Ao minuto: Irão promete responder "de forma proporcional e decisiva" a ataques dos EUA

[Camisa Roxa]

THE BIG PICTURE -- WHAT'S HAPPENING OUT THERE?

MARKET UPDATE

Our caution against opening new LONG positions and recommending that stops be tightened proved timely, as the major indices each lost about 6% last week. Half of that drop came on Friday. It was the worst weekly performance since early July 2002. Economic news, including earnings, was mixed last week and not material enough to have triggered this drop. The culprit is uncertainty about the looming war with Iraq, compounded by concerns that the US will engage in war without UN support or backing from its traditional allies. The market cannot go up in the short-term until the grip of uncertainty is released.

We are traders, and we search for short and medium trends to base our recommendations. However, last week's market action led us to peer at the LONG-TERM TRENDS of the indices. Regretfully, that view is ominous.

Economic conditions are driven by everything that touches us, including business cycles; technology; education; social needs; personal, corporate, and government debt; international relations; balance of payments; and on and on. These factors combine to form the economy, and their collective influence is etched on the price charts of the Dow, the S&P 500, and the Nasdaq, documenting a historical timeline of major events. Significant trends are not evident on daily or weekly charts. But, they unfold clearly on monthly and longer-term charts where long-term trends can be distinguished from short-term trading ranges. We prepared two charts of the S&P 500 to demonstrate what we mean.

The first chart is a plot of daily S&P values. On this chart the S&P appears to have been trading in a range of about 750 to 925 since July 2002.

Click here to view chart:
http://www.BullMarket.com/moneyflow/cha ... 3_cht1.htm


However, on a monthly chart, that daily trend fades, as the dominant landscape is the decidedly downward price trend that began in September 2000 and has yet to be broken.

Click here to view chart:
http://www.BullMarket.com/moneyflow/cha ... 3_cht2.htm


Notice that the S&P elevator paused on the 1135th floor for about 6 months in late 2001 and early 2002 before resuming its bleak trek down. It stopped again in late 2002 and has lingered in the current range (750 to 925) for about six months. But, the trend is still negative, and reversing the steep drop that began nearly three years ago will require a long period of consolidation. That consolidation, according to the charts, has not yet started.

Moreover, the S&P is unlikely to reverse soon because many who bought stocks on the way down are trying to recover some of their losses by selling on any price rise. This keeps a lid on prices. Eventually, the sellers will unload most of their positions to new owners. Since the new owners have a low cost basis, they can afford to hold the positions until prices go up significantly. They are reluctant sellers and are responsible for establishing the support level for their stocks. When the old owners are finally gone, the S&P will be in position to rise. It takes a period of consolidation or trading in place for the selling to be completed. And, between the S&P's September 2000 value of 1530 and its Friday close of 860, a lot of stock needs to change hands to finish off the selling. That means it will take some time for the market to recover.

Right now the market likely is still headed down, never mind a consolidation. The October low is the next support level, and it is only down 15% from here. If that level fails to hold, the subsequent support level is in the low 700s and then the low 600s. It is not out of the question that we could get there. THAT IS WHAT IS OMINOUS .

But, there are always some good stocks in a Bull Market, even on the worst days like last Friday. Our research found 164 of them priced above $5.00 that trade over 100,000 shares daily. Here are Friday's leaders:



TEREX (TEX, $11.52)
Farm & Construction Machinery Sector up 19%

POWER INTEGRATION (POWI, $21.21)
Integrated Circuit Board Sector up 15%

STARBUCKS (SBUX, $22.95)
Specialty Eateries Sector up 15%

So, for traders the long-term trend is interesting intellectually, but we still need to find stocks making short-term moves. And we can.



MARKET OVERVIEW

WAR, EARNINGS BRING MARKET LOWER

Investors were subjected to a bunch of wild swings this past week. The major indices started off the week on a big down note, as the Dow slipped below the 8000 barrier. The blue chip index didn't stay there for too long, and two straight up days had investors smelling a rally. Hopes for that were dashed, however, by another strong decline on Thursday. But the market ended the week on a positive note, with heady gains in the week's final session (except the Nasdaq, which posted a slight drop). Still, all three major indices ended negative for the third straight week.

Though it was another busy earnings week, geopolitical concerns took the forefront as the United Nations Security Council released its weapons inspection report on Iraq. The inspection team leaned towards the negative side, saying that Iraq had not genuinely accepted the U.N. disarmament resolution.

