September May End Winning Streak for S&P 500, History Sh
Enviado: 3/9/2003 10:21The calendar bodes ill for U.S. stocks as the Standard & Poor's 500 Index tries to extend its longest monthly winning streak in five years.
September has been the S&P 500's worst month of the year during the past half century, according to Ned Davis Research Inc., with a decline of 0.44 percent on average. October is the second-worst month, with an average 0.4 percent loss. The index has fallen in 30 out of 51 Septembers since 1952.
This year, the S&P 500 has risen for the past six months in recording a 20 percent gain. Money managers such as Wayne Reisner of Carret & Co. said stocks may be headed for a fall, especially since prices already have risen to reflect expectations that the economy will accelerate.
``It has us all nervous since this year has been pretty good,'' said Reisner, who helps manage $2 billion in New York. ``If we get into September and any number on the economy turns out not to confirm that things are going in the right direction, the market could backtrack.''
September's weakness may stem from corporate executives' propensity to cut profit forecasts during the month and selling by mutual funds to take losses for tax purposes, investors such as Reisner said.
Six and Seven
The S&P 500 has slipped 0.4 percent from a peak reached on June 17 as some investors speculated that stock prices already reflect potential earnings and economic growth for the rest of the year. It's up 26 percent from its 2003 low in March.
The benchmark rose 1.5 percent last week, giving it a 1.8 percent gain for August. The Dow Jones Industrial Average added 0.7 percent, and the measure also rose 1.8 percent for the month. The Nasdaq Composite Index advanced 2.6 percent, resulting in a 4.4 percent increase for August. Financial markets are closed today for the Labor Day holiday.
The S&P 500 and Dow have advanced for six straight months and the Nasdaq has gained for seven consecutive months. It's the longest streak for the S&P 500 since 1998, as well as the longest for the Dow and Nasdaq since 1995.
Buying and selling slowed last week as August drew to a close. New York Stock Exchange trading averaged 1.1 billion shares a day, 20 percent below the three-month daily average.
History Making
September ranks as the worst month for the Dow average as well as the S&P 500. In the past century, the Dow has fallen an average of 1.2 percent. It's the only month when the benchmark has fallen more than half the time, according to Ned Davis.
The declines in September have at times been historic. On the first day of trading after the Sept. 11 terrorist attacks, the Dow lost 684.81 points, its biggest-ever point decline. On Sept. 3, 2002, the S&P tumbled 4.2 percent, its biggest slide since the terrorist attacks.
October has also produced some notable losses. The market crashed on Oct. 19, 1987, and the Dow Jones Industrial Average's 23 percent plunge that day was the biggest percentage loss ever. On Oct. 27, 1997, the Dow tumbled 7.2 percent, and the decline prompted the New York Stock Exchange to halt trading early.
The market may tend to fall in September because when companies assess their earnings, some realize they will fall short of full-year forecasts, speculated John Zimmerman, an investment strategist at Banc of America Capital Management.
`Negative Psychology'
``Companies have gone through the year really optimistic and then they get into September and they say, `We ain't going to make it,''' said Zimmerman, whose firm oversees $315 billion in St. Louis. ``They take down earnings estimates. It produces a lot of negative psychology.''
For the past four years, the ratio of U.S. companies reducing earnings forecasts to those raising estimates was the highest in September, according to Thomson Financial.
Last September, companies such as Honeywell International Inc., the world's biggest maker of aircraft electronics; J.P. Morgan Chase & Co., the country's second-largest bank by assets, and Electronics Data Systems Corp., the world's No. 2 seller of computer services, cut their profit forecasts.
The S&P 500 dropped 11 percent for the month, its biggest decline in any month since August 1998 and the largest slide in September since 1974.
Tax Season
Francois Trahan, chief investment strategist at Bear Stearns & Co., said stocks also may slump because mutual-fund managers sell to take losses before the end of their fiscal year. Many funds close their books for the year on Oct. 31.
This year, many investors are anticipating profit growth will accelerate through year-end as the economy picks up. Money managers such as Carret's Reisner and Banc of America's Zimmerman said the market may drop if company forecasts fail to reinforce those expectations.
