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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (42987)	10/7/2001 9:55:35 PM
From: Dealer	Read Replies (3) \| Respond to of 65232

Stocks Expected to Slip After Air Attacks Slideshows Reuters Photo The Stock Market By Denise Duclaux NEW YORK (Reuters) - Investors are expected to push stocks lower at the opening bell on Monday as air strikes against Afghanistan (news - web sites) whip up anxiety ahead of the worst corporate earnings season in ten years. ``I expect the market is more likely to be down then up on this news,'' said Milton Ezrati, senior economic strategist at Lord Abbett & Co., which oversees about $40 billion. ``Not that it's not welcome, but it increases uncertainty.'' Stocks, which tumbled to three-year lows following the Sept. 11 attacks, had been crawling back on hopes for added stimulus from the Federal Reserve (news - web sites) and the U.S. government. But the first phase of warfare, coupled with a bleak quarterly earnings season and a looming economic recession, could put any market recovery on hold. ``I think markets typically get skittish around whenever these actions take place,'' said Joel Naroff at Naroff Economic Advisers. ``Under these circumstances, when there is uncertainty like this, people go to the safer havens and that's fixed-income assets.'' Most Wall Street strategists predict a weak open, but they add sentiment could change on a dime. Indeed, a handful say the reprisals for the attacks on the World Trade Center and the Pentagon (news - web sites) could provide a short-term boost. They draw similarities with the rally that coincided with the 1991 U.S. military actions to force Iraq out of Kuwait. ``When the stock market opens on Monday, we might actually see a relief rally as we had in 1991,'' said Wells Fargo chief economist Sung Won Sohn. Stock index futures opened lower on Sunday after the United States launched its military strike against Afghanistan. The December Nasdaq 100 contract dropped 10 points to 1,271 and December Standard & Poor's 500 stock index futures contract fell 6.80 to 1,064.60 at about 7:30 p.m. (2330 GMT). The United States on Sunday began the first leg of what it has said will be a protracted and wide-ranging war against terrorism and the countries that support it. Few investors were caught off guard as the reports of strikes against targets of the Taliban regime in Afghanistan surfaced on Sunday, but the added apprehension may be enough to snap a two-week rally in the markets. ``Everyone understood this was coming, but it's still a negative shock at a time when the market needs a positive shock,'' said Christian Stracke, chief Latin American debt strategist at Commerzbank Securities. This week marks the beginning of the third-quarter earnings season, when companies report financial results and hint at what is to come later in the year. The reports are expected to show the sagging U.S. economy, as well as slower consumer and capital spending, slammed profits in the third quarter. Analysts now forecast third-quarter profits will fall an average of 21.3 percent from the same period a year ago, according to Thomson Financial/First Call. That's the worst performance since the second quarter of 1991. It gets worse. Currently, analysts expect full-year profits to be down 13.8 percent. But First Call strategists say those analysts' forecasts will probably come down about 3 percentage points more, making 2001 the worst year since at least 1969. ``Earnings are going to be lower than the consensus estimates and that means there's still a downside risk to stocks,'' said Nick Sargen, global market strategist for J.P. Morgan Private Bank, which oversees $300 billion. In the first week of trading after the Sept. 11 attacks, blue chip stocks posted their worst week since the Great Depression -- down more than 14 percent. Two weeks after the attack on Pearl Harbor in 1941, the Dow was down just 6.6 percent. When North Korea (news - web sites) sent troops across the 38th parallel in 1950, the Dow fell just 7 percent in two weeks. The previous periods marked beginnings of economic booms, whereas now the economy already was barely above a stall, despite a slew of rate cuts by the Federal Reserve and a tax cut from the federal government. Investors worry that the cost of fighting terrorism and the attack's impact on consumer confidence will push the economy into a recession. The near-term outlook for corporate profits and the economy appears bleak enough to spook investors, but some strategists say any dip in the market could represent a good buying opportunity. A recession is widely expected, but the Federal Reserve's nine interest-rate cuts this year as well as President Bush (news - web sites)'s proposal for a fat stimulus package are seem boosting the economy by 2002. ``I think our economy will most certainly slip into a recession, but what the Fed did is provide us with a more vigorous recovery at the back end of all this,'' said Phil Orlando, chief investment officer for Value Line Asset Management, which oversees $6 billion. Stocks rose on Friday, erasing early losses in a late-day recovery, after President Bush proposed at least $60 billion in new tax cuts to help cushion the nation's economy from the fallout of last month's air attacks. Investors last week welcomed solid outlooks from tech icons Dell Computer Corp. (Nasdaq:DELL - news) and Cisco Systems Inc. (Nasdaq:CSCO - news) as well as the Federal Reserve's ninth interest-rate cut this year. For the week, the Nasdaq gained about 7.1 percent, the Dow rose about 3.1 percent and the S&P 500 tacked on about 2.9 percent. For the year, the Nasdaq has tumbled 35 percent, the Dow is off roughly 15 percent and the S&P 500 has dropped more than 18 percent.