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Biotech / Medical : PFE (Pfizer) How high will it go? -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (7964)	6/17/1999 4:11:00 PM
From: Anthony Wong	Read Replies (1) \| Respond to of 9523

A rate hike won't kill this bull market By Frank Cappiello, CBS MarketWatch Last Update: 10:43 AM ET Jun 17, 1999 NewsWatch BALTIMORE (CBS.MW) -- What a difference a day makes! All this week the financial markets have been running scared, paranoid about an increase in rates when the Federal Reserve meets on June 29...and a nagging worry that this will be the first of a series of increases over the next twelve months. And we all know when interest rates go up, the price of financial assets (both stocks and bonds) go down. And that's precisely what has been happening for some days now. Suddenly on Wednesday, the long awaited Consumer Price Index Report for last month was released. Voila! No sign of inflation. Happy days are here again! Does this mean that the Fed won't raise rates at the end of this month? No. There is still the possibility (50-50) that Alan Greenspan & Company will want to take back one of the three interest rate cuts last Fall....just for inflation insurance. What the CPI Report does mean is that the fear of the Fed's "bias toward tightening" will not be a series of overzealous rate hikes similar to 1994 when back-to-back rate increases hurt the economy and the stock market. Inflation unlikely Nevertheless, stock and bond prices are still reflecting the belief that inflation will return in a very major way. That doesn't seem likely. The recent payroll statistics reflecting labor pressures were neutral. Further, gold prices (usually a harbinger of future inflation) have been going down rather than up. While "the bears" may argue that current gold price weakness is more a story of less demand and more supply, the demand side would certainly be stronger if financial markets expected a surge in inflation. Further, other commodities such as copper and silver have signaled weakness recently. Oil prices are well off from their high (the result of curtailment of supply rather than increased demand) and agricultural products such as soy beans, corn, wheat, and cotton have also been weak.Other signs: Help Wanted ads declining. Finally, the world economy is still not as completely safe as the Federal Reserve would like to think. Argentina is having problems, Brazil is nervous. The weakness of the Euro reflects uncertainty over Europe near-term. Additionally, global excess of capacity in nearly everything and the disinflationary effect of the Internet all make for a less certain argument for oncoming inflation. Finally, note that, excluding technology, the U.S. economy is currently rising at about 2% a year. While the tech sector adds to that overall growth, spending on technology is not inflationary but rather deflationary. Job security Fed Chairman Greenspan has often cited job security as one of the prime reasons for the recent slow growth in inflation. Deregulation of industries, such as transportation and communications, has totally changed the working environment in these areas. Add in declining union membership as a result of these trends, the growing employment of outsourced temporary workers, and the pressure of global competition from lower-wage countries over the past twenty years and it's not surprising that many American workers prefer job security and benefits to substantial wage hikes. While interest rates are important to stock prices, corporate earnings are of near equal importance. As we move further into summer, we expect growing earnings reflecting a good second quarter to more than offset rising interest rate anxieties. Chairman Greenspan seems to be saying again and again, this U.S. economy now in its ninth year of expansion seems to be breaking all the classic economic rules...and so has this stock market. We don't believe the bull market is over yet. Stocks we like: America Online (AOL: news, msgs); T. Rowe Price (TROW: news, msgs), the mutual fund management company; Paychex (PAYX: news, msgs), the payroll processor to small businesses; and Hibernia Corp (HIB: news, msgs), a "value" bank in Louisiana; and Pfizer (PFE: news, msgs). Frank Cappiello is a regular contributor to CBS MarketWatch. He is president of San Francisco-based McCullough, Andrews & Cappiello, which manages more than $1.3 billion. cbs.marketwatch.com