New Lows May Be Close, Some Investors Say: U.S. Stocks Outlo
Enviado: 8/2/2003 17:17New Lows May Be Close, Some Investors Say: U.S. Stocks Outlook
By Philip Boroff
New York, Feb. 8 (Bloomberg) -- Since mid-January, both the Standard & Poor's 500 Index and the Dow Jones Industrial Average have gone about two-thirds of the way toward six-year lows. They may get closer in the coming week.
The threat posed by a second U.S.-led war against Iraq sent stocks lower Friday even though the country's unemployment rate unexpectedly dropped. Some investors said the potential for war may crowd out further evidence of a growing economy or signs of higher corporate profits.
``We're going down,'' said Brian Pears, a Victory Capital Management Inc. managing director who oversees the $62 billion asset manager's equity trading desk. ``Nothing gets fixed in the market until the situation with Iraq gets fixed.''
Stocks dropped for the fourth consecutive week, the third decline of that length in the past 12 months. El Paso Corp. led the latest drop in the S&P 500. The largest U.S. owner of natural- gas pipelines, which cut its dividend by more than four-fifths and said it would sell more assets to pay off debt, sank 42 percent. AT&T Corp. was the Dow's worst performer, off 34 percent.
The S&P 500 and Dow have both fallen 11 percent from this year's highs, set Jan. 14. The S&P 500 would have to lose another 6 percent to reach its Oct. 9 close of 776, the lowest since April 28, 1996. The Dow would have to fall 7 percent to match its low of 7286. Both indexes are off 6 percent for the year.
Selling, Not Holding
Even those who predict a quick U.S. victory in an Iraqi war, and a resulting stock-market rally, recommend investors restrain their expectations.
``There is no such thing anymore as buy and hold,'' said Federated Investors Inc. Vice Chairman Thomas Madden, who helps oversee $195 billion and foresees a bear market for another decade or longer. Madden suggests Federated's money managers sell shares more quickly than before to lock in gains.
On Friday, stocks dropped for a fourth day after the Labor Department reported that the jobless rate fell to 5.7 percent in January from an eight-year high. Companies added 143,000 jobs, the most in more than two years. The increase followed a report by the Institute for Supply Management that showed manufacturing expanded for a third month.
Share prices declined even as profit reports bolstered the view that companies are emerging from a slump. Earnings increased 17.4 percent among the 385 companies in the S&P 500 that published results, according to Jeffrey Warantz, an analyst at Salomon Smith Barney. Almost three-quarters met or surpassed analyst forecasts, up from 65 percent 12 months earlier.
Can't Forget Iraq
``The market's going to retest our October lows'' and may keep falling, said Richard Campagna, a money manager with Shaker Investments in Cleveland, which oversees about $1 billion. ``The economy is moving forward slowly and in a staggered fashion.''
Next week, Federal Reserve Chairman Alan Greenspan appears before the House and Senate to deliver the central bank's twice- yearly report on monetary policy and the economic outlook. The government will also release retail-sales figures for January.
If this week's performance is any guide, stocks may not get much of a lift no matter what the reports suggest, some investors and traders said.
``The stock market should be up sharply,'' Victory's Pears said. ``But you can't take Iraq out of the picture.''
On Wednesday, a rally sparked by Secretary of State Colin Powell's speech at the United Nations on the case for war against Iraq fizzled later in the day. Speculation persisted that a war won't happen soon, disrupting economic growth.
Yielding Too Little
Some investors argued that the economy is overwhelmed by debt. Although the Federal Reserve reported that U.S. consumer borrowing in December had its greatest decline in more than a decade, debt totaled $1.7 trillion, excluding mortgages.
Sears, Roebuck & Co. said Thursday that it noticed an increase in delinquencies and had to set aside more money to account for consumers who fail to pay bills. Shares of Sears, the largest U.S. department-store chain, dropped 12 percent this week.
Federated's Madden, while saying he expects stocks to rally after a U.S.-led invasion of Iraq, compares the current market to that of the 1970s. Between 1969 and 1981, the Dow declined to 875 from 943.
Dividends are too low as a percentage of the S&P 500's value to suggest that stocks have hit bottom, in his view. The dividend yield is 1.8 percent, less than half of the 4.3 percent average for 13 bear markets since World War II, according to a study published Jan. 31 by International Strategy & Investment.
