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Lehman cuts outlook
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September 10, 2001: 3:13 p.m. ET
A market optimist becomes more pessimistic as stock slide continues
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NEW YORK (CNNfn) - Lehman Brothers' chief portfolio strategist, Jeffrey Applegate, became the latest bull to pull in his horns Monday, lowering his outlook for stocks amid worries that the Federal Reserve has not cut interest rates enough to stimulate the economy.
Applegate cut his year-end target for the Standard & Poor's 500 index to 1,375 from 1,450. Though lower, the new forecast would still mean a 4.1 percent gain for the index in 2001, and a 26 percent surge from Friday's close, when the index fell to its lowest levels in nearly 3 years.
"The risk to this new forecast is down, not up," Applegate said in a note to clients.
"Fiscal policy is still too tight for current circumstances," Applegate added.
Like others, the strategist has lowered his forecasts amid declining corporate profits. The revision marks a sharp turnaround from the end of last year, when most Wall Street seers saw an earnings recovery by now.
Nine months ago, Applegate was among the most optimistic of optimists, forecasting the S&P 500 at 1,800 by the end of this year.
The new forecast comes one month after Goldman Sachs' chief investment strategist, Abby Joseph Cohen, cut her year-end S&P to 1,500 from 1,550. Applegate also downwardly revised his outlook in August.
But unlike the late 1990s, analysts' forecasts have not moved markets. That appeared to be the case with Monday, with stocks trading flat.
In his forecast, Applegate cut S&P 500 profits estimates for 2001 to $49.25 per share from $50.50 per share. He also lowered 2002 earnings per share for the index to $59 from $61.
Applegate said that the market and the economy needs more interest-rate cuts to improve.
"The markets can only be as robust as the policy mix is good," he said. "Which it ain't."
The Federal Reserve, which cuts rates seven times this year, meets again next month. 
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