my Portfolio Grader for 33 big blue chips. Of these 33 stocks, 12 were downgraded from a B-rating (Buy) to a C-rating (Hold), and 9 stocks were downgraded from a C-rating to a D-rating (Sell). I’ve listed the first 10 stocks rated as Hold below, but you can find the full list – including the stocks’ Fundamental and Quantitative Grades – here. Chances are that you have at least one of these stocks in your portfolio, so you may want to give this list a skim and adjust accordingly.

Ticker	Company Name	Total Grade
ASML	ASML Holding NV ADR	C
BBD	Banco Bredesco S.A. Sponsored ADR Pfd	C
BP	BP p.l.c. Sponsored ADR	C
CDNS	Cadence Design Systems, Inc.	C
HEI.A	HEICO Corporation Class A	C
LULU	lululemon atheltica inc.	C
MDLZ	Mondelez International Inc. Class A	C
NTES	Netease Inc Sponsored ADR	C
SLB	Schlumberger N.V.	C
STE	STERIS plc	C

After such a “fast and furious” start to 2024, you may be wondering if the momentum will persist in the second quarter and beyond. In my opinion, we’re just getting started! However, I think our biggest winners will be from a few select artificial intelligence stocks… The truth is there is a lot of hype around AI stocks right now. But instead of blindly throwing your money at any company with “AI” tacked to the end of its name, you need to make sure that they also have superior fundamentals. For example, one of my top AI picks shot up by 255% in the first quarter, compared to the S&P 500’s 10.2% gain. That’s why I have hand-picked five stocks that I expect to lead the charge as AI explodes. If you become a member of Breakthrough Stocks now, I’ll send you the names in my brand-new special report: 5 Small-Cap Gems for the 2024 A.I. Boom. These are five companies that are properly incorporating AI into their businesses or stand to directly profit. You’ll also have full access to my Breakthrough Stocks Portfolio, all my Weekly Updates, Monthly Issues, Special Reports, Special Market Podcasts – and much more. Click here for full details. (Already a Breakthrough Stocks member? Click here to log in to the members-only website now.) Sincerely, Louis Navellier Editor, Market 360