There will definitely be some "painting" going on this week, my take is triple coats on everything<g>
Sunday September 10, 1:29 pm Eastern Time
WALL ST WK
AHEAD-September chill
threatens Street
By Denise Duclaux
NEW YORK, Sept 10 (Reuters) - The September
chill that has descended upon Wall Street may
worsen this week as worries more companies will
confess to earnings shortfalls threaten to outweigh
relief over lower oil prices and tame economic data.
``A cloud will hang over the market and probably
make anything to the upside a laboured advance,''
Paul Cherney, a market analyst at S&P Marketscope, said.
This week marks the unofficial start of the ``confessional period,'' when
companies that will miss analysts' profit estimates for the third quarter come clean
ahead of the reporting season. Last week, investors mauled technology stocks
after brokerage houses downgraded leading chip makers, leaving the market
especially skittish.
On the plus side, the agreement by oil producing countries over the weekend to
pump more oil in a bid to tame runaway prices could perk stocks. Investors will
likely breathe a sigh of relief, but oil prices are likely to remain near their decade
highs in the short term, experts said.
Later in the week, the Consumer Price Index, the nation's broadest gauge of
inflation, is expected to show that inflation remains in check, lessening the odds
the U.S. Federal Reserve will increase borrowing costs. Wall Street, however, is
already convinced that interest rates will remain on hold the rest of the year.
``I think we will see some choppiness, perhaps on the downside,'' said David
Rolfe, chief investment officer at Wedgewood Partners Inc.
TIME TO CONFESS
Last week, investors returned from their holiday and sent the market on a rocky
path amid technology jitters, high oil prices and a flailing Euro. The tech-rich
Nasdaq composite index (^IXIC - news) ended the week down 6 percent at
3,978.41. The Dow Jones industrial average (^DJI - news), the closely watched
blue-chip gauge, edged 18 points lower at 11,220.65.
A dour Wall Street now enters the peak time for quarterly confessions, when
companies warn profits will fall short of forecasts. National Discount Brokers
Group Inc. (NYSE:NDB - news), Campbell Soup Co. (NYSE:CPB - news), auto,
space and defence parts maker TRW Inc. (NYSE:TRW - news) and
semiconductor maker SpeedFam IPEC Inc. (NasdaqNM:SFAM - news) soured
investor sentiment with poor outlooks last week.
Soaring energy costs and the beleaguered Euro are denting corporate profits
already. Dupont Co. (NYSE:DD - news), the leading U.S. chemical company,
dragged down chemical stocks across the globe when it warned profits would sag.
``Foreign currency translation is hurting those multinationals that have exposure in
Europe,'' Rolfe said. ``If you own those names, you have to keep it on your radar
screen. It's one of the areas that you may see more preannouncements.''
In addition, many chip stocks have swooned as some analysts have argued that the
semiconductor industry is close to reaching its peak. Last week, top brokerage
firms cut their investment ratings on chip makers Intel Corp. (NasdaqNM:INTC -
news) and Micron Technology Inc. (NYSE:MU - news), while other investment
houses to rushed in to defend the stocks.
``As we get closer to the end of the quarter we are going to get a lot of
understanding as to what - if any - demand issues exist,'' said Thomas Galvin,
chief investment officer at Donaldson Lufkin & Jenrette. ``A lot of PC shipments
are done in September, so it's premature for anyone to make any judgments on
whether demand is weakening or not.''
SOME RELIEF IN SIGHT
The market is expected to get a lift from Sunday's news that Organisation of
Petroleum Exporting Countries (OPEC) ministers agreed to boost oil supplies by
800,000 barrels daily. The increase, the third this year, should help quell concerns
that high energy bills could trigger inflation and dent world economic growth.
The extra oil, slightly more than anticipated by dealers, is aimed to meet demands
among importing nations to ease crude into its preferred range of $22-$28 a barrel.
``That would generally be viewed as a positive, except obviously for oil stocks,''
said Joe Stocke, chief investment officer at StoneRidge Investment Partners.
Crude should retreat from last week's 10-year highs of $35 a barrel in the United
States, experts said. But it could be months before prices ease down to the
$20-$25 a barrel comfort zone sought by big oil buyers.
``There will still be a definite concern,'' Stocke said. ``There is some talk the
winter in the Northeast might be cooler than it has been for the past few years.
There will probably be some easing of the tension, but still some nervousness.''
DATA TO PAINT TAME PICTURE
Wall Street will focus on a trio of data expected to confirm that the economic
slowdown is on track after six interest rate hikes since June 1999. Retail sales and
producer price data, released on Thursday, and consumer price data, posted on
Friday, are expected to paint a tame inflation picture.
``The data will definitely be watched,'' Stocke said. ``But the feeling is that Fed is
on hold for the near-term, so the market probably won't react dramatically to the
data.''
The Consumer Price Index, the nation's broadest measure of inflation, may take
precedence as markets look to gauge whether the recent surge in oil prices has fed
through to consumers.
In a poll by Reuters, economists predicted that, on average, CPI would rise 0.2
percent for August, unchanged from last month. Excluding volatile food and
energy costs, so-called core prices are expected to increase 0.2 percent, also even
with July.
Many market watchers believe Alan Greenspan, the nation's top inflation fighter,
has seen enough data signalling a cooling economy and will refrain from jacking up
interest rates the rest of the year, especially in the midst of a presidential election.
``The market has already squeezed all they are going to get out of the Fed on hold
right now,'' Cherney said. |
