Stocks May Get Boost on Election's End
By Elizabeth Lazarowitz and Denise Duclaux
NEW YORK (Reuters) - Stocks are expected to tick up on Thursday now Democrat Al Gore has accepted defeat after five weeks of political wrangling and congratulated Republican George W. Bush's on winning the U.S. presidency.
But any gains could prove fleeting as the twin fears over profit warnings and an economic slowdown return to roost on Wall Street.
``There could be more finality and certainty, but I don't know of too many people who were not anticipating this presidential outcome,'' said David Sowerby, a market strategist for Loomis Sayles. ``We could get a positive boost, but there is still this greater concern over pre-announcements.''
A flood of earnings confessions and investment downgrades overpowered investor enthusiasm on Wednesday, quashing hopes that stock prices fully reflected the softening economy.
The tech-stacked Nasdaq Composite Index dropped 109.00 points, or 3.72 percent, to 2,822.77. The Dow Jones Industrial average rose a modest 26.17 points, or 0.24 percent, to 10,794.44. The broader Standard & Poor's 500 index shed 11.19 points, or 0.82 percent, to 1,359.99.
``People are still leery about earnings, and that still hangs over the market,'' John Davidson, chief investment officer at Orbitex Management, said, referring particularly to tech shares.
ELECTION RALLY LARGELY DISCOUNTED
Gore ended his protracted presidential battle in a prime time national address on Wednesday. Wall Street has been anticipating a Bush victory for days, analysts said, so chances are slim that any presidential rally on Thursday will last long.
``We've been waiting for this so long ... the relief rally is already built in,'' said Charles Payne, head analyst at Wall Street Strategies.
The Texas governor has been a favorite with many on Wall Street all along. Some investors like Bush's plans for tax cuts. They also anticipate that a Bush administration would mean less government regulation of prescription drug prices and health care, as well as a more relaxed approach to antitrust issues will boost stocks.
Software powerhouse Microsoft Corp., cigarette maker Philip Morris Cos. Inc. and drug giant Merck & Co. Inc. have risen recently as many investors bet on a Bush win.
As the drawn-out ballot battle begins to end and seem like just a bad dream, the direction of interest rates and corporate earnings will again fill investors' heads.
``The focus is going to shift away from the political area to the economic area, going forward,'' said Peter Gottlieb, fund manager at First Albany Corp., with $500 million under management.
WEAKER EARNINGS STILL WORRY WALL STREET
Wall Street is still grappling with the fears of weaker corporate earnings, which whacked the Nasdaq market in November, when the high-tech Nasdaq Composite Index gave its worst monthly performance in 13 years, analysts said.
In recent weeks, a chorus of corporate voices, particularly from the high-tech sector, have confessed results are likely to disappoint Wall Street in the quarters ahead.
The warnings, from technology companies like No. 1 computer chip maker Intel Corp. and top personal computer maker Compaq Corp. have forced investors to face the impact of the economic slowdown on profits.
``Starting out'' in 2001, ``we may have further problems in certain sectors of technology,'' said Barry Hyman, chief investment strategist at Weatherly Securities. ``I think the impetus for the Nasdaq will be the Fed lowering interest rates.''
Stock market investors will go back to basics, looking for indications of how much the U.S. economy has slowed, analysts said.
Wall Street will get two big doses of inflation data this week -- the U.S. Producer Price Index (PPI) on Thursday and the Consumer Price Index (CPI) on Friday.
Traders will be scanning the numbers for more clues as to whether the inflation-fighting Federal Reserve might be willing to cut interest rates to ease the U.S. economy's fall from a formerly blockbuster pace of growth. The Fed has raised interest rates six times since June 1999 to rein in inflation.
Few investors expect the Fed to lower rates at its next policy-setting meeting on Dec. 19, but many are betting the U.S. central bank will drop its bias toward raising rates.
``The Fed in 2001 will be on the side of the equity market,'' Hyman said. ``I think they will lower rates, and that's the key factor in determining a positive outlook next year.'' |
