Encore! Encore!
By Kevin N. Marder, CBS MarketWatch
Last Update: 1:47 PM ET Jun 19, 1999
Bond Report
NEW YORK (CBS.MW) -- What do you do for an encore?
Coming off the Dow Jones Industrial Average's best week in the last 15
and the Nasdaq Composite's shiniest week in the last 20, what's out there
that can drive U.S. shares higher in the coming five days?
There's nothing of substance on the economic front. And the
second-quarter earnings season is still a few weeks away from launch.
On the negative side of the ledger, there'll no doubt be some more
warnings of second-quarter earnings shortfalls along the lines of recent
disclosures by Quantum, UAL, US Airways Group, Gillette, Jabil
Circuit, Western Digital, and Becton Dickinson.
But on the positive side of the coin, what can drive more gains?
In a word: perceptions.
Those companies that are perceived to be on the verge of an upside
earnings surprise will be the chief beneficiaries of investor affection this
next week. Indeed, the market has already set out separating the wheat
from the chaff.
But in most cases, companies don't hoist a green flag indicating profits will
be richer than the Street expects. It's up to investors to determine the men
from the boys.
Gregory Kuhn, money manager at Kuhn Asset Management Co., has
already spotted some likely candidates.
"Your big-cap tech leaders are breaking out here on good volume," he
noted. "A couple of examples are MCI WorldCom and Cisco Systems.
And Lucent Technologies looks like its ready to break out to a new
high. Nokia is another.
"To me, that's very important, because these stocks had a chance to fall
apart and didn't."
Kuhn has had a good record of sidestepping serious market corrections
and being fully-invested when he believes the climate is ripe for an
intermediate-term advance.
Last week, he shoveled money back into the market.
"The tone of the market is very positive in here," Kuhn said.
Frank D. Gretz, market analyst at Shields & Co., likes the fact that
technology is once again beginning to dominate the list of stocks printing
52-week highs.
"Despite a background of dubious breadth and volume, it's easy to see
upside potential here that could be substantial," Gretz said.
Notwithstanding the leadership of many smaller issues, Gretz is thinking
big. As in "big-cap."
"If the big-cap tech stocks are able to break out along with the big-cap
cyclicals, throw in a rally in the big oils and you're talking about another
good run in the big-cap averages."
Upcoming events
The coming week's economic calendar is light. Thursday: May durable
goods orders. Weekly jobless claims. Friday: May existing home sales.
First-quarter gross domestic product growth. See full story.
As for the earnings agenda, things pick up a little from the pace of the
past few weeks as a number of companies whose quarters end in May
roll out results. Monday: Cabletron, Micron Electronics, Tuesday:
Cognos, Kaufman & Broad, Lehman Brothers, Lennar, Manugistics
Group, Stride Rite, 3Com, Verity, Wednesday: Bed Bath & Beyond,
Family Dollar, Goldman Sachs, Micron Technology, Thursday: Morgan
Stanley Dean Witter, . Friday:
According to earnings researcher First Call, the consensus outlook for the
second quarter calls for 12.4 percent growth, vs. the 13.2 percent growth
expected one week ago, and the 13.4 percent figure of the week before
that. The S&P 500's long-term earnings growth rate is 7 percent.
Conferences: Tuesday: Merrill Lynch Technology, Taiwan. Wednesday:
Merrill Lynch Technology, Taiwan. Thursday: Merrill Lynch Technology,
Taiwan.
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