A general article - "January effect may be chilled"
By Mark Lewis
NEW YORK4 (Reuters) - January could have a chilling
effect on Wall Street rather than the usual seasonal
boost if Asia's economic crisis inhibits U.S. investors.
Traditionally, early January sees the U.S. stock market
boosted by a seasonal inflow into mutual funds, said
Dan Ascani, president and director of research at
Global Market Strategists.
But this year Asia's woes may keep U.S. investment
dollars on the sidelines, cutting the ''January effect''
short.
''We agree that it will probably be compromised by
worries over Asia,'' Ascani said. ''Just like the 'Santa
Claus rally' was less than usual this year.''
A year ago, the Dow Jones industrial average began
the year at 6,448. By the end of January, it stood at
6,813.
This year, the Dow was at 7,908 before Friday's
opening bell for the first trading session of 1998.
Analysts did not expect that the next few weeks
would see the usual January rally.
''We're in the New Year here with lower expectations
than we had last year,'' said Alan Ackerman, market
strategist for Fahnestock and Co.
Given the U.S. economy's strong fundamentals, ''It's
tough not to be bullish,'' Ackerman said.
But Wall Street analysts said that until investors get a
better idea of how Asia's economic crisis will affect
U.S. companies' earnings, the market is unlikely to
sustain a strong and prolonged rally.
Among the U.S. economic indicators due out this week
are producer prices Thursday and unemployment data
Friday.
''The market will be faced with a slew of economic
reports,'' said Peter Cardillo, Westfalia Investments
director of research. ''It's going to be a bumpy road,
but all in all I suspect that the market will be trading
higher at the end of the week than it was (last)
Friday.''
The Dow Jones industrial average ended Friday at
7,965.04, up 56.79 points for the day and 285.73 for
the week. The Nasdaq Composite Index closed at
1,581.52, up 11.17 for the day and 70.14 for the
week.
The coming week ''will be choppy at best, with
perhaps a slight bias on the upside,'' said Bill Meehan,
chief market analyst at Cantor Fitzgerald.
Meehan said the continuing negotiations among the big
U.S. commercial banks on how best to help South
Korea should not produce market-moving news
because investors already are persuaded that no major
Korean-related default is imminent.
But, as the next round of U.S. earnings reports looms,
Meehan expects to see some downward revisions for
full-year 1998 earnings estimates due to the Asian
crisis.
''We've not seen the end of that story,'' he said.
''That will come back to haunt the market.''
Other U.S. economic indicators due this week include
factory orders on Tuesday and new home sales on
Wednesday. Cardillo said he did not expect ''any
really negative news that could gyrate the numbers in
a big way.''
''The economic news from here on in should show a
weakening economy,'' he said. ''The question is, how
will this affect corporate earnings?''
Frank Calta, managing director of institutional trading
for Dain Bosworth, said the market is ''very nervous,''
but added its potential for another strong year should
not be underestimated.
''You have to be cautious, but we like the market,''
he said. ''As long as interest rates stay where they
are and the economy chugs along, we'll be OK.''
The Standard & Poor's composite index of 500 stocks
rose 4.61 points to 975.04 on Friday. For the week, it
was up 38.58 points.
The NYSE Composite index of all listed common stocks
was up 0.96 points at 512.15. It was up 18.55 points
for the week.
^REUTERS@ Reut17:07 01-02-98
(02 Jan 1998 17:06 EST)
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