Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: LastShadow who wrote (23557)	10/19/1999 12:31:00 AM
From: ynot	Read Replies (1) \| Respond to of 43080

LS, tried the link, my computer goes 'bonkers', i guess i'll wait ;) ynot ;)

To: LastShadow who wrote (23557)	10/19/1999 1:34:00 AM
From: Esway	Respond to of 43080

NEW YORK (CBS.MW) -- Closely watched Wall Street pundit Abby Joseph Cohen said Monday that recent declines in U.S. share prices have been spawned by concerns that have been overdone. But the Goldman Sachs head of investment strategy's comforting words did little to allay the market's frazzled nerves. The Dow Jones Industrial Average was down slightly Monday afternoon, while the tech-packed Nasdaq fell a hefty 2.4 percent. See Market Snapshot. In a note to clients, Cohen said the market's recent fears -- which have centered on profits, inflation and interest rates -- are unwarranted. Having already priced in a 25-basis-point rate hike, the downside of bond and equity markets will be limited should the Federal Reserve decide to nudge up interest rates at the Nov. 16 Federal Open Market Committee meeting. "We believe that yields are unlikely to move much higher on a sustained basis. We believe that the S&P 500 is now about 5 percent undervalued given current yields," Cohen said. (See chart.) Should rates on long-dated and intermediate-term bonds move lower, the undervaluation of S&P 500 shares would become more pronounced, the strategist said. On Sept. 8, Cohen raised her year-end price target for the Dow Industrials to 11,500 from a previous projection of 10,300. In addition, the strategist raised her target on the S&P 500 to 1,385 from 1,350 -- a target that had been in place since the start of the year -- and also set a 12-month rolling price target for the S&P 500 of 1,450. Profit outlook Cohen said the profit outlook remains favorable, with companies generally unveiling solid gains for the third quarter and showing meaningful improvements from last year -- which was marked by soggy global economic conditions. "Despite pre-announcements by some companies of disappointing results in the third quarter, the actual reporting period thus far has been strong," Cohen observed. Her estimates for S&P 500 operating earnings per share were raised in early September to $51 from $49 for 1999 and to $55 from $53 for 2000. Strong third-quarter results are likely to give investors more comfort regarding the outlook for the fourth quarter as well as next year, she said. "Equity prices are more directly linked to the expected durability of the profit cycle than to the specific quarterly result," Cohen stated. Inflation backdrop Cohen said that inflation has move higher, as had been expected. But rather than a general increase in prices, gains have been attributable to specific and transitory factors. Friday's jump in wholesale prices, for example, was driven by three items: tobacco, energy and auto prices, Cohen noted. Cohen said U.S. economic growth is likely to slow in response to the higher-interest-rate environment. The current capacity-utilization rate of a little over 80 percent isn't likely to put upward pressure on prices. And while economic growth will improve modestly overseas, global capacity remains low, which should also work to keep price pressures at bay. The dollar's recent weakness is due to the improving growth outlook in other economies, which is evidenced by the better performance of the euro and the yen in recent months, Cohen said. But she said she believes the impact of changes in foreign exchange rates will be more meaningful for economies outside the United States, where there is more reliance on exports and foreign trade is a larger percentage of gross domestic product. Fleeting factors Cohen said the nervous market is placing a greater deal of attention on short-term factors. This behavior is due to investors' impatience with the market's recent trading range as well as the inflation and interest-rate concerns. Mutual-fund inflows, she observed, are in a seasonally weak period, as the strongest inflows typically occur early in the calendar year. In addition, the end of the tax year for many mutual funds also triggers selling of "portfolio laggards" as investment managers look to match realized capital gains with realized losses for tax purposes. Finally, as year-end approaches, Y2K-related fears may produce some atypical behavior among investors, despite the fact that the financial-services industry is seen as well-prepared for the event and isn't expected to encounter any major computer glitches. Julie Rannazzisi is a reporter for CBS MarketWatch.