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To: Antonio Gargani who wrote (29469)	8/16/1999 12:06:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 41369

Bond outlook brightens By Elaine Garzarelli, CBS MarketWatch Last Update: 1:33 PM ET Aug 15, 1999 Also: columns & opinion NEW YORK (CBS.MW) -- The producer price index for July came in with an increase of only 0.2 percent (finished goods), while the core index was flat (up only 1.5 percent from a year ago) and intermediate goods rose 0.6 percent. This report temporarily calmed fears in the stock and bond markets of a Fed rate tightening. In addition, the Federal Reserve's Beige Book did not show any signs of accelerating inflation. Strong retail sales figures showed an increase of 0.7 percent in July. However, the data was dominated by auto dealer sales without which sales only rose 0.3 percent. Despite these milder reports, we believe there is a 80/20 chance of a Fed tightening at the next meeting due to the strong CIBCR inflation reading for July (see our newsletter for details on this index). Although the current stock market correction may not be over, we recommend investors focus their attention over the long term. We continue to favor investing in technology as we believe advances and stronger consumer-related Internet demand will continue to create profitability for the sector. We also like the financial sector -- including banks, brokerages, and insurance. The main reason for our attractive ranking on these groups is our positive outlook for bonds. In addition, we continue to recommend the health care industries such as drugs and medical supplies and hospital management as technological advancements continue to help further profitability in the group. For our favorite stocks in these groups, please refer to our newsletter. Interest rate analysis We continue to favor the bond market as an investment that has the potential of creating a better return than the stock market. With its price appreciation as well as a yield of 6.12 percent (for the 30-year bond), we believe bonds are a smart investment. Our readers know we believe bond yields are near their peaks and don't think they should rise much more. We believe Greenspan will not allow inflation to rise and along with the continued budget surplus, bond prices should rally when signs of a slowing economy become evident. We remain bullish on bonds and continue to predict a 10-year bond yield of 4.5 percent sometime in the next 6 to 12 months. Elaine Garzarelli is a columnist for CBS MarketWatch. You can get more information at her Web site.