Little Hope for Better Days on Wall St.
March 4, 2001
By REUTERS
Filed at 11:13 p.m. ET
NEW YORK (Reuters) - No rest for the weary on Wall Street this week: corporate profit prospects remain bleak, and the Federal Reserve is playing its cards close to its chest on the question of U.S. interest rates.
Stocks may struggle up from the two-year lows they plumbed last week, but any rallies will be tepid and short-lived, with little in the way of positive news expected to inspire buying, analysts said. That likely makes for a seesawing market.
``People are becoming a little more cautious,'' said Bill Leszinske, chief investment officer at Harris Investment Inc. ``I think that's going to be the attitude until you begin to see better news.''
Investors will spend much of the week bracing for a key monthly employment report due on Friday that could help clear up the lingering questions about the severity of the U.S. economic slowdown, analysts said.
Retailers top a light list of earnings reports set for release this week, with retail chain Target Corp.expected to issue its corporate scorecard on Tuesday.
Last week, Wall Street was pelted by a barrage of warnings from companies saying that their results will take a hit from the slowing U.S. economy -- including high-tech heavyweights like software maker Oracle Corp. (ORCL.O).
Investors are left to wonder when the tech blood bath will end, and the answer from many analysts is: Not anytime soon.
''The earnings are just very, very weak in that whole sector and that probably is going lead the continued underperformance as we go forward,'' Leszinske said.
The Nasdaq Composite Index (.IXIC) ended last week with a drop of 6.4 percent, while the Dow Jones industrial average (.DJI) crept up 0.2 percent.
Optimism about the economy's widely anticipated comeback in the second half of this year should eventually give the market a boost, analysts said, but it will be a while before Wall Street pulls out of its funk.
``You're going to have to wait until an October announcement from companies saying that things are getting better,'' said John Forelli, senior vice president of Independence Investment Associates Inc., which manages $25 billion. ``Right now, in the next three months you're not going to hear much good news.''
Federal Reserve Chairman Alan Greenspan left investors hanging last Thursday when he hinted U.S. financial markets will have to wait for an interest rate cut to bolster economic growth.
The Nasdaq market last Wednesday wrapped up its third-worst month ever after Greenspan signaled the U.S. financial markets will have to wait for another interest rate cut -- at least until the Fed's next policy meeting on March 20.
Greenspan, speaking as part of his twice-yearly testimony
on the economy and monetary policy, said the economy seemed to be on an excessively weak path, but did not look as bad so far this year as it did in late 2000. The Fed chief also stressed the Fed's preference for changing rates at scheduled meetings, quashing investors' hopes for an imminent cut.
The U.S. central bank is still widely expected to cut its benchmark short-term interest rate by half a percentage point to 5 percent at its next meeting to boost growth by cutting borrowing costs and thus encouraging spending.
But Greenspan's remarks were typically cryptic, and investors are hoping Friday's jobs report will shed some light on what action the financial markets can expect from the Federal Reserve.
``If there were to be people losing jobs in (sectors) other than the manufacturing sector, that would threaten incomes and spending at the level of the whole economy, and that would be a classical indication of the beginning of a recession,'' said Pierre Ellis, senior economist at Decision Economics.
Payrolls were expected to have risen by 62,000 in February, following January's 268,000 gain, according to a recent Reuters poll of U.S. economists. The unemployment rate was forecast at 4.2 percent, unchanged from the prior month.
In the same report, average hourly earnings -- closely watched by Greenspan as a gauge of wage inflation -- was expected to have risen 0.3 percent after posting an unchanged reading in January.
Revised productivity figures for the fourth quarter of 2000, set for release on Tuesday, are expected to show a gain of 2.0 percent after a 2.4 percent increase in the third quarter. During the same period, economists projected unit labor costs rose 4.5 percent following the prior quarter's 4.1 percent gain.
A gob of other data, including the National Association of Purchasing Management's non-manufacturing index for February on Monday, January factory orders on Tuesday, January consumer credit on Wednesday and January wholesale inventories on Friday, will also be on Wall Street's radar screen.
Investors will also tune in for the Fed's Beige Book report on Wednesday, a look at the economy based on anecdotal evidence.
Along with retailer Target, office products retailers OfficeMax (OMX.N) and Staples Inc. (SPLS.O) are scheduled to issue their results on Tuesday. Quarterly earnings releases are also expected from Toys R Us (TOY.N), Zale Corp. (ZLC.N), Ann Taylor (ANN.N) and Costco Wholesale (COST.O) this week.
In between the sprinkle of earnings reports, investors will be bracing for more profit warnings, analysts said.
``We're in earnings limbo right now,'' Forelli said. ``The unplanned things that you're going to end up getting in March are going to be more earnings warnings, so that's not good for the market, obviously.''
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