In addition to the U.N.'s statements, President Bush delivered his State of the Union address on Tuesday night. The president talked about a number of things, including his proposed $675 billion economic stimulus plan and the need for massive healthcare reform. But the comments that grabbed everyone's attention were those on Iraq. Bush promised to have evidence that Iraq was NOT cooperating with weapons inspectors by the U.N. Security Council's February 5th meeting. The new developments heightened the chances of a military conflict with Iraq, and the war fear cloud grew larger.

Though corporate news took a backseat to the geopolitical tensions, a number of Dow components released their latest quarterly results this week, including PROCTER & GAMBLE (PG, $86, up 2), SBC COMMUNICATIONS (SBC, $24, down 1), and EXXON MOBIL (XOM, $34, up 1). Procter & Gamble reported earnings that beat the Street, as profits grew 15%. The consumer products giant also backed its earnings outlook for 2003.

SBC showcased the Telecom sector's woes in its latest earnings report, posting a lower profit year-over-year on revenues that declined 6%. The company doesn't expect things to get better this year, forecasting another revenue contraction and higher costs from its pension fund and medical plans.

Exxon Mobil's results reflected the benefits of high oil prices. The company boosted profits by 53% year-over-year and beat earnings estimates by 6 cents per share. But the high prices -- stemming from war fears and the Venezuelan oil strike -- did do some damage to the company's refining and marketing operations. So, for big oil firms like Exxon Mobil, high oil prices are a two-headed monster.

This week marked the end of the first month of 2003, and so far the market is doing more of the same. All three major indices fell in January, with the Dow dropping 3.5%, the S&P 500 slouching 2.7%, and the Nasdaq falling 1.1%. This is a chilling sign that we could be in for another down year. There's still a long way to go, but don't get your hopes up for a market recovery just yet. And you know the old _expression: So goes January, so goes the year.

For the week, the Dow Jones slipped 77 points, or 0.9%, to close at 8054.

The S&P 500 fell 5 points, or 0.6%, to finish at 856.

And the Nasdaq was the biggest loser, dropping 21 points, or 1.6%, to close at 1321.



ECONOMY WATCH

1. EXISTING HOMES SOLD AT A RECORD RATE
Sales of existing homes rose 5% in December, according to the National Association of Realtors. Home sales jumped to an annual rate of 5.86 million, up from a 5.57 million rate in November. Low mortgage rates led to strong demand from first-time homeowners. The average mortgage rate fell to 6.04% during the month, the lowest level in nearly 40 years. In 2002, 5.56 million existing homes were sold, to reach an all-time high, topping the previous record in 2001 by 5%.



2. DURABLE GOODS RISE
The Commerce Department on Tuesday announced that durable goods orders ticked up 0.2% in December after a 1.5% decline in the prior month. However, economists expected the figure to rise 0.8%. Orders for communications equipment and cars dropped, but those losses were offset by increases in orders for military equipment, computers, and capital goods. For the whole year, durable goods orders fell 0.2%. Though the numbers improved from a big 11.6% fall in 2001, the decline reiterates the fact that business are holding back on their spending.



3. CONSUMERS ARE LESS CONFIDENT
The Conference Board released its latest consumer confidence index reading on Tuesday. The index fell to a nine-year low of 79.0 in January, down from December's reading of 80.7. The expectations index also fell, from 84.1 to 81.1, and the percentage of consumers expecting fewer jobs in the next few months rose from 20.2% to 20.9%. Once again, an economic indicator suggests that the economic recovery is slowing down. Consumers have been the economy's lone bright spot during this down period. If we stop spending, we could be in real trouble.



4. ECONOMY SLOWS DOWN
The Commerce Department reported on Thursday that gross domestic product (GDP) slackened to a crawl in the fourth quarter of 2002. GDP slowed down to a mere 0.7% annual rate in the quarter. For all of 2002, GDP grew 2.4%, an improvement upon 2001's minute expansion rate of 0.3%. But it still lagged behind economic growth of 3.8% in 2000 and slowed quite a bit from the 4% pace recorded in the third quarter. Defense spending and sales of automobiles and homes were the economy's main supports last year. Government expenditure rose 4.4% in 2002, its highest increase since 1986.



