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To: stockman_scott who wrote (45976)	1/8/2002 2:31:23 PM
From: Sully-	Respond to of 65232

Stocks on thin ice without upbeat profit forecasts By Chelsea Emery NEW YORK, Jan 8 (Reuters) - Investors are on thin ice as the fourth-quarter earnings season heats up and a blast of bad news threatens to melt stock market gains. Fourth-quarter earnings are expected to fall by 22 percent from the same period last year -- making it the worst quarterly performance since the last recession in 1990-1991. Even so, it's the year ahead that investors are really concerned about. The big worry is that companies will offer downbeat profit forecasts for this year. Market gauges have soared on optimism that the Federal Reserve's 11 interest-rate cuts last year will boost the economy, but to hold up gains, investors need tangible evidence corporate profits are about to turn. ``We're pretty far out on the ice here -- we've seen some big gains already,'' said Mace Blicksilver, a money manager at Marblehead Asset Management. ``If companies are able to say things are improving, I see a pop in stock prices. If it's still a black hole'' the stocks will swoon, he said. Analysts forecast first-quarter earnings will fall from a year ago, but are predicting 8.5 percent growth in the second quarter. The second half is expected to be even better, compared with a poor showing last year: Analysts predict quarterly profit gains of 29.4 percent and 39.7 percent in subsequent quarters, according to market research firm Thomson Financial/First Call. But recent history shows analysts' expectations drop as the year goes on and second-quarter forecasts could fall into negative territory as higher unemployment keeps consumers from spending, said First Call. For stocks to move higher, Wall Street needs a safety rope that has been absent from recent reports -- upbeat corporate forecasts, or guidance. A slew of companies earlier in the year refused to say when profit growth would return, citing cloudy economic conditions. But now that those economic clouds are lifting, Wall Street expects firms to signal improvement. ``Fourth quarter won't be so great, but that won't hurt the market because people are looking forward,'' said Charles Blood, director of strategy at Brown Brothers Harriman. ``The economy is bottoming and there's an improving outlook for cyclical stocks like tech, industrials, car makers. Earnings don't matter at the beginning of a bull market.'' The market seems to feel the same way. Stocks have surged after tax rebates, interest-rate cuts and reports of slashed business inventories and high levels of cash stashed in low-interest money market funds. The Nasdaq composite index (^IXIC - news) is up more than 40 percent from three-year lows touched on Sept. 21. ``We know fourth quarter is a dud,'' said Blicksilver. ``It all comes down to guidance and visibility.'' 'HORRIBLE' EARNINGS Earnings expectations for the fourth quarter are dismal indeed. Hard-hit technology firms are expected to report profits tumbled 64 percent, according to analysts surveyed by First Call. That's an improvement from the drop of 71 percent in the prior quarter, but a far cry from growth of 41 percent clocked in the third quarter of 2000. The fourth quarter overall is expected to be the worst since the third quarter of 1991, when profits dropped 24.2 percent. ``Earnings are going to be horrible,'' said Louis Navellier, who oversees $5 billion as a portfolio manager at Navellier & Associates in Reno, Nevada. ``Guidance is everything. I wouldn't bother buying a stock that's not going to have positive earnings by the second quarter.'' Even ``safe haven'' sectors, so called because earnings are stable during times of economic declines, have seen dark days. Energy companies are forecast to report profits that fell an average of 53 percent as they struggled with fallout from the collapse of energy trader Enron Corp. (NYSE:ENE - news) and lower oil and natural gas prices. Utility and consumer staples companies will likely show profit growth of 6 percent and 4 percent, respectively. These firms usually report earnings in the low teens, First Call said. ``Even the safe haven companies haven't done well because of overseas problems, currency issues and competitiveness in the business -- they can't raise prices to meet increased costs,'' said Chuck Hill, First Call's director of research. ``There really isn't much to talk about on the positive side.'' Unemployment is one factor that will likely pin profits lower in future quarters, Hill said. That's because unemployment cuts into consumer spending. The unemployment rate rose to 5.8 percent in November and many strategists expect it to go as high as 6.5 percent before turning lower. Still, there are some bright spots. For one, more companies are offering rosy outlooks. Of the 1,217 early profit announcements so far, 25 percent have been positive. That's more than the 16 percent average clocked during the same time frame of the first three quarters of 2001, according to First Call. About 46 percent of all company preannouncements have been negative, down from 67 percent in the earlier three quarters. Wall Street pros say investors will need to see more of this guidance for gains to hold. If the signs are not forthcoming, all bets are off. ``Investors need guidance or immediate gratification in the form of better earnings now,'' said Navellier. ``If they don't get them, it's a threat to the market.''

