More trouble spots ahead for U.S. stock market : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

More trouble spots ahead for U.S. stock market NEW YORK (AP) - After two of the most gut-wrenching weeks in recent Wall Street history, investors are anxious to know when the stock market is going to turn around and move higher.

Given the current state of the U.S. economy, in which corporate layoffs and restructuring have replaced the rapid expansions of recent years, a comeback isn't quite so simple. The market is likely to face more vulnerable times.

''I'm not holding out hope any time soon'' for a turnaround, said Gary Kaltbaum, a market technician for First Union Securities. He reasoned that stocks still are overvalued and that investors will be grappling with earnings disappointments all year.

''The Dow stocks are just now playing catch-up. The voracity of selling leads me to believe that any rally will also be sellable,'' Kaltbaum said.

Kaltbaum referred to the Dow Jones industrials' two-week slide that sent the blue chips into so-called bear market territory - represented by a 20 per cent decline from the index's Jan. 14, 2000 closing high of 11,722.98 - during Thursday's trading. The Dow closed Friday at 9,504.78, down 1,139.84, or 10.7 per cent, during the previous two weeks and 18.9 per cent off its peak.

The Dow fell victim to the same investor fury that sent the Nasdaq composite index plunging more than 60 per cent from its high of 5,048.62 of a year ago.

Market watchers are split about when a rebound could occur.

''The market is the best forecaster of the future,'' said Kaltbaum, who believes that the stock market is predicting a recession.

Other analysts forecast a recovery sooner, and point to recent trading sessions in which volume has been heavy and selling has been widespread across sectors, which in the past has often signalled that the market was about to touch bottom.

''Certainly, the dumping of stocks has become indiscriminate and the general mood of the market, because of the persistent unrelenting selling is extremely gloomy,'' said Alfred E. Goldman, director of market analysis for A.G. Edwards & Sons Inc. in St. Louis. ''It means we are closer to a bottom.''

Others agree.

''We are getting very close,'' said Brian Belski, chief fundamental market strategist for U.S. Bancorp Piper Jaffray.

However, ''does this mean we are out of the woods yet?'' Belski said. ''No. We need to get through the next few weeks to build some credibility.''

Analysts do agree on two things:

The Wall Street market must wait to see whether companies' coming warnings of disappointing first-quarter earnings have been factored into beaten-down stock prices. If results are worse than investors' already lowered expectations, stocks will continue downward.

Whether the Federal Reserve lowers interest rates before it meets in mid-May is key to stock prices trending higher.

The Fed must ''restore a sense of confidence to the business community, as well as the stock market, that they do recognize that equities are under pressure,'' said Alan Ackerman, executive vice-president of Fahnestock & Co.

One thing the market has going for it, oddly, is that upcoming economic data, such as consumer confidence and unemployment figures, are likely to be quite weak. And, given the market's sometimes contrarian way, bad news will actually be good news if it prompts the Fed to lower interest rates for the fourth time this year.

''The good news for the stock market is that over the next 30 days, the macroeconomic data is going to look as bad as the earnings data has for months,'' said Robert J. Barbera, chief economist at Hoenig & Co. of Rye Brook, N.Y.

Analysts expect the New York-based Conference Board on Tuesday to report that its Consumer Confidence Index fell significantly in March to 104.1 from 106.8, where it stood in February and the lowest since June 1996.

While a weaker consumer confidence figure could encourage the Fed to lower interest rates more aggressively, the economy won't immediately show the effects of lower borrowing costs. Some analysts quickly remind that it takes about six to nine months for that to occur, and so they caution investors not to let themselves be encouraged by more signs of consumers clamping down their spending.

''Earnings are not going to turn around until consumers start spending more money,'' said James Meyer, director of research at Janney Montgomery Scott in Philadelphia.

''The market is getting too focused on dumb things. The dumb thing in this market is to say, 'Bad news is good news.' It's not.''

-- Carl Jenkins (, March 26, 2001

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