5. JOBLESS CLAIMS RISE IN THE LATEST WEEK
Initial jobless claims for the week ended January 25 rose by 14,000 claims, the Labor Department reported on Thursday. However, weekly claims remained under the 400,000 level, and the four-week average fell by 3,000 to 384,000. This is the third straight week that new claims have remained below 400,000. Still, the unemployment rate is at 6%, and many companies have talked about cutting even more jobs this year. So don't count on a job market recovery yet.



IN THE NEWS

I. KIMBERLY-CLARK POSTS LOWER PROFITS
KIMBERLY-CLARK (KMB, $46, up 1) announced lower earnings in the fourth quarter of 2002 on Monday. The consumer products maker reported net income of $370 million, or 72 cents a share, up from earnings of $340 million, or 65 cents in the year-ago period. However, excluding one-time charges, profits fell from 82 cents a year ago to 76 cents in the latest quarter, but the results beat the previously-lowered consensus estimate. Sales fell slightly from $3.35 billion to $3.34 billion. The company has been entrenched in a diaper market battle with PROCTER & GAMBLE (PG, $86, up 2), leading to results that were "below our expectations," according to the firm's CEO. Looking ahead, Kimberly-Clark expects pension costs to swallow any earnings growth it achieves. Not pretty.



II. MORE TELECOM WOES
SBC COMMUNICATIONS (SBC, $24, down 1) reported 4Q02 net income that doubled results from the year-ago period. Earnings totaled $2.4 billion, or 71 cents a share, for the quarter, up from a $1.2 billion profit a year ago. However, excluding one-time items, the firm earned less than last year, 62 cents a share vs. 64 cents in the year-ago quarter. Earnings matched Wall Street expectations. Furthermore, revenue at the nation's second-largest local phone company fell 6% to $11.2 billion. All of the firm's business segments fell year-over-year, except for Wireless and Directory revenues.

SBC expects 2003 revenues to fall again, as companies are expected to continue to cut back on network spending. Additionally, expenses will rise with higher pension and medical costs. SBC's forecasts confirmed gloomy outlooks from rival Telecom firms AT&T (T, $19.48, down 0.55) and BELLSOUTH (BLS, $23, unch.) last week.



III. DISAPPOINTING OUTLOOK FROM DUPONT
DUPONT (DD, $38, down 2) came out with 4Q02 earnings, reporting a much lower profit year-over-year. The nation's #2 chemical company achieved net income of $350 million, or 35 cents a share, down sharply from a huge $3.92 billion, $3.82 per-share, profit in 4Q01. However, last year's results include a big one-time gain for the sale of the company's drug business. Excluding one-time items, the company beat analysts' estimates by 2 cents and nearly tripled a year-ago profit of 12 cents. But DuPont lowered its 1Q earnings projections, saying that they should match last year's results. In 1Q02, the firm earned 55 cents a share; analysts were looking for a 64-cent profit this year.



IV. MERCK NOT MURKY ON 2003 EARNINGS PROJECTIONS
Pharmaceutical firm MERCK (MRK, $55, up 1) announced a slightly higher profit in the fourth quarter of 2002. The drugmaker earned net income of $1.89 billion, or 83 cents a share, compared to an 81-cent profit in 4Q01. The results met Wall Street expectations. Revenue rose 11% to $13.9 billion for the quarter. However, sales of the firm's Vioxx arthritis drug dropped 25% to $385 million and sales for cholesterol drug Zocor rose a mere 2% to $1.74 billion. Both drugs were hampered by excess inventory stocking in earlier quarters, and the company expects the trend to reverse in the first quarter. For 2003, Merck reiterated previous guidance for full-year earnings of $3.40-3.47 a share, which would reflect 11% growth. Currently, analysts expect the firm to earn a $3.39 profit.



V. NORTHROP GRUMMAN RAISES ITS EARNINGS
NORTHROP GRUMMAN (NOC, $91, up 1) posted higher quarterly earnings in the fourth quarter of 2002 on Tuesday. The defense contractor reported net income of $225 million, or $1.72 a share, vs. earnings of $130 million, or $1.28 a share, in the year-ago period. Excluding pension costs and other one-time items, the firm earned $240 million, or $1.83 cents a share, beating Wall Street expectations for a $1.66 profit. This is the last quarter in which the firm will report earnings excluding pension costs. And this year's pension costs will be sizable. Previously, Northrop Grumman forecasts 2003 earnings of $7-7.50 a share, excluding pension costs. Now, the company predicts a $4-4.50 profit after taking its pension liabilities into account. Still, a strong earnings report from this company, once again showing the benefits for the Defense sector from increased military spending.



