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By Julie Rannazzisi, CBS MarketWatch
Last Update: 12:58 PM ET Apr 15, 2000 Bond Report
NEW YORK (CBS.MW) -- It was a week that made knees wobble and veteran market watchers shake their heads in disbelief.
Solid earnings reports -- which were expected to be the market?s saving grace -- miserably failed to take stocks higher.
The catalyst for Friday?s bloodbath was an unexpected jump in the consumer price index. The CPI climb was a clear indication that inflation is creeping up, and, some observers say, it may give the Fed the smoking gun to be more aggressive in its future rate hikes.
The bad news panicked an already fearful market and unleashed yet another wave of selling.
"We had an emotional overreaction to the consumer price index," said Art Hogan, chief market strategist at Jefferies & Co. "It was a tumultuous week and what we needed Friday was good news," Hogan said.
When the market got bad news, investors just threw in the towel and sold indiscriminately.
A different wealth effect
The effects were staggering. Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co., noted in the final hour of trading Friday that over $2 trillion of net wealth had been eliminated during the week?s selling spree. That amount, he said, exceeded all of the $1.7 trillion of wealth gained at the household level last year, according to data from the Federal Reserve.
The Nasdaq is now down 18.3 percent for the year and is off 34 percent from its closing high of 5,048 set on March 10. The Nasdaq fell a record-breaking 1,125 points this week, corresponding to a 25 percent fall.
The Dow Industrials is down 10.3 percent for the year and off 7.2 percent, or 803 points, on the week.
Where?s the bottom?
The big question is: Are we getting close to a bottom or should we expect another round of selling next week?
Many market pundits believe the kind of panic selling on high volume witnessed Friday is a sign a bottom is near. But, they add, that doesn?t mean good times are just around the corner.
"It?s possible that the pain may be near an end, yet the 'feel good' time is still some time off," said Frank Gretz, chief market strategist at Shields & Co. "It may be that prices are near not going down anymore, but they?re not yet near going up -- at least in any important way. And that, for most, really is bad news."
"This is a market -- particularly the Nasdaq -- that could very well make the proverbial ?L? bottom. [Stocks] stop going down, but they don?t go up. There?s plenty of bouncing around, plenty of rallies, but no real satisfaction," Gretz satisfaction.
Terry Gabriel, technical analyst at IDEAglobal.com, believes rallies will be sold until the market finds its footing. After that, stocks will carve out a trading range.
It?s disturbing, Gabriel said, that good earnings news couldn?t help the market. However, he added, the fact that pessimism is so rampant could indicate the market?s near a bottom.
Michael Holland, president of Holland & Co., said the fact the price plunge came amid a backdrop of good earnings reports and a strong economy could bode well for a rebound.
?We?ll be OK,? he said.
Upcoming events
After last week?s data-packed week, the market will take a break from market-moving economic releases. Only a few reports are on tap.
Monday: No data. Tuesday: March housing starts and building permits. Wednesday: February trade data.Thursday: Weekly initial claims, April Philadelphia Fed index, March Treasury budget statement. Friday: Markets closed for Good Friday.
Earnings watch:
Next week will be one of two peak weeks for first-quarter results with almost 200 of S&P 500 companies set to report, according to First Call. By the end of the week, almost 60 percent of the S&P companies will have reported.
Most of the major industries will have been heard from in a meaningful way by the end of next week -- with the notable exceptions of oil producers, insurance, health care services and retailers, First Call said. It?s also a big week for Dow stocks -- with 12 set to report.
As the results pour in, it?s clear the first quarter is on track to report very strong earnings, First Call said. The final results, in fact, are still likely to show at least 22 percent growth from the previous year.
Earnings are up 27 percent for the 18 percent of the S&P 500 companies that have reported, First Call said. So far, earnings are, on average, coming in 6.7 percent above expectations |
