|
Wall St. at crossroads
|
 |
April 22, 2001: 7:00 a.m. ET
For stocks, a good month meets a bad year; analysts see more of the same
By Staff Writer Jake Ulick
|
NEW YORK (CNNfn) - Down but not out. That's the state of the U.S. stock market these days after a big run-up in April that followed 12 months of declines.
The Nasdaq composite index stands 32 percent above its April 4 low but remains 57 percent below last year's record high. The Dow Jones industrial average, off nearly 10 percent from its peak, is still up more than 12 percent from its trough. And that trough came just four weeks ago.
What's next? Analysts are guardedly optimistic, hedging their outlooks somewhere between euphoria and doom.
"I don't think the market is going to collapse and I don't think it's going to go through the roof," said Jon Burnham, chairman and CEO of Burnham Securities. "If I had to guess, I'd say the market's going to go sideways over the next two weeks."
 Burnham is encouraged by the Federal Reserve, which cut interest rates for a fourth time last week. But he's also bracing for more bad news from Corporate America, which is in the midst of reporting its worst quarter for profits in a decade.
Those reports will once again be Wall Street's focus this week, as the period for first-quarter results hits full stride.
Among them, online retailer Amazon.com's (AMZN: Research, Estimates) losses are expected to narrow to 25 cents a share. AT&T (T: Research, Estimates), meanwhile, is expected to see its profits fall to 5 cents a share from 48 cents in the year-ago period. At Exxon-Mobil (XOM: Research, Estimates), earnings per share are forecast to grow to $1.35 from 95 cents last year.
When it comes to the markets, John Forelli, senior vice president of Independent Investment Advisors, sees some short-term pull back.
"We should expect some profit taking," Forelli said. "If we hold on to half of the gains (of the last two weeks) we should be happy about that."
 Stocks fell Friday, but finished the week with strong gains. So far, nearly half of the companies in the S&P 500 have reported first quarter results. And while about half of them have beat Wall Street forecasts, many of those were sharply lowered targets that came after a record number of firms warned that profits or sales would fall short.
Forelli sees more difficult earnings and economic news during the next several months. But he says that the market's worst losses may already reflect the bleakest news about the economy and profits.
Burnham, of Burnham Securities, has divided his bets. He likes defensive stocks that pay dividends such as Kinder Morgan (KMP: up $0.85 to $68.00, Research, Estimates) the natural gas company. He also favors real estate investment trusts. But Burnham also believes that technology companies like Microsoft (MSFT: Research, Estimates) and IBM (IBM: Research, Estimates), which have posted big gains this year, won't collapse.
Last week, Goldman Sachs' market strategist Abby Joseph Cohen once again called stocks undervalued. "We do not expect an intractable recession, and expect profit growth to reaccelerate in the second half of 2001," she wrote in a note to clients.
 But Cohen did lower her year-end target for the S&P 500. Her new 1,550 target, down from 1,650, would mean 25 percent gains from current levels.
Just hours after Cohen's note, the Federal Reserve cut interest rates between regular meetings, turning a morning of stock gains into a major rally. The move improved the psychology on Wall Street. And many economists expect that the fourth rate cut of the year won't be the last. The Fed holds its next regular meeting May 15.
Fed officials will have plenty of fresh economic data to digest by then.
Consumer confidence figures for April come Tuesday. The Conference Board's gauge of sentiment is expected to fall once again, to 113, amid negativity over the falling stock market and rising corporate layoffs.
Companies including DaimlerChrysler (DCX: Research, Estimates), Motorola (MOT: Research, Estimates), and Nortel Networks (NT: Research, Estimates) have all announced payroll cuts in recent weeks.
Wednesday brings data on durable goods orders for March, which are expected to rise 2 percent. Homes sales data, released on the same day, are forecast to stay roughly flat. Still, the housing market, unlike the manufacturing sector, is among the few areas of the economy to remain buoyant.
 The employment cost index, which measures labor costs, will be released Thursday. Analysts surveyed by Briefing.com expect that the index rose 1.1 percent in the first-quarter, following a 0.8 percent rise during the final three months of last year.
But the biggest piece of data comes Friday when the government presents figures on the nation's gross domestic product for the first quarter. Analysts forecasts that GDP rose 0.9 percent during the first three months of the year, following a 1 percent gain in the fourth quarter.
The 0.9 percent growth rate, though low compared with year-ago figures, would still keep the economy in a record-long expansion.
Also Friday, Fed Chairman Alan Greenspan speaks to the annual gathering of the Bond Market Association, which brings together fixed-income professionals.
Bonds, which outperformed stocks last year, have had a tough April as investors moved money away from fixed-income securities and into stocks.
By the end of last week, the 10-year Treasury note was yielding 5.3 percent. At this time last year, that kind of return would not sound attractive. These days, with all the major indexes lower on the year, 5.3 percent looks pretty good. 
|
|
|
|
|
 |
|