By Philip Boroff
New York, Feb. 8 (Bloomberg) -- Since mid-January, both the Standard & Poor's 500 Index and the Dow Jones Industrial Average have gone about two-thirds of the way toward six-year lows. They may get closer in the coming week.
The threat posed by a second U.S.-led war against Iraq sent stocks lower Friday even though the country's unemployment rate unexpectedly dropped. Some investors said the potential for war may crowd out further evidence of a growing economy or signs of higher corporate profits.
``We're going down,'' said Brian Pears, a Victory Capital Management Inc. managing director who oversees the $62 billion asset manager's equity trading desk. ``Nothing gets fixed in the market until the situation with Iraq gets fixed.''
Stocks dropped for the fourth consecutive week, the third decline of that length in the past 12 months. El Paso Corp. led the latest drop in the S&P 500. The largest U.S. owner of natural- gas pipelines, which cut its dividend by more than four-fifths and said it would sell more assets to pay off debt, sank 42 percent. AT&T Corp. was the Dow's worst performer, off 34 percent.
The S&P 500 and Dow have both fallen 11 percent from this year's highs, set Jan. 14. The S&P 500 would have to lose another 6 percent to reach its Oct. 9 close of 776, the lowest since April 28, 1996. The Dow would have to fall 7 percent to match its low of 7286. Both indexes are off 6 percent for the year.
Selling, Not Holding
Even those who predict a quick U.S. victory in an Iraqi war, and a resulting stock-market rally, recommend investors restrain their expectations.
``There is no such thing anymore as buy and hold,'' said Federated Investors Inc. Vice Chairman Thomas Madden, who helps oversee $195 billion and foresees a bear market for another decade or longer. Madden suggests Federated's money managers sell shares more quickly than before to lock in gains.
On Friday, stocks dropped for a fourth day after the Labor Department reported that the jobless rate fell to 5.7 percent in January from an eight-year high. Companies added 143,000 jobs, the most in more than two years. The increase followed a report by the Institute for Supply Management that showed manufacturing expanded for a third month.
Share prices declined even as profit reports bolstered the view that companies are emerging from a slump. Earnings increased 17.4 percent among the 385 companies in the S&P 500 that published results, according to Jeffrey Warantz, an analyst at Salomon Smith Barney. Almost three-quarters met or surpassed analyst forecasts, up from 65 percent 12 months earlier.
Can't Forget Iraq
``The market's going to retest our October lows'' and may keep falling, said Richard Campagna, a money manager with Shaker Investments in Cleveland, which oversees about $1 billion. ``The economy is moving forward slowly and in a staggered fashion.''
Next week, Federal Reserve Chairman Alan Greenspan appears before the House and Senate to deliver the central bank's twice- yearly report on monetary policy and the economic outlook. The government will also release retail-sales figures for January.
If this week's performance is any guide, stocks may not get much of a lift no matter what the reports suggest, some investors and traders said.
``The stock market should be up sharply,'' Victory's Pears said. ``But you can't take Iraq out of the picture.''
On Wednesday, a rally sparked by Secretary of State Colin Powell's speech at the United Nations on the case for war against Iraq fizzled later in the day. Speculation persisted that a war won't happen soon, disrupting economic growth.
Yielding Too Little
Some investors argued that the economy is overwhelmed by debt. Although the Federal Reserve reported that U.S. consumer borrowing in December had its greatest decline in more than a decade, debt totaled $1.7 trillion, excluding mortgages.
Sears, Roebuck & Co. said Thursday that it noticed an increase in delinquencies and had to set aside more money to account for consumers who fail to pay bills. Shares of Sears, the largest U.S. department-store chain, dropped 12 percent this week.
Federated's Madden, while saying he expects stocks to rally after a U.S.-led invasion of Iraq, compares the current market to that of the 1970s. Between 1969 and 1981, the Dow declined to 875 from 943.
Dividends are too low as a percentage of the S&P 500's value to suggest that stocks have hit bottom, in his view. The dividend yield is 1.8 percent, less than half of the 4.3 percent average for 13 bear markets since World War II, according to a study published Jan. 31 by International Strategy & Investment.