Reisner said he is considering reducing his holdings of companies such as Intel Corp. and Walt Disney Co. because their share prices have climbed faster than their earnings, making the stocks expensive.
Intel, the world's biggest maker of semiconductors, sells for 38 times the average profit estimate for 2003, as compiled by Thomson Financial. The stock has jumped 84 percent this year, the biggest gain in the Dow average. Disney, the second-biggest media company, trades at 33 times earnings estimates. The S&P 500 is priced at 19 times forecasts.
``People are becoming more optimistic, but it's already baked into the market,'' Zimmerman said. ``Good news is OK. Bad news is a terrible disruption. The market needs great news to get it going.''
Numbers to Come
A 10 percent decline in stock prices ``wouldn't be out of the question'' amid any string of disappointing profit forecasts, he said.
On the other hand, Zimmerman said the U.S. economy is showing too much strength for many companies to cut estimates. Reports this week on U.S. manufacturing and unemployment may reinforce the optimism.
The Institute for Supply Management's manufacturing index for August probably will show expansion for the second straight month, according to all 24 economists in a Bloomberg News survey. The report is to be released Tuesday at 10 a.m. New York time.
On Friday, the government reports on employment in August. The economy probably added 18,000 jobs after shedding 44,000 in July, according to the median estimate of economists, who also predict the unemployment rate held steady at 6.2 percent.
More than 95 percent of the S&P 500's members have reported second-quarter results. The reports and analysts' forecasts have provided evidence to some investors that stocks can hold onto their gains.
`Fundamental Reasons'
Profit last quarter rose 9.6 percent for companies in the index, according to Thomson Financial. Analysts forecast third- quarter earnings to rise 14.5 percent and fourth-quarter profit to climb 21.3 percent.
Zimmerman predicts economic and profit growth will help the S&P 500 finish the year as high as 1100. That's an 9.1 percent gain from current levels and would be a 25 percent jump for the year.
Reisner said he's bracing for a decline this month.
``It doesn't makes sense that investing would operate on a calendar,'' he said. ``There are fundamental reasons to be concerned too, not just because of the calendar.''
By: Bloomberg
September has been the S&P 500's worst month of the year during the past half century, according to Ned Davis Research Inc., with a decline of 0.44 percent on average. October is the second-worst month, with an average 0.4 percent loss. The index has fallen in 30 out of 51 Septembers since 1952.
This year, the S&P 500 has risen for the past six months in recording a 20 percent gain. Money managers such as Wayne Reisner of Carret & Co. said stocks may be headed for a fall, especially since prices already have risen to reflect expectations that the economy will accelerate.
``It has us all nervous since this year has been pretty good,'' said Reisner, who helps manage $2 billion in New York. ``If we get into September and any number on the economy turns out not to confirm that things are going in the right direction, the market could backtrack.''
September's weakness may stem from corporate executives' propensity to cut profit forecasts during the month and selling by mutual funds to take losses for tax purposes, investors such as Reisner said.
Six and Seven
The S&P 500 has slipped 0.4 percent from a peak reached on June 17 as some investors speculated that stock prices already reflect potential earnings and economic growth for the rest of the year. It's up 26 percent from its 2003 low in March.
The benchmark rose 1.5 percent last week, giving it a 1.8 percent gain for August. The Dow Jones Industrial Average added 0.7 percent, and the measure also rose 1.8 percent for the month. The Nasdaq Composite Index advanced 2.6 percent, resulting in a 4.4 percent increase for August. Financial markets are closed today for the Labor Day holiday.
The S&P 500 and Dow have advanced for six straight months and the Nasdaq has gained for seven consecutive months. It's the longest streak for the S&P 500 since 1998, as well as the longest for the Dow and Nasdaq since 1995.
Buying and selling slowed last week as August drew to a close. New York Stock Exchange trading averaged 1.1 billion shares a day, 20 percent below the three-month daily average.
History Making
September ranks as the worst month for the Dow average as well as the S&P 500. In the past century, the Dow has fallen an average of 1.2 percent. It's the only month when the benchmark has fallen more than half the time, according to Ned Davis.