VI. KRAFT'S EARNINGS LEAVE A BAD TASTE
KRAFT FOODS (KFT, $32, down 4) on Wednesday reported a 70% rise in earnings in the latest quarter. The food company achieved 4Q02 net income of $930 million, or 54 cents a share, compared to a 32-cent profit a year ago. The results beat estimates for earnings of 52 cents. Revenue rose 3% to $7.8 billion. However, Kraft lowered its earnings projections for the current year. Analysts were expecting earnings of $2.25 a share, but the company now predicts that earnings will fall to a range of $2.10-2.15. As is the case with a number of other firms, Kraft expects rising pension costs to take a 9-cent chunk out of 2003 earnings. We told you that this would be a big problem.



VII. PAPER GAINS AT INTERNATIONAL PAPER
Dow component INTERNATIONAL PAPER (IP, $36, unch.) posted a net loss for the fourth quarter of 2002 on Thursday. The nation's largest paper and wood products company reported a net loss of $130 million, or 27 cents a share, narrowing a loss of $570 million, or $1.19 a share in the year-ago quarter. Excluding one-time items, the company earned 33 cents a share, more than doubling results from a year ago. Sales remained flat at $6.3 billion. Over the past two years, the company has cut costs and sold over $3 billion of its assets in an effort to streamline its business. One of the firm's 4Q02 charges -- for $590 million - was related to the sale of some of its businesses. Looking ahead, the company sees another tough quarter as the winter months cause lower demand for its products. Still, analysts expect 1Q profits to improve upon last year's performance.



VIII. BOEING FLIES ON HIGHER EARNINGS
BOEING (BA, $32, up 1), another Dow company, reported 4Q02 earnings that fell significantly from the year-ago profit. The aerospace firm said that net income clocked in at $570 million, or 71 cents a share, down 21% from a $720 million, 90 cent per-share profit in 4Q01. But including one-time items like a huge September 11th charge in 2001, the firm grew its earnings sixfold, from $100 million to $590 million, or 72 cents a share. The results were in line with Wall Street expectations. For the full year, Boeing's earnings dropped from $2.8 billion to $2.3 billion as revenues fell from $58.2 billion to $54.1 billion. Boeing expects to earn $2.00 a share this year and $2.20 a share next year. As Victory Capital Management says, this shows that Boeing is in a "very, very slow recovery." The Airline industry's woes continue to plague this stock.



IX. DISNEY GETS AN EARNINGS SURPRISE
DISNEY (DIS, $17.50, up 0.40) came out with its 4Q02 earnings after the bell Thursday. The media and entertainment giant reported a 42% fall in net income to $255 million, or 13 cents a share, from $440 million a year ago. Excluding one-time items, however, the firm earned 17 cents a share -- good enough to top the consensus estimate. Revenue rose 6% to $7.47 billion but narrowly missed estimates for $7.49 billion. Quarterly earnings were hurt from costs related to the Super Bowl and the company's big movie flop, "Treasure Planet." But profits received a surprise boost from stronger revenue from the company's theme parks. The company expects to grow both 2003 and 2004 earnings by 25-35%. That kind of growth would push earnings ahead of current Wall Street expectations.



X. HONEYWELL POSTS A QUARTERLY LOSS
Dow component HONEYWELL (HON, $24, unch.) posted a 4Q02 net loss of $1.46 billion, or $1.78 a share on Friday. In 4Q01 the conglomerate turned a profit of $120 million, or 14 cents a share. Revenue was flat at $5.9 billion. Last quarter's results were dragged down by a huge $1.9 billion charge related to asbestos lawsuits and asset write-downs in several businesses. However, the firm backed previous forecasts to earn $1.60-1.70 per share in 2003. The consensus estimate of $1.66 falls within that range.

1. SECTOR-RELATED NEWS

OIL

EARNINGS AREN'T CRUDE AT THESE OIL COMPANIES

Two big oil companies came out with earnings before the bell on Thursday. EXXON MOBIL (XOM, $34, up 1) posted a 53% rise in 4Q02 net income to $4.1 billion, or 60 cents a share, from $2.7 billion, or 39 cents a share, a year ago. Excluding one-time items, the oil firm turned a 56-cent profit, topping Wall Street estimates by 6 cents. Revenue rose 18% to $56 billion.

