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To: Return to Sender who wrote (571)	5/13/2001 9:53:52 PM
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Even Fed Cavalry Can't Spur Stocks dailynews.yahoo.com By Chelsea Emery NEW YORK (Reuters) - Wall Street expects the Federal Reserve (news - web sites) to ride to the rescue with a half-point cut in interest rates this week, but nervous stock investors are not yet ready to uncircle the wagons. Instead, money managers and traders said they expect the market to languish amid worries the economy and corporate profits will decline further. ``There's no reason for stocks to go up,'' said Vincent Farrell, chairman of Victory Capital Management, which oversees $75 billion. ``We're entering a period of limbo because there won't be any more action on the Fed's part for a while and it'll be a few more weeks before we start seeing (quarterly profit) preannouncements. I expect stocks to trade sideways and slightly down.'' Troubling statistics will weigh on the market. For one, earnings for companies in the Standard & Poor's 500 index (^SPX - news) are expected to drop 3.1 percent this year, even after the Fed has already slashed rates by 2 percentage points, according to Thomson Financial/First Call. Investors will get a fresh profit outlook next week as the No. 1 U.S. personal computer maker Dell Computer Corp.(NasdaqNM:DELL - news) is expected to report quarterly results on Thursday. Dell said last Monday it would cut up to 10 percent of its staff because of slowing industry growth. Employers are slashing jobs to bolster their bottom lines in the face of slowing sales. In April, the jobless rate jumped to 4.5 percent, its highest level since October 1998. That exacerbates worries that corporate profits will drop more as consumers sock money away to guard against hard times. An indication of whether spending is slowing will be seen in earnings reports of retailers Home Depot Inc. (NYSE:HD - news)and Wal-Mart Stores Inc.(NYSE:WMT - news), expected on Tuesday. The latest economic data on Friday showed an uptick in inflation at the wholesale level, and investors will scrutinize the economy's key inflation gauge, the Consumer Price Index (news - web sites), on Wednesday. Optimists say the slowdown so far is just part of a normal economic cycle and suggest excess cash created by lower interest rates will soon start flowing into stocks. ``I've got nothing but good news,'' said Charles Blood, director of financial markets strategy at Brown Brothers Harriman & Co. in New York. ``When you have money supply growing faster and the economy growing slower, money sloshes around looking for a home and it ends up in the financial markets.'' But traders say the market has already factored in a rate cut and stocks need more to move higher. ``From what I'm seeing, there's no visibility in corporate earnings,'' said Ken Sheinberg, head of listed trading at SG Cowen. ``Price-earnings ratios are getting back up to somewhat excessive levels, investors have already put a bunch of cash to work and inflation is pushing up, making it tougher for the Fed to cut rates as aggressively. I expect a (stock market) move to the downside.'' Last week, the market broke a four-week winning streak for the benchmark Standard & Poor's 500 index(.SPX), which closed off almost 1.7 percent, and the blue-chip Dow Jones industrial average(^DJI - news), which declined 1.2 percent. The technology-heavy Nasdaq Composite Index(^IXIC - news) lost almost 3.9 percent. ECONOMIC DATA GRABS ATTENTION A majority of Wall Street analysts forecast the Fed will cut short-term rates by another half percentage point to 4 percent at its policy-setting meeting on May 15, according to a recent Reuters poll. That would be the fifth cut of half a percentage point this year as the central bank has tried to jump-start the slowing economy. Investors deem the move necessary after a slew of companies have slashed work forces. April's payroll loss was the biggest since a 259,000 drop in February 1991, just as the last 1990-91 recession was coming to an end. ``That consumer number was really shocking,'' said Farrell. ''It shows us we still have some consumer slowdown to go through.'' Stocks slumped on Friday after the core producer price index, a measure of how much producers pay for materials, excluding volatile food and energy prices, showed an uptick in inflation, casting a doubt on how long the Federal Reserve will continue its aggressive rate cutting campaign. ``Consumer, consumer, consumer,'' said Kathy Dodd, who helps oversee $3 billion for Banc One Investment Advisors. ``That's what I'm concerned about the most. People are still watching those unemployment numbers. If consumer spending weakens, it's going to impact the stock market broadly.'' Even reports showing retail sales rebounded in April, indicating consumers still remain willing to spend in the face of the slumping economy, couldn't bolster stocks on Friday. ``If you are getting in the market now, you are really buying on faith,'' said John Forelli, portfolio manager at Independence Investment LLC, which oversees $23 billion. ``Once we get past June, I don't expect any good earnings or economic news through the third quarter.''