“It seems like an odd time to say so, but more analysts are starting to worry that the stock market is overdue for a pullback,” writes E.S. Browning in today’s Wall Street Journal.

“Investors weren’t feeling that way on Friday, when they sent stocks sharply upward. But that means that it now has been almost 11 months since the broad market — as measured by the Dow Jones Industrial Average or the Standard & Poor’s 500-stock index — suffered a 5% drop from a high. With stocks surging ahead, hopes and expectations are rising. Fear has gradually subsided.”

“Usually, when that sort of thing happens, some kind of bad news sends stocks down 5% or 10% or a little more. It doesn’t have to provoke a true bear market — a decline of 20% — but it does quiet the euphoria. The rally then often resumes, and phrases like ‘healthy consolidation’ get thrown around.”

“The last time such a healthy consolidation occurred was at the end of March last year when the Dow industrials fell 6% amid worry about the Iraq war. Since then, the biggest pullback has been 4%, and that was in September. (The Nasdaq Composite Index has sometimes fallen more sharply, but it often is more volatile than the broad market.)”

” ‘The market is vulnerable’ to a pullback, worries Russ Koesterich, chief North American stock strategist at State Street Global Markets, the brokerage arm of State Street Bank in Boston.”

“Mr. Koesterich has just finished a study suggesting that, at manufacturing companies in particular, raw-material and energy costs are rising faster than prices. That means that, at a time when investors’ expectations are high, companies may have trouble delivering the profit margins that investors expect.”

” ‘There is some evidence that earnings won’t be as robust as the Street is expecting’ later this year, he says, adding that ‘February is typically a weak month for the market, especially coming off of several strong months.’ “

“Historically, he and others note, February is one of the few months when stocks have tended to fall (typically following December and January gains).”

” ‘We have been expecting a correction simply because nothing goes straight up,’ says Joseph Keating, chief investment officer at AmSouth Asset Management, a money-management unit that oversees $25 billion in investments for AmSouth Bancorp in Birmingham, Ala. ‘I wouldn’t be surprised if we see another 4% or 5% decline in the market over the next couple of weeks.’ “

http://online.wsj.com/article/0,,SB107607643896622984,00.html