more bear news. christmas canceled.
Sunday December 3 4:04 PM ET
Bears Here to Stay on Nasdaq
By Emma-Kate Symons
NEW YORK (Reuters) - The bears have come to Wall Street -- at least in
high-tech form -- and investors are not counting on Federal Reserve Chairman
Alan Greenspan (news - web sites) to play Santa Claus this year and deliver
the traditional Christmas rally.
The Nasdaq composite index (^IXIC - news), already littered with deflated
Internet and high-tech stocks, lost 23 percent in November, its most dismal
monthly performance in 13 years. A relief rally early on Friday lost steam in
the afternoon amid continued worries of slowing corporate earnings growth and
continued uncertainty over the U.S. presidential election.
``Any type of a rally like we saw on Friday is going to be short-lived and it's not
going to be sustainable,'' said Howard Kornblue, money manager with ING
Pilgrim Inc. which has $12 billion in funds. ``The best that you can hope for is
for the market to go sideways and I would not expect a rally.''
Indeed, investors are bracing for more drops in U.S. stocks this week.
Irrational exuberance -- the term Greenspan coined for the booming stock
market of the 1990s -- is a quaint and outmoded notion when the
technology-heavy Nasdaq is by any measure in a bear market -- down 20
percent or more.
In fact, the Nasdaq has lost almost half its value since its all-time high of
5048.62 on March 10. That is the second-worst performance for the index
since it was started in 1971, after a drop of nearly 60 percent in the market
crash of 1973-74.
But it does not come close to the stock market drop in the wake of the 1929
crash, which took stocks down nearly 90 percent over a period of three years.
The blue-chip Dow Jones industrial average (^DJI - news) is in bad shape, but
with much less exposure to technology stocks, it fell only 5.1 percent in
November. The Dow is still not considered to be in bear territory, down 9.8
percent on the year and only about 12 percent below its all-time high.
Wall Street now has its sights set on the U.S. Federal Reserve to eventually
drag stocks out of their doldrums. Six interest rate hikes to stave off inflation
since June 1999 have taken the wind out of the once-roaring U.S. economy --
so much so that recession has entered Wall Street's vocabulary. Some analysts
now believe the Fed will change its stance on monetary policy to neutral when
it meets on Dec. 19.
All Eyes On Jobs Data, The Fed
The U.S. Labor Department will report crucial unemployment figures for
November on Friday. The jobless rate was at a 30-year low of 3.9 percent in
October, and the Street is banking on a rise in unemployment, which will take
some pressure off wages and inflation.
U.S. fixed-income markets are already pricing in up to three interest-rate cuts
of 25 basis points each by the Fed in the coming months, analysts said.
But any interest rate cuts could come too late for battered U.S. stocks, already
limping under the weight of a stream of warnings of slower sales from
technology heavyweights, and the nearly month-long battle for the White
House.
``I think the economy will continue to slow and the stock market will continue
to work its way lower,'' Kornblue said.
Technology Trauma To Worsen
Technology companies have consistently warned of weaker growth throughout
the quarter and analysts have taken notice. Estimates for fourth-quarter
earnings growth in the technology sector have been scaled back by almost half
in the past two months, First Call/Thomson Financial said on Friday.
Since Oct. 1, earnings growth expectations for the tech sector have dropped
from 29 percent to 14 percent for the fourth quarter 2000, according to First
Call, which tracks brokerage estimates for future corporate earnings. For the
first quarter of 2001, analysts cut growth estimates from 28 percent to 14
percent.
Many analysts slashed their earnings forecasts for PC makers as well as
chipmakers following lackluster third quarter results, and last week's report of
slow holiday sales from personal computer maker Gateway Inc. (NYSE:GTW
- news)
Specialty chipmaker Altera Corp. (NasdaqNM:ALTR - news) also said this
week its fourth-quarter sales would be unchanged from the third quarter.
``Technology stocks could still go significantly lower from here because even
though they are down a large percentage from their peaks, a lot of them are
still overpriced,'' Kornblue said, citing Internet sector stocks like Yahoo! Inc.
(NasdaqNM:YHOO - news) and Priceline.com Inc. (NasdaqNM:PCLN -
news).
Euro Equities To Suffer Too
The story is much the same across the Atlantic, where European stock
strategists see more downside before any recovery kicks in.
There is a growing conviction that a bottom is not far away, but fund managers
remain loath to put money back into volatile new economy sectors, they said.
``We are expecting things to get uglier before they get better,'' ABN Amro
European strategist Theodore Varelas said.
``We are expecting more bad news from corporates, and until we get some
relief from the oil price and better indications on the economic environment --
German IFO and U.S. NAPM -- that's not going to happen.
``It's definitely not time to go back into the market yet,'' Varelas said.
While the FTSE Eurotop 300 (^FTEU3 - news) and the narrower, blue-chip DJ
Stoxx (^STOXX50E - news) rose about 1 percent each, comfortably above
year lows, the picture for TMTs was very different.
The DJ Stoxx technology (^SX8P - news), trading 5.5 percent higher at 793.25
on Friday, was 36 percent off its year high. Telecoms (^SXKP - news) jumped
3.6 percent to 536.94 points, nearly half its 12-month high, and media (^SXMP
- news) rose 2.4 percent, 45 percent off its high for the year.
Domestic growth markets have also fared badly. The Nouveau Marche (^NMFK - news) is flat on the year,
while Frankfurt's Neuer Markt (^NMDKX - news) and London's techMARK (^FTT1X - news) have skidded
about 30 percent each. Spain's blighted Nuevo Mercado (^NMSK - news) has plumbed a 60 percent loss. |
