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New record; whither rally?
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March 10, 1999: 10:09 p.m. ET
Panelists assess market's direction after the Dow average achieves new peak
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NEW YORK (CNNfn) - After Wednesday's stock market gains to new record highs, the Dow Jones industrial average is now up 6-1/2 percent on the year. The S&P 500 also set a new record.
The Nasdaq is up almost 10 percent on the year, although still more than 100 points off last month's record. In fact many widely held technology stocks are in the minus column for the year. Compaq (CPQ) is down 25 percent; IBM (IBM), Intel (INTC) down 1-1/2 percent; and Hewlett Packard (HWP) is up just a fraction from last year's closing price.
Assessing the marketplace Wednesday on "Moneyline News Hour with Lou Dobbs" were three of Wall Street's top strategists: Charles Blood, director of financial markets at Brown Brothers Harriman; Michael Holland, chairman of Holland & Co.; and Richard Hoey, director of equity research at the Dreyfus Corp.
Here are highlights of their roundtable discussion:
LOU DOBBS, ANCHOR: Charles, let me start with you. Where should we be putting our money? Is this rally going to run?
CHARLES BLOOD, BROWN BROTHERS HARRIMAN: Well, I think investors should not be in any rush to put in new money. I'm a little concerned that we could have a pullback here. It's still a bull market. By the end of the year I think the market is still up nicely.
DOBBS: How high?
BLOOD: There are some problems, though.
DOBBS: Let's go to the good news first. How high at the end of the year?
BLOOD: I think we could get to 11,000 on the Dow; 1,400 on the S&P.
DOBBS: That's good news.
BLOOD: That's not supposed to be an outlandish forecast.
DOBBS: Now we can accept some bad news.
BLOOD: OK, bad news. Higher interest rates have been developing for the better part of a month and you saw it today, new highs in the same number of stocks making lows as new highs. It's not a broad market.
DOBBS: Mike, what are your thoughts?
MICHAEL HOLLAND, CHAIRMAN, HOLLAND & CO.: I am a little more optimistic than that, Lou. Interestingly, the four stats that you mentioned in your introduction are Intel, Compaq, Hewlett Packard and IBM -- I think are all incredibly attractive stocks as investments today because of what you just said. They haven't participated in this bull market recently. They're all selling at or below the market multiple -- very average prices for I think are world-class companies.
DOBBS: And is it your judgment -- you're more optimistic, you said, than Charlie -- are you talking about a Dow above 11,000 for the end of the year?
HOLLAND: I have no judgment; I would have a guess. My guess would be that it's probably more than that, but it's a guess.
DOBBS: Dick, how about you?
RICHARD HOEY, THE DREYFUS CORP.: I'm a little more neutral. I don't think we're going to make a big change in the S&P from here to year end. I don't see a big up or big down. But within the market something really important is taking place, which is we're losing the old leadership.
If you look on the new high list, you don't see a lot of drugs, you don't see a lot of technology. What we're seeing is -- what's powering the market in the last couple of days -- I think it will run for a while -- is the laggers. We've moved up into the catch-up phase of the market.
Look today, it's DuPont (DD) and Exxon (XON) leading this market. That's not what was happening a month or two ago. And I think what's happened is the evaluation of those really great companies that everybody says it doesn't matter how much you pay. Well, when you paid the $50 for Compaq it turned out that was a little too much.
DOBBS: Laggers among the big cap stocks.
HOEY: No, I think we will also see a stalling out of this pattern of the super-cap stocks outperforming the rest of the market. I think we're right at an inflection point in a lot of areas from the old pattern to the new pattern.
I think the Japanese stock market is coming on. I think that the out-performance of the super-caps is going to stall out right about here and it's really going to put people off because many portfolio managers have structured their portfolios for the old patterns; that's what will win for them and they're in the wrong position. That's why you saw Schlumberger (SLB) go up so much today.
DOBBS: Give us your best judgment about what investors should be investing.
HOEY: I think what you buy right now is what has lagged, which is you buy value funds which have been behind the market. Value small-cap has been way behind. I think it's quite attractive. I think a lot of the sector that have not performed, whether its utilities, REITs, oils -- many of these sectors are very attractive and they are by no means not overvalued. What you stay away from is these stocks that have had massive multi-year moves -- are up triple over the course of the last three years. I think that stuff is going to get sold here.
DOBBS: Mike, are you in anyway cautioned by Dick's judgment here?
HOLLAND: I'm not bearish. I couldn't disagree with him more about going to the value parts. I think the companies that have been great producers of profitability and profits -- for example the four that you mentioned, which I repeated, have not been doing particularly well in the stock market.
Those four companies are selling at or below the market multiple. I think they offer extraordinary value themselves. They wouldn't be in Dick's value funds, which he refers to on the one hand. On the other hand I think they're great values themselves.
HOEY: Another two points down and they would be.
DOBBS: I think we're making a market here. Charlie, you said you would not rush in -- investors should not be rushing in with their money here.
BLOOD: No.
DOBBS: But if they were cautiously moving here, what would you counsel them to do?
BLOOD: Well, it's nice to have a little disagreement on a panel. I'm not convinced it's time to switch the leadership here. It's hard to switch leadership late in a bull market usually -- and if it does switch, it's usually more of a last gasp. So I would stay big-cap particularly rather than small-cap here.
DOBBS: And stay with the established leaders?
BLOOD: Stay with the established leaders. There's probably a play out there; maybe it's the oil price move that started it, where commodities bounce back and pull some of these stocks with them. But that would not encourage me in a longer-term sense.
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