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To: FARA who wrote (27025)	7/26/1999 11:25:00 PM
From: puborectalis	Read Replies (2) \| Respond to of 41369

Garzarelli still bullish..don't worry......Stock market breather OK By Elaine Garzarelli, CBS MarketWatch Last Update: 1:34 PM ET Jul 25, 1999 Also: columns & opinion NEW YORK (CBS.MW) -- A combination of events last week led the stock markets to take a break from hitting new highs. First, as we expected, Greenspan did not give the "all is okay" speech traders hoped to hear at the Humphrey-Hawkins testimony Thursday. Instead, he said that there is still a chance that inflation will accelerate within the foreseeable future. We believe, as long as the CIBCR leading inflation index (an index Greenspan pays attention to) continues to rise, he will be open to further rate hikes even with the current neutral bias. Secondly, the yield on the long bond rose to over 6 percent Friday as the increase in the yen and euro suggested lesser interest in U.S. assets from foreigners. And finally, this week's strong earnings reports led investors to take profits before the employment cost index comes out next week (this could be an important piece of data for the Fed). See Economic Preview. With all this we continue to remain bullish -- looking for an S&P 500 (SPX: news, msgs) level of 1,600 (12,400 for the Dow (DJIA: news, msgs)) over the next six to 12 months. Our proprietary stock market indicators are in low neutral territory. However, they have not signaled a bear market. As we mentioned previously, we believe 10 percent to 20 percent corrections are possible at any time but think they would create excellent buying opportunities. Interest rate analysis We continue to believe bonds remain an excellent investment at current prices, especially with yields moving up this week to 6 percent. The bond market "vigilantes" will make sure that bonds do the Fed's job of controlling inflation yields back up. In essence, such actions help the Fed to keep the economy soft and inflation in a secular downtrend. We believe this strategy of the bond market will eventually nip lingering inflation and eventually allow yields to decline to their equilibrium level. Also see Bond Report. Our bond model indicates equilibrium for the 10-year bond should be 4.5 percent based on the current low inflationary environment and the continuing budget surplus. Elaine Garzarelli is a columnist for CBS MarketWatch. You can get more information at her Web site.