not an optimistic outlook for the market...
WALL ST WEEK AHEAD/More summer fun -- for bears
Reuters Story - September 19, 1999 13:21
By Amy Collins
NEW YORK, Sept 19 (Reuters) - Four months into a grinding, sideways, summer-long break, a consensus is building on Wall Street that things may get worse before they get better.
While the market reached some nominal highs during the summer, stocks have essentially made no headway since mid-May.
Despite the long pause, which has most recently produced four straight losing weeks for the Dow Jones industrial average, many on Wall Street analysts are pessimistic on the near-term outlook, seeing few potential catalysts for a rally and some possible reasons the next move could be lower.
"We started a fade earlier this week," said Gregory Nie, a technical analyst at EVEREN Securities Inc. in Chicago. "The fade will carry into early next week."
As far as the broader market, expectations are subdued.
The only stocks doing well lately have been the 50 to 100 most active stocks, said Richard Cripps, managing director of equity strategy at Legg Mason Equity Research. "We're grinding lower is what we're doing," Cripps said. "The majority of stocks have been having trouble for a long period of time," he said. The Dow has been in a tight trading range, making its last all-time closing high on Aug. 25 at 11,326.04.
That rally did not last. Within two days, the market had retraced its gains to finish with a weekly loss of about 10 points. Since that week, the Dow has not had a gain for the week, with the losses creeping higher to 11 points in the following week. A 50-point weekly loss followed and and then, last week's 225-point fall, with the blue-chip Dow closing at 10,803.
While the near-term outlook may not be stellar, dramatic losses are not expected, either. The Dow should find support at 10,500 or better, Nie predicted. "It's a market that lacks momentum in either direction," he said. There is little in the way of economic news this week, meaning attention will likely be temporarily directed away from whether another interest rate increase will be coming at the Federal Reserve's Oct. 5 meeting.
In the absence of major economic news, attention is likely to center on a thin stream of corporate earnings news and the first wave of profit warnings for the third quarter .
Companies have been trained to report their bad news early, and for the most part, keep mum on leaking the good news in advance.
Although the peak third-quarter earnings season is not expected to begin until October, sneak previews will come this week into the performance of the major Wall Street brokerage houses and U.S. homebuilders.
Goldman Sachs Group will report on Tuesday, Morgan Stanley Dean Witter will report Wednesday, and Lehman Brothers will report Thursday. Also, A.G. Edwards Inc. plans to release its earnings on Monday or Tuesday.
The outlook appears mostly positive for those companies. Earlier this month, an analyst for Salomon Smith Barney Inc. raised his earnings estimates for Morgan Stanley, Lehman and Goldman, saying the firms' underwriting activity would not be as weak as earlier expected.
3Com Corp. , the No. 2 maker of computer network equipment and ConAgra Inc. , the nation's No. 2 food processor are both expected to report their results on Tuesday.
Homebuilders Lennar Corp. and Kaufman & Broad Home Corp. are also expected to report this week, according to First Call.
In economic news, July's international trade numbers will be released Tuesday. Wednesday will see release of the federal budget for August as well as the Beige Book of U.S. economic conditions from the Federal Reserve. On Thursday, August help wanted figures and jobless claims for the week ending Sept. 18 will be released.
On Tuesday, the International Monetary Fund and the World Bank will hold its annual meeting and on Wednesday the IMF will release its economic outlook.
On Wednesday, the Organization of Petroleum Exporting Countries will hold a policy-setting meeting and Federal Reserve Governor Edward Kelley will speak in Seattle on "The Fed's Role in the U.S. Economy,"
The market will continue to monitor economic news, comments from Fed members, currency rates and other economic elements for signs of a possible rate increase.
"There is a good chance they'll take no action," said Gary Campbell, chief investment officer at Commerce Bank, in St. Louis, Mo.
But Campbell said he thinks there still might be a hike at one of the last two Federal Open Market Committee meetings this year, scheduled on Nov. 16 and Dec. 21.
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