AMERADA HESS (AHC, $47, down 8) fared quite a bit worse than its rival in the fourth quarter. The company reported a big net loss of $370 million, or $4.20 a share, drastically turning around a year-ago profit of $55 million, or 61 cents a share. The firm took a $530 million charge related to the write-down of one of its oil fields in Equatorial Guinea. Excluding charges, the firm turned a profit of $145 million in the quarter, up from $85 million in the year-ago period. Revenue rose from $2.9 billion in 4Q01 to $3.3 billion in the latest quarter, a 14% increase.

TODD'S TAKE: The financial results from these two companies painted a mixed picture of the Oil industry. On the one hand, oil prices rose over 40% for the quarter, as the Venezuelan oil strike and fears of a war in Iraq boosted crude prices over the last few months. The average selling price was $24.70/barrel, up $3.65 over the average price in 4Q01.

As a result of higher oil prices, both firms saw big growth in their Exploration and Production units. Amerada Hess achieved earnings of $175 million, 51% higher than a year ago. Exxon Mobil's profits from the division grew 73% to $3 billion.

But higher oil prices also meant lower profits from refining and marketing operations. Exxon Mobil's Refining and Marketing unit experienced a 19% drop in earnings to $820 million. Amerada Hess posted a similar drop, as earnings shrank 20% to $20 million for the quarter. As we said was the case with VALERO ENERGY (VLO, $34, down 2), the company had trouble selling its refined products like jet fuel and gasoline due to a glut of supply on the market.

Despite the uptrend in crude prices, it's a rough environment for these oil companies because they also bank on refining operations for business. Both firms, however, expect a turnaround in the market this year. That could be the case, if the economy picks up a little and demand for refined oil products rises to normal levels. We'd suggest investing in Exxon Mobil over Amerada Hess if you were to pick one.

FINANCIAL

EARNINGS AREN'T BLUE AT AMERICAN EXPRESS

AMERICAN EXPRESS (AXP, $36, up 2) released its earnings Monday afternoon. The financial services company reported 4Q02 net income of $685 million, or 52 cents a share, more than doubling the year-ago profit of $295 million. Earnings topped Wall Street expectations by a penny. Revenue posted a 6% jump to $6.2 billion.

TODD'S TAKE: This was a solid quarterly performance from American Express. Business at nearly all of the firm's units improved year-over-year, proving that the company bounced back from a tough fourth quarter in 2001.

The firm saw good growth in American Express card usage this quarter. The amount of money charged to American Express cards surged 13% in the quarter to $84 billion, while the number of cards in use rose 4% to 57 million. This increased business came from a combination of two main factors: 1) Customers used their cards for more purchases over the holiday shopping season, and 2) Customers used their cards for more everyday purchases, as the American Express rewards program spurred them to earn more reward points.

Despite continued weakness in the travel industry, the firm's Travel-Related Services division earned $550 million, up from $390 million from the unit in 4Q01. The travel unit experienced improved spending volumes and good credit quality while keeping costs down. Costs rose just 10% year-over-year.

The American Express Bank division posted a $24 million profit, up sharply from the year-ago profit of $9 million. Private banking holdings jumped 12% as consumer activity increased. Additionally, Personal Financial Services (PFS) client volumes increased 10% for the quarter.

The American Express Financial Advisors unit was the company's lone sore spot. Profits fell 6% year-over-year, from $165 million to $155 million. Considering that the year-earlier results included a $45 million restructuring charge, business declined significantly at the division. With continued weakness in the stock market, revenue from the unit fell 5% and the company saw a lower level of average assets under investment.

Looking ahead, American Express expects 12-15% earnings expansion on 8% revenue growth. But the firm remains cautious on the economy. The company's CFO said, "Clearly, we are still dealing with a weak economy and volatile equity markets...and the added uncertainty about the prospect of war in Iraq and other geopolitical events further clouds the view." Just like the rest of the Financial sector, improved business will depend on an improved economy. If the economy does pick up, then American Express will continue to be a solid performer in the market.

EUROPE

IS EUROPE WORSE OFF THAN THE U.S.?

