The stock market is having its first chance to respond to Friday's disappointing jobs report and the results are predictable: In recent trading, the Dow was down 105 points while the S&P 500 was lower by 1%, albeit off its worst lows of the day (so far).
Bob Doll, chief equity strategist for fundamental equities at BlackRock, says a 5% to 7% pullback "would not be out of the ordinary," given the jobs report following the market's huge rally since the October lows.
"We could have a consolidation here, which would be very much overdue in some sense," he says, noting the market was "acting a little tired" even prior to last week's selloff.
Doll, whose firm oversees about $3.5 trillion in assets, believes investors would be wise to buy the dip. "I'd advise people not to be faint of heart and on the pullback do some buying," he says, citing healthcare (notably healthcare services) and cyclicals (notably energy and tech) as his favorite sectors.
Predicting major averages have not yet hit their highs for 2012, Doll cites a positive monetary backdrop, among other factors. While last week's decline was attributed, in part, to fear the Fed won't do another round of bond buying, the strategist notes the central bank isn't about to do an abrupt reversal.
"Maybe we won't see QE3 out of the Fed but we still have essentially zero interest rates, and that's very powerful," he says, further noting the European Central Bank "only began aggressive easing in the fourth quarter of last year."
While monetary policy may dominate short-term psyche -- Doll says Ben Bernanke's speech tonight is more important than the start of earnings season -- he says easy money is not the only reason to stay bullish: Fundamentals are "not great but good enough"; sentiment is still "very negative" -- which is positive from a contrarian basis -- and "valuations not extended even after the run," he says.
In sum, Doll believes things may not be as good for investors as they seemed a month ago, but they're a lot better than they look Monday afternoon.