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To: bill meehan who wrote (50609)	7/4/1999 5:33:00 PM
From: accountclosed	Read Replies (1) \| Respond to of 86076

WALL ST WEEK AHEAD - Are earnings hopes too high? By Eric Wahlgren NEW YORK, July 4 (Reuters) - The U.S. stock market appears to be gearing up for a summer bash this week with interest rate worries all but vanquished and investors betting on rosy second quarter earnings. But some Wall Street professionals see a chance that with hopes running so high, particularly on the profit front, investors could be setting themselves up for disappointment that could spoil the merry mood like a downpour on a garden party. The worry: that so-called ''whisper numbers'' -- the name given to earnings estimates that circulate by word of mouth on Wall Street and are often higher than published figures -- could prove a heavy burden. Analysts usually turn to consensus estimates, or the published averages of earnings forecasts, to rate a company's quarterly performance. In reality, however, figures do not always reflect the full measure of expectations because not all analysts update numbers late in the quarter. Into the void has burst a booming gray market in fresher, unofficial numbers once the province of professional traders but now also available on many Web sites. ''The real issue might be what happens if the numbers beat the consensus estimate but they don't beat the whisper number,'' said Hugh Johnson, chief investment officer at First Albany Corp. ''If you are going to worry about earnings, that's what we are going to to focus on.'' In a possible preview of what could come, consider the fate of FDX Corp. (NYSE:FDX - news), the parent company of the world's largest air express shipping service company Federal Express. Last Wednesday June 30 its shares ended down 87.5 cents at $54.25 after falling as low as $52.38 following its posting of record quarterly fourth quarter results that beat the consensus and actually met the high end of Wall Street forecasts. The problem? The Memphis, Tenn.-based company missed market expectations that had grown even more optimistic heading into the report. A meager trickle of corporate profit warnings this quarter has contributed to the upbeat mood. According to research tracking firm First Call, operating earnings at large U.S. corporations are expected to grow a robust 15-16 percent. Pierre Ellis, senior economist at Primark Decision Economics, said he doubts that expectations have climbed too high for many companies. But he agreed that a few stocks could get dinged if the companies have been the subject of overly-optimistic forecasts. ''If a company has a high valuation and the optimism is not justified, the valuation is going to alter drastically,'' Ellis said. ''In terms of the average performance going into earnings, I don't think that is going to be a general phenomenon for the overall stock market.'' With the Dow Jones industrial average closing at a record high of 11139.24 last Friday July 2, analysts see a minor sell-off this week before the kick-off of second quarter earnings, which unofficially starts the week of July 12. ''You are going to have some traders say, 'Hey, I don't care. I am going to take some of these profits,''' said Alfred Kugel, senior investment strategist at Stein Roe & Farnham in Chicago. ''On balance, the market will be trending upward, but there will be some profit taking somewhere in there. We will have a day or two of sell-off.'' Two big companies set to report this week before the earnings season's unofficial start are Dow components Alcoa Inc. (NYSE:AA - news), the world's top aluminum manufacturer, and diversified conglomerate General Electric Co. (NYSE:GE - news). The Federal Reserve's modest, 25-basis-point interest rate increase last Wednesday June 30 was a boon for the stock market, particularly because it came with the central bank's adoption of a ''neutral'' stance toward future policy. The Dow gained 5.5 percent last week. But Ellis and others said they are not convinced the Fed has closed the door on another increase in the near-term. In search of clues on further Fed action, market watchers pointed to this week's retailer same-store sales, due out Thursday. ''The Fed watches these numbers,'' Ellis said. ''If these numbers give an indication of continuing great consumer exuberance, the chance of tightening will go up a little bit.'' The market rolled past a U.S. Labor Department report last Friday that showed 268,000 jobs were added to nonfarm payrolls, which was well above forecasts of a 220,000 gain. Likewise, a higher than expected 0.4 percent rise in hourly wages did not spark an inflation scare. ''I think it all kind of washed out,'' said Kugel of the employment figures. biz.yahoo.com