WALL ST WEEK AHEAD-Market mood turns cautious
By Cal Mankowski
NEW YORK, Feb 28 (Reuters) - A spike in long-term interest
rates and worries about a slump in personal computer sales have
started a caution light flashing on Wall Street.
"We think positive earnings growth will lead to higher
stock prices but not to the extent that we saw stock prices
increase last year," said Howard Kornblue, senior vice
president and senior portfolio manager of the Pilgrim America
MagnaCap Fund.
All eyes will be on technology stocks in the coming week
after some of the bigger names in the group were hit by a
barrage of selling on Friday. Analysts were debating whether
personal computer sales were going into a seasonal slowdown or
something more serious was taking place.
Two investment conferences set for New York this week will
be closely watched for new clues about where technology is
going. Jupiter Communications has a conference scheduled where
many Internet companies will discuss their strategies, while a
Morgan Stanley Dean Witter conference will hear presentations
from many computer service companies.
"The overall climate toward technology companies showing
powerful earnings is still favorable," argued Richard Driehaus,
chief investment officer at Driehaus Capital Management Inc. He
noted that the small and mid-cap technology issues that he
likes have been volatile recently and may continue to be
volatile in the near term. But he said many or the stocks can
be bought on the declines.
He cited the case of Network Solutions Inc. <NSOL.O>, which
had dropped to the 142 area two weeks ago but as of Friday's
close had recovered 40 points. Network Solutions, which
registers names like .com for businesses going on the Internet,
finished at 181-1/2 Friday, gaining 4-7/16 on the day.
"This is not really scaring us too much," Driehaus said.
Referring to Friday's drop in QLogic Corp. <QLGC.O>, he said,
"We would buy it in here." QLogic closed at 58-1/8 on Friday,
dropping 4-7/8 for the day.
For bigger name technology issues, however, Driehaus said
some of them may be making a rolling top in their chart
patterns.
International Business Machines Corp. <IBM.N> was hit hard
on Friday, falling 3-7/8 to 169-3/4, while Dell Computer Corp.
<DELL.O> fell 1-5/8 to 80-1/8 and Compaq Computer Corp. <CPQ.N>
fell 6-3/16 to 35-1/4.
Concern about technology issues was not the only issue
spooking investors last week. A rise in the yield on the
benchmark 30-year Treasury bond to the 5.6 percent area,
highest since last August, was blamed for a big sell-off in
stocks on Wednesday which had the Dow Jones industrial average
dropping 145 points.
Some traders may be hesitant to do anything this week
before Friday's report on February payroll employment. Although
robust growth is expected, by week's end the market will have
had plenty of time to adjust to the outlook for a stronger
economy. In a Reuters survey, non-farm payrolls are seen
growing by 245,000 and the jobless rate is seen steady at 4.3
percent.
Marshall Acuff, equity strategist at Salomon Smith Barney,
said long-term interest rates have room to decline from current
levels, but he says the more important point is that 1999 is
likely to be the first in some time where rates on a calendar
year basis do not decline. He expects stocks to be in a trading
range for much of 1999, meandering between 8,000 and 10,000 on
the Dow.
"We don't think that the recent spike up in rates is going
to stick," said Kornblue. But he said for the year stocks may
be up 9-12 percent, a respectable showing by historical
standards and lackluster only by comparison with the outsized
gains in each of the past four years. Kornblue said he was
pleased with fourth-quarter earnings posted by stocks that he
owns such as General Electric Co. <GE.N>, McDonald's Corp.
<MCD.N> and Tricon Global Restaurants Inc. <YUM.N>.
The Dow index finished Friday at 9,306, dropping 60 points
on the day.... |