The declines in September have at times been historic. On the first day of trading after the Sept. 11 terrorist attacks, the Dow lost 684.81 points, its biggest-ever point decline. On Sept. 3, 2002, the S&P tumbled 4.2 percent, its biggest slide since the terrorist attacks.
October has also produced some notable losses. The market crashed on Oct. 19, 1987, and the Dow Jones Industrial Average's 23 percent plunge that day was the biggest percentage loss ever. On Oct. 27, 1997, the Dow tumbled 7.2 percent, and the decline prompted the New York Stock Exchange to halt trading early.
The market may tend to fall in September because when companies assess their earnings, some realize they will fall short of full-year forecasts, speculated John Zimmerman, an investment strategist at Banc of America Capital Management.
`Negative Psychology'
``Companies have gone through the year really optimistic and then they get into September and they say, `We ain't going to make it,''' said Zimmerman, whose firm oversees $315 billion in St. Louis. ``They take down earnings estimates. It produces a lot of negative psychology.''
For the past four years, the ratio of U.S. companies reducing earnings forecasts to those raising estimates was the highest in September, according to Thomson Financial.
Last September, companies such as Honeywell International Inc., the world's biggest maker of aircraft electronics; J.P. Morgan Chase & Co., the country's second-largest bank by assets, and Electronics Data Systems Corp., the world's No. 2 seller of computer services, cut their profit forecasts.
The S&P 500 dropped 11 percent for the month, its biggest decline in any month since August 1998 and the largest slide in September since 1974.
Tax Season
Francois Trahan, chief investment strategist at Bear Stearns & Co., said stocks also may slump because mutual-fund managers sell to take losses before the end of their fiscal year. Many funds close their books for the year on Oct. 31.
This year, many investors are anticipating profit growth will accelerate through year-end as the economy picks up. Money managers such as Carret's Reisner and Banc of America's Zimmerman said the market may drop if company forecasts fail to reinforce those expectations.
Reisner said he is considering reducing his holdings of companies such as Intel Corp. and Walt Disney Co. because their share prices have climbed faster than their earnings, making the stocks expensive.
Intel, the world's biggest maker of semiconductors, sells for 38 times the average profit estimate for 2003, as compiled by Thomson Financial. The stock has jumped 84 percent this year, the biggest gain in the Dow average. Disney, the second-biggest media company, trades at 33 times earnings estimates. The S&P 500 is priced at 19 times forecasts.
``People are becoming more optimistic, but it's already baked into the market,'' Zimmerman said. ``Good news is OK. Bad news is a terrible disruption. The market needs great news to get it going.''
Numbers to Come
A 10 percent decline in stock prices ``wouldn't be out of the question'' amid any string of disappointing profit forecasts, he said.
On the other hand, Zimmerman said the U.S. economy is showing too much strength for many companies to cut estimates. Reports this week on U.S. manufacturing and unemployment may reinforce the optimism.
The Institute for Supply Management's manufacturing index for August probably will show expansion for the second straight month, according to all 24 economists in a Bloomberg News survey. The report is to be released Tuesday at 10 a.m. New York time.
On Friday, the government reports on employment in August. The economy probably added 18,000 jobs after shedding 44,000 in July, according to the median estimate of economists, who also predict the unemployment rate held steady at 6.2 percent.
More than 95 percent of the S&P 500's members have reported second-quarter results. The reports and analysts' forecasts have provided evidence to some investors that stocks can hold onto their gains.
`Fundamental Reasons'
Profit last quarter rose 9.6 percent for companies in the index, according to Thomson Financial. Analysts forecast third- quarter earnings to rise 14.5 percent and fourth-quarter profit to climb 21.3 percent.
Zimmerman predicts economic and profit growth will help the S&P 500 finish the year as high as 1100. That's an 9.1 percent gain from current levels and would be a 25 percent jump for the year.
Reisner said he's bracing for a decline this month.
``It doesn't makes sense that investing would operate on a calendar,'' he said. ``There are fundamental reasons to be concerned too, not just because of the calendar.''
By: Bloomberg