TODD'S TAKE: If you think the U.S. economy is in bad shape, then look across the Atlantic. Many analysts believe that economic prospects throughout Europe will be even worse. In fact, the environment over there is bad enough that many European companies are "jealous" of the economic situation in the U.S., to use the words of German bank HVB Group.

This year, a number of analysts have cut their projections on various parts of the European economy. For instance, French automaker Renault's CEO expects Western European auto demand to fall 6% this year. The euro zone's economy now is expected to grow less than 1.5% in 2003, down from previous forecasts for 2% expansion. And Germany's economy, which makes up 30% of the zone's gross domestic product, could shrink by 0.1% in the current quarter, with growth not passing 1% for the year.

What's causing this European mess? Well, one factor is the ever-strengthening euro. In 2002, the currency increased its value relative to the dollar by 16%. That makes European exports more expensive to the rest of the country, eliminating demand for the products. This trend really hurts companies that rely on exports, such as Europe's biggest aluminum company, PECHINEY (PY, $14.34, down 1.22). Merrill Lynch expects the euro to rise another 10% this year, so things could get even worse for exporters.

High oil prices aren't helping either. While the majority of European companies planned on oil rising to $25/barrel this year, oil prices have surged way past that mark. On January 6th, oil had already risen 50% since the beginning of 2002 to $30/barrel. And that makes stimulants like the European central bank's 50 bp interest-rate cut last December virtually useless, since the added money that they inject into the system have to be used on oil and gasoline.

Tack on falling consumer sentiment, increased jitters over a war in the Middle East, and the lack of any big tax cut programs, and we're looking at a situation that's even worse than the one we're complaining about in the U.S. It looks like we can't depend on support from other countries to get out of this economic funk. In fact, we may have to help the rest of the world recover once we get back on our feet.

DEFLATION

THIS PROBLEM ISN'T DEFLATING

TODD'S TAKE: As the latest consumer and producer price indices have suggested, inflation is not a problem for the current economy. Last year, consumer prices increased by less than 2%, the smallest rise in over 35 years. But as the latest economic recovery begins to stall, inflation's long-lost brother, deflation, could come out to play. And he looks a lot meaner than inflation.

With prices rising by such low levels, deflation is a very real problem. All it would take is an average-size recession to eliminate inflation and even cause deflation in prices. The Federal Reserve appears confident that it can solve the deflation problem if and when it comes. One Fed Governor said, "Sufficient injections of money will ultimately always reverse a deflation."

But is that really true? During a period of deflation, the Fed's favorite economic fix -- cutting short-term interest rates -- will be rendered useless. That's because already-low rates can't be dropped below zero. So the Fed's idea would be to release loads of U.S. dollars into the money supply, by buying back Treasury bonds or devaluing the dollar by purchasing foreign currency. But even the Fed admits that those tools are untested as deflationary solutions.

For instance, look at the strategy of buying Treasury Bills. Normally, the infusion of money into the economy would provide consumers with money to use for purchasing goods, which would give a boost to the economy. But if short-term interest rates were at or near zero and banks had plenty of cash on hand -- as would likely be the case during a deflationary period -- then the extra money wouldn't matter.

Let's say that instead, the Fed buys longer-term Treasury bonds. That would lower long-term interest rates, thus giving businesses an incentive to ramp up investment spending and bolster the economy. However, the Fed's ability to manipulate those rates is questionable. While the Fed was successful in keeping long-term rates down in order to finance World War II, the governing bank tried to change long-term rates in the early 1960s and failed to make much of a difference. And even if the Fed were able to lower long-term rates, there's no assurance that it would stem deflation. Falling prices lead to corporate defaults, as companies don't make enough money off of their goods and services. That leads to higher fears of default, which would increase lender risk and cause them to ask for more in return. Thus, borrowing costs could remain high even as Treasury bond yields fell.

Another idea would be for the Fed to buy foreign currencies. That would lower the value of the dollar and make American exports cheaper for the rest of the world. The extra business would boost the domestic economy and bring the country out of the deflationary recession. But this type of currency manipulation is questionable as well, and the strategy could spur traditional exporting countries to initiate a trade war.

It's understandable that the Fed seems unworried about deflation, as it boosts consumer and investor confidence. But if deflation does set in, the Fed may find itself powerless to stop it. And that's a scary thought for both the stock market and the overall economy.