Possible Buying Catalysts For The Troubled Investor
By Raymond Hennessey
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--So now what?
The markets remain in the throes of their selloffs, punctuated by the near
freefall in stocks toward the close Monday.
It's easy for pundits to advise staying on the sidelines. The question is,
of course, when to jump in and buy?
First, a caveat. The knee-jerk reaction by many bulls will likely be that
this selloff presents the perfect "buying opportunity." Prices haven't been
this low in years. Step right up, and go nuts.
But, lately, this philosophy hasn't worked. Last spring, when volatility
first reared its ugly head, it was a buying opportunity. When the Nasdaq
Composite Index hit 4000, it was a buying opportunity. Same at 3000. Likely,
the same at 1923.39.
Is it, though? The jury is still out. But there are at least some key
potential catalysts on the horizon that might spark some buying and
straighten out the markets. Here's a list:
ECONOMIC DATA. Retail sales news comes in Tuesday morning from the Commerce
Department, followed by housing starts and the producer price index on
Friday from elsewhere in the government. The devil will be in the details
here. This will be the case of "no good news is good news." The data are all
expected to be weak. That's good, because it leads to ...
FED MEETING MARCH 20. The conventional wisdom as of Monday morning was that
there was a better-than-even chance of a 50-basis-point cut from Federal
Reserve Chairman Greenspan & Co. Weak data, coupled with the stock chaos,
are likely to make this a reality.
This very talk might spark a mini-rally, as the unfounded hope of an
intermeeting cut helped spark some buying two weeks ago. But, the real
buying might not come until the Fed actually makes its move.
Still, a sustainable rally will need more than just an easing environment
from the Fed. The market has been in an easing environment for a few months
now, and has still been selling off.
BUSH TAX CUT. Consumers will not see the full effects of a Bush tax cut for
years, but this is a market that has been so driven by psychology, that any
move that suggests people will have more money than they had before stands a
chance of boosting investor interest in stocks.
The deal's through the House, but a resolution in the Senate is still months
away. Still, an appearance of momentum might be enough to get the market
going even before the Senate counts yeas and nays.
A ROSIER OUTLOOK ON BUSINESS AND THE ECONOMY FROM CORPORATE AMERICA. At a
time when so many companies have been warning that the economic outlook is
clouded and that sales will be off, a group of companies saying that things
are not as bad as they might seem might help jump-start stocks.
Specifically, they'll need to say that their customers are buying products
again.
This, more than any of the above, might be the most effective catalyst. But
it might not come to the second half or even next year, if the latest
warnings from technology firms are any indication. Companies of all stripes
have been warning because the economy is bad for a while now. That's why
people are debating whether there's a recession now.
And why stocks acutely have been feeling gravity's pull.
-By Raymond Hennessey, Dow Jones Newswires; 201-938-5354;
raymond.hennessey@dowjones.com
(END) DOW JONES NEWS 03 |
