From Monday's Nightly Business Report:
nightlybusiness.org
05/24/99: Analysis Of Wall St. Action From Al Goldman Of A.G. Edwards
PAUL KANGAS: With me now to discuss the downside developments on Wall
Street today is Al Goldman, the chief market strategist for the A.G. Edwards
Brokerage in St. Louis. And great the see you again, Al.
ALFRED GOLDMAN, CHIEF MARKET STRATEGIST, A.G. EDWARDS: Thank
you, Paul. Good to be with you, particularly on a day like today.
KANGAS: Yes. This 174 point drop in the Dow, 66 point downturn in the
NASDAQ Composite, in any way, did this sell-off shake your bullish faith,
long-standing and well-documented bullish faith in this market?
GOLDMAN: No, not at all. It's not a great way to start a week, Paul, but I think
we have to remember that the market had been on a one-way trip upward, 1100
Dow points in 5 weeks. And it looked to me like we're hit by some very normal
profit taking today. The blood did flow, but I think it's creating opportunities.
KANGAS: Well, of course, First Boston Brokerage kind of triggered things by
recommending actually selling some of the major money center banks like
Citigroup and Chase Manhattan (CMB), Bank One (ONE)_ and so forth, because
there they're worried about the Y2K problem. Do you put any substance in that?
GOLDMAN: That was a shock to the system. Not many firms on Wall Street ever
recommended sell, particularly the major banks.
KANGAS: Right.
GOLDMAN: No, we could see some disruptions in the first quarter, maybe the
second quarter of next year. And certainly those banks dealing with foreign
banks could have some things to trip, that might trip them up a bit. But we to
think pull back from the banks today was attractive, created an attractive buying
opportunity. And as far as we're concerned, the problems that are going to come
up are going to be very short lived. A year from now we think that Y2K will be a
footnote in the history books.
KANGAS: Well, also, you know, when you see weakness in banks like this, you
usually assume it's the threat, the possibility of higher interest rates that might
cause that. But very uncharacteristically, the Dow Utility Index, I should say, hit
a record high today for the fourth consecutive session. Can you put any logic to
this?
GOLDMAN: Well, I'm impressed by the actions of the utilities because they're a
good proxy as far as the future direction of interest rates. And I think they are
reading it right. We believe that the Consumer Price Index in April was an
anomaly, it will be up 0.07 of a percent and 0.04 on the core. And we think we're
going to see that reversed. Plus we think the economy is going to see its growth
slow down in the third and fourth quarter. So we don't see pressure from interest
rates or from inflation being a problem, and the youths have picked up on that.
KANGAS: Well, you've mentioned that the market was in need of a correction,
perhaps a little bit tired of the constantly going up. If you had fresh money, what
would you do here?
GOLDMAN: I think the market is creating opportunities. And anybody who has been watching the market for the last multiple years, knows that the time to buy is during pull backs. Technology was badly battered today and a couple of favorites are Applied Materials (AMAT) and Intel. The pharmaceuticals got sick today. They need some of their own medication, but Pfizer and American Home Products look attractive. Banks, First Union acted relatively well today and we think is is a buy. GE (GE) in the qually growth companies, and Albertsons (ABS), a food stock that we have liked fundamentally went up today. And it looks like it trades out at triple bottom.
KANGAS: Very briefly, what about the airlines? They were very weak today.
GOLDMAN: I think the airlines are going to open up buying opportunities, but not
at the moment. They had a run up. I believe people are beginning to change their
mood of last week. Last week people were worried that the economy was
overheating. This week I see some concern that maybe we're going to slow down
too much. I would leave the airlines alone for the time being.
KANGAS: We just have about 25 seconds left, Al. What about the bond market?
What do you do here?
GOLDMAN: I'd be a buyer of bonds. Very little inflation. We think the bond
topped out in yield at the 595 area. And we see the bond yielding close to 5.2
percent by year end.
KANGAS: All right. So still bullish!
GOLDMAN: Still bullish. The fundamentals stay bullish. And the technicals, we
had a very normal pullback. The technicals are still in good shape.
KANGAS: And the volume wasn't that heavy.
GOLDMAN: Volume came down.
KANGAS: Right. Al, thanks as always for sharing your thoughts with us. We
appreciate it.
GOLDMAN: Thank you.
KANGAS: My guest, Al Goldman, chief market strategist, A. G. Edwards. |
