This time, bull may be real
The optimism could stick this time as investors look at 2002 as a recovery year.
March 8, 2002: 5:17 p.m. ET
By Staff Writer Parija Bhatnagar
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NEW YORK (CNN/Money) - Dead cat bounce or the first inklings of a monster rally: That's the $64,000 question for market pros attempting to make sense of a March stock run that is easing the pain of a frustrating February.
Whatever happens, a month that began with a two-day jump of nearly 500 points in the Dow Jones industrial average could mean that the stock markets are making a statement -- and with some conviction.
"There's been a decisive shift to the upside in market sentiment," said Barry Hyman, chief investment strategist with Ehrenkrantz King Nussbaum. "The Dow has done its job and it has made a statement of recovery based upon defensive-style spending, cyclicality and the absence of accounting-related issues for the Dow."
Fellow bull Alan Ackerman, market strategist with Fahnestock & Co., chimes in with the opinion that there's "certainly more fire in the belly" of investors, who are starting to think it's not bad to buy stocks when they're down.
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There's been a decisive shift to the upside in market sentiment. The Dow has done its job and its made a statement of recovery.
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Barry Hyman, chief investment strategist with Ehrenkrantz King Nussbaum. |
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But "conversely, they're also thinking why hold on to potential hot potatoes past a few strong trading sessions without taking some cash off the table," Ackerman said.
To the nay sayers -- aka, the bears and a few fence-sitters -- the word's out that the sharp run-up is yet another short-lived bear-market rally at a time when the Federal Reserve doesn't have another rate cut left.
"We're in a frenetic short-covering based rally. The jury is still out about how long this is going to last," Bernie Schaeffer, market analyst and chairman of Schaeffer Investment Research, told CNNfn's Street Sweep.
Traders deliver yet another perspective on the mood of the market, suggesting that the bearish tone is actually a self-defeating sentiment -- particularly given the buzz over Friday's unexpected drop in the February unemployment rate that capped a week of strong economic data.
According to Michael Driscoll, senior block trader with Credit Suisse First Boston, this on-the-cusp-of-spring rally will hold because "no one buys it."
"Many people are downplaying it, saying that the underlying fundamentals don't justify stock prices," he added. "That distrust is a good indicator that the rally can travel further than you expect."
Driscoll suggests that those not convinced of a rebound are running afoul of one of the markets' most respected names -- Fed Chairman Alan Greenspan, who this week strengthened his positive view about the economy.
"Greenspan saying he's optimistic about an economic recovery is as positive as it gets. He may as well jump up and down on Times Square ringing a bell," Driscoll said.
But a funny thing happened Thursday following the Fed chairman's revised appraisal. The market pulled back, with investors appearing to gloss over Greenspan's words and ignoring the pitch from the market cheerleaders.
As key indicators continue to paint a rosier picture of the economy, they could also foreshadow a rise in interest rates as early as May.
Market watchers say it's just an adjustment factor and investors won't get caught up on it. "This perception creates a negative opinion on Wall Street. But over time, it will help the equity markets because it is reflexive of a better earnings picture," said Ehrenkrantz King Nussbaum's Hyman.
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We're in a frenetic short-covering based rally. The jury is still out about how long this is going to last.
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Bernie Schaeffer, market analyst and chairman of Schaeffer Investment Research. |
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But even the die-hard optimists contend that earnings concerns - and, to a lesser extent the fear of another Enron-like accounting scandal -- will continue to rock the boat.
"Visibility and valuation could weigh down the indices. There's concern that stocks remain overvalued. In techs, the visibility is poor and valuation is high," Hyman explained, citing Oracle's (ORCL: up $0.20 to $14.20, Research, Estimates) warning last week, and Intel (INTC: up $1.19 to $34.17, Research, Estimates) tightening its first-quarter revenue range. "That's why the Nasdaq (merely) sits in the 1,800s while the Dow moved up dramatically to pre-Sept. 11 levels,"
Accounting concerns haven't gone away, but they're less obvious because a market doesn't like to rehash old stories. The growth versus recession story has pushed the accountability story to the background, said Hyman.
But tensions in the Middle East and the possibility that the United States will expand its war against terror to Iraq are weighty issues with market-moving potential.
"Exogenous factors can't be telegraphed. If a war breaks out in the Middle East, and oil flows are disrupted, or the U.S. experiences another terrorist attack, that will hurt this positive mood," said Driscoll. 
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