Markets at bottom? Analysts beg to differgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Wednesday, March 14 12:47 AM SGT
Markets at bottom? Analysts beg to differ NEW YORK, March 13 (AFP) - Does the recent mauling on Wall Street mean the markets have touched bottom? Or is this just the next phase in a prolonged slump for the stock market?
That is what Wall Street analysts are trying to figure out, and not surprisingly, there are widely divergent views.
With the Nasdaq down more than 60 percent from its peak of 5,000 a year ago and the broader Standard and Poor's down some 20 percent, some analysts say the worst carnage is over and that stocks may be poised for a rally.
But others say an uncertain US economic situation and the inability of companies to forecast growth prospects even in the face of lower interest rates means Wall Street is not out of the woods yet.
Cantor Fitzgerald chief investment strategist Bill Meehan suggests the Nasdaq may slide to 1,500 by the end of June because of a deteriorating macroeconomic environment.
"The problem is the companies' inability to forecast anything beyond the second quarter, let alone the third and fourth quarters," said Meehan.
"It turned out that the emperor was wearing his birthday suit," said Meehan, indicating that the growth in the technology sector was lacking strong, long-lasting catalysts.
Noting how the selloff is spreading to the broader market, he noted that, while blue chips were "holding up very well until a couple of weeks ago," the tide has now turned considerably negative.
"The pain will be more widespread," as the technology doldrums spill over onto the remaining 80 percent of the US economy, he said.
Alfred Goldman of AG Edwards said however that the gloom may have pulled the markets down too far and that a rally may be at hand.
"Everywhere you look, you see only negative news and a glass is completely empty attitude. The market has all the earmarks of a capitulation," Goldman said.
"All that is needed to make it final is to see the buyers show up. So far, that hasn't happened; but history shows that when markets get this oversold, the bottom is close at hand."
But economic consultant A. Gary Shilling warns investors to get trapped in a "sucker rally," saying the US economy faces a "deep and wide" downturn.
The situation on Wall Street "looks like late 1973, when the Dow regained two-thirds of its earlier drop then fell another 41 percent," he wrote in Forbes magazine. "Sell stocks. As I've recommended many times, buy bonds, especially long Treasurys."
Larry Wachtel at Prudential Securities said signs of a clear bottom is still unavailable. Wachtel talked about the necessity to see a "climactic sell," where all shares, regardless of their prospects and history, are sold following a complete loss of confidence.
Wachtel said the Nasdaq still may be overvalued, trading at a price-earnings ratio of 154, well above historical levels of 15 to 20.
"Bottom-line, it's the bottom-line," said Wachtel. "Profits drive stocks and the profit picture continues dicey."
"The real fear the market is facing now is that this earnings thing won't be resolved this year, and you will still be looking at earnings worries in the first half of 2002," said Charles Pradilla, chief investment strategist at S.G. Cowen in New York.
Others say the bloodbath on Wall Street is providing an extraordinary buying opportunity.
"The valuations in this sector are the best we have seen in four or five years," said John Frankola at Parker/Hunter Asset Management.
"Typically, bear markets are great times to buy for long-term investors."
-- Carl Jenkins (firstname.lastname@example.org), March 14, 2001