=DJ US Stocks Still Lower On Strategist's Bearish Market Call
12/03/2002
Dow Jones News Services
(Copyright © 2002 Dow Jones & Company, Inc.)
By Nick Baker
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--U.S. stocks have been lower throughout Tuesday after Merrill Lynch advised investors to trust a fatter slice of their assets to bonds in lieu of stocks and AOL Time Warner warned that it expects a sharp drop in advertising and commerce revenue at its online division.
The slight recovery mounted after leading drug developer Merck backed its prior 2002 and 2003 earnings targets, amid speculation that it would temper expectations, has fizzled some, but market indexes are off their session lows.
Merck, a component of the Dow Jones Industrial Average, was off as much as 8% earlier, but is now off only 1.62, or 2.7%, to 58.33, helping alleviate some of pressure pushing that benchmark index lower. Nonetheless, the selling continues on Wall Street.
What hasn't persisted, however, is Merrill Lynch's investment recommendation on Merck. Earlier Tuesday, Merrill cut the stock to sell from buy. It recently nudged Merck up to neutral.
Arguably the most important Merrill action, however, came from its chief U.S. strategist, Richard Bernstein, who now advises investors put 45% of their money in stocks, down from his prior 50% recommendation, and 35% in bonds, a boost from 30%.
The stock market "still appears highly speculative to us," Bernstein wrote, which indicates a "major" bull market isn't imminent. He believes the Standard & Poor's 500-stock index will sit at 860 in 12 months, 8% below where it closed Monday: 934.53.
Reflecting on Bernstein's 12-month stock market projection, U.S. Bancorp Piper Jaffray's director of institutional trading, Tony Cecin, said he wouldn't be discouraged if stocks move "sideways" over the next year, as Bernstein's S&P 500 estimate assumes. But the tone of the market has improved over the past seven or eight weeks, Cecin said, so he doesn't believe stocks will retest their October lows.
"We've seen good, positive activity in what I consider to be a bull market context," Cecin said. "My gut feeling is I like how the market's acted over the past seven or eight weeks. It's better than previous rally attempts."
The Dow Jones Industrial Average is down 101.63, or 1.2%, to 8760.94 after being down 141 earlier. The Nasdaq Composite Index has lost 31.74, or 2.1%, to 1453.04 and the S&P 500 has lost 12.15, or 1.3%, to 922.38.
The Russell 2000 Index of small-cap stocks is down 5.73, or 1.4%, to 402.81 and the Standard & Poor's SmallCap 600 Index is off 2.06, or 1%, to 203.77.
AOL Time Warner said it expects ad and commerce revenue at its America Online division to fall by as much as half next year. It followed that announcement by detailing plans to revitalize the service. AOL shares remain down sharply, falling 2.34, or 14.1%, to 14.23.
Merck still expects 2002 earnings that match the figure posted in 2001, $3.14, and 2003 earnings of $3.37.
Nokia is off 1.05, or 5.2%, to 19.10 after the world's largest mobile-phone maker dampened growing optimism by projecting only 10% growth in global handset sales next year. Motorola, the second-largest handset producer, is down 1.04, or 8.9%, to 10.66.
Auto makers are struggling. Ford Motor said vehicle sales in November fell 16.6% from the year before, while General Motors's vehicle sales dropped 18.2% during the month. Ford is down 1.31, or 11.4%, to 10.14 while General Motors is falling 1.96, or 4.9%, to 37.99.
(For more stock movers, look under the code n/mmm.)
Regarding a longer-term stock recovery, Cecin suggested that "The only thing missing is for corporate purchasers to open the corporate purse strings and spend." He continued: "That's what has to occur for the market to make any sustainable advance. If I were a betting person, I'd bet it will happen" in the near future.
Volume on the New York Stock Exchange is 1.02 billion shares, with down volume ahead of up, 777 million to 234 million. Decliners are beating gainers, 1,888 to 1,309.
Volume on the Nasdaq is 1.02 billion shares, with down volume ahead of up, 872 million to 145 million. Decliners are ahead of advancers 2,168 to 1,029.
-Nick Baker, Dow Jones Newswires; 201-938-4047;
nick.baker@dowjones.com
(END) DOW JONES NEWS 12-03-02
02:37 PM |
