Market strategists predict stocks up over 10% in 2012

NEW YORK -- In what could be a prelude to what Wall Street pros say will be a better year for investors in 2012, stocks rose nearly 3% Tuesday amid better news on housing construction in the USA and some positive headlines out of Europe.

The Standard & Poor's 500-stock index rallied Tuesday to its biggest gain since Nov. 30. It rose 36 points to close at 1241, but it's still down 1.3% in 2011. Trading has been erratic all year amid angst over Europe's debt crisis, slow economic growth at home and political uncertainty around the globe.

But a quick survey of New Year's prognostications from investment strategists suggests stocks might deliver the double-digit gains that they have put up, on average, over the long term. A snapshot of 2012 year-end-price targets from five firms shows an average gain of 10.5% for stocks.

Brian Belski, one of Wall Street's more upbeat strategists, expects the S&P 500 to hit 1400 next year. That's 13% higher than Tuesday. While Belski still expects periods of "excess volatility and doubt," he says the U.S. is better equipped to ride out financial turbulence. "The relative stability of U.S. fundamentals and economic conditions will be an attractive alternative compared to other more volatile assets around the world," he said in his "2012 U.S. Market Outlook."

Other market-moving forces in 2012:

•Historical trends. Stocks tend to emerge stronger after steep corrections, says Sam Stovall, chief equity strategist at S&P. Of the eight declines of 15% to 25% since 1945, the market was up an average 31.7% a year after the drops. He says the nearly 20% drop that ended in early October increases the odds of a rebound.

•Fading recession fears. Savita Subramanian, head of U.S. equity strategy at Bank of America Merrill Lynch, says the "avoidance of recession and continued earnings growth" from U.S. companies could drive the S&P to 1350, or 9% higher.

•Europe's debt woes. If the eurozone can work through its problems without a major policy mistake that causes financial contagion and slower global growth, stocks should get a lift. "But risks remain elevated," Tobias Levkovich of Citigroup warned in a report.

In his outlook, Barry Knapp of Barclays Capital said stocks should perform better in the second half of the year when "economic fallout in Europe dissipates and the U.S. election gets priced in."