Morgan Stanley's Wien -Fed to hike
rates 100 pts by yr-end
NEW YORK, Jan 3 (Reuters) - Morgan Stanley Dean Witter's
U.S. investment strategist Byron Wien said Monday that he sees
the Federal Reserve beginning a monetary tightening in the spring
and hiking rates by more than 100 basis points by year-end to
slow the economy.
The tightening, combined with high valuations, will spark a stock
market slide that will take the Standard & Poor's 500 (^SPX - news) down 25 percent, where it will
remain for several months.
He said that the powerful advances in the global and U.S. economies and stock markets will create
an enormous demand for capital early in the year, and the long U.S. Treasury bond yield will top 7.5
percent, further straining excessive equity valuations.
He also sees online users complaining about slow speeds, disappointing service at some tech
companies, and delivery bottlenecks from e-tailers triggering buyer resistance in Internet-related
stocks.
``There is a graduated carnage in technology. Some Internet content and retailing stocks correct 50
percent, and access providers come down by a third. Personal computer and other hardware
companies with current earnings only decline 25 percent,' Wien added.
``The Internet continues to be viewed as the most powerful business phenomenon in our lifetime, but
the stocks were discounting a profitability reality that was unlikely to come true.'
During the year, Wien sees the price of crude oil moving above $30 a barrel and staying there as
growth throughout most of the world beats expectations and supply remains under control.
He expects oil service stocks to rally, with Halliburton Co. (NYSE:HAL - news), Schlumberger Ltd.
(NYSE:SLB - news) and Smith International Inc. (NYSE:SII - news) seeing gains.
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