Lifted at The Zoo:
www2.marketwatch.com =yhoo&guid=%7B83C544A5%2D2CB9%2D4ACE%2DBEAD%2D9AD2A1E4D225%7D
Setting the stage for the next leg
By Joseph V. Battipaglia, CBS MarketWatch.com
Last Update: 12:09 PM ET Mar 26, 2001
NEW YORK (CBS.MW) -- I'm certainly not going to talk about capitulation and market bottoms - I'll leave that to the technicians and shorter-term oriented.
But what I will point to was that Thursday's complete rout of stock prices in the face of no significant or new fundamental developments speaks a lot about short-term volatility, but offers little insight into the longer term outlook for the market.
For the longer term, a progression of encouraging data on the broad economy suggests that the worst may be over. I have said that for the market to recover it needs to see improvement in the economy, a sense that the worst of the earnings cuts are behind us and an overall renewal of confidence. This process is underway.
For quite some time some fundamental factors have been working against us. With each passing month these became more onerous. In the early part of last year interest rates were rising as money supply was tightening. Energy prices after going through $30 bbl went on to $35 bbl and put a damper on spending. And, thirdly, the 36-day long election battle hurt confidence and changed behavior sufficiently during the fourth quarter to add that much more negativity to the situation.
Of course, the combination of a slight disruption in final demand coupled with a fairly significant inventory build going into the second half of 2000 put the stock market in reverse.
PCs and Semiconductors
The worst of this seems to be over. Interest rates are going down. Liquidity is being added to the economy. Energy prices have cracked below $30 on their way to below $25. Consumption on big ticket items like autos and houses continue to move ahead at an acceptable pace due in part to lower mortgages, relatively full employment rolls and significant buildup of net worth over the last five years despite the recent stock market decline.
As I have pointed out for the last several weeks, unemployment claims are a key, leading indicator for our analysis and those numbers appear to have stabilized ...more at link...... |