To: stockman_scott who wrote (45976)	1/8/2002 3:02:24 PM
From: Sully-	Respond to of 65232

14:57 ET Cisco Systems (CSCO) 20.82 +0.29 (+1.4%): Lehman expects positive commentary out of today's Salomon Smith Barney presentation at 3:30 ET; co is likely to discuss continued market share gains and good order linearity continuing through Nov and Dec. Firm's Jan rev est is +3% with EPS of $0.05; CY02 ests are +12% in rev accelerating to +15-16% in CY03. EPS has room for upside, and firm believes FY03 est of $0.42 is conservative and could see consensus #s inch up to $0.50 over time.

To: stockman_scott who wrote (45976)	1/8/2002 3:33:14 PM
From: Sully-	Read Replies (1) \| Respond to of 65232

Worst Retail Holiday in Decade Ends By Pedro Nicolaci da Costa NEW YORK (Reuters) - Sales at U.S. chain stores fell in the last retail week of 2001, concluding what analysts said was the worst holiday shopping season in a decade and suggesting weakness could persist in the new year, two reports showed on Tuesday. Given the sort of lackluster sales results seen over the holidays, consumer spending -- which accounts for two-thirds of U.S. economic activity -- is unlikely to lead the troubled U.S. economy out of a recession that is now entering its 11th month, analysts said. The Bank of Tokyo-Mitsubishi and UBS Warburg said their retail chain store sales index slipped 0.6 percent during the week ended Jan. 5, following a 0.9 percent rise a week earlier. Separately, Instinet said its Redbook Retail Sales Average fell 3.5 percent in the five weeks ended Jan. 5, compared with the previous period. December was a five-week month for retailers. ``We're barely up in December,'' said Carey Leahy, senior U.S. economist at Deutsche Banc Alex. Brown. ``People may be surprised at how weak consumer spending in the first quarter is going to be.'' Soft sales have begun translating into job losses for workers at major retailers. Target Corp.(NYSE:TGT - news), one of the country's largest retailers, said on Tuesday it will cut full-time employees who stock shelves and unload merchandise at its Marshall Field's department store unit. Other retailers, hurt by the economic downturn, have laid off employees, including Gap Inc.(NYSE:GPS - news), Nordstrom Inc.(NYSE:JWN - news) and Sears, Roebuck and Co. (NYSE:S - news) The holiday shopping season is a crucial test for retailers because sales in November and December usually account for around one-quarter of overall retail sales for the year. Leahy said that although consumer resilience definitely kept the current recession from deepening further, weak retail sales point, at best, to a ``tepid'' recovery for the struggling U.S. economy. Compared with the same week last year, the BTM index rose 1.4 percent, below the prior week's 2.6 percent year-over-year gain. Sales in the week ended Jan. 5 rose 1.8 percent compared with the year-ago period, according to Redbook. KMART LAGS Kmart Corp.(NYSE:KM - news), the nation's No. 2 discount retailer, has bucked a year-long trend favoring discounters over department stores. In the latest negative development for the struggling discounter, credit rating agency Fitch cut Kmart's ``junk'' debt ratings further on Monday, citing ``weakened'' operations and ''negative sales momentum'' in the latter part of 2001. Fitch said the company's troubles were compounded by an attempt to slash prices on consumer goods that went awry -- the promotions failed to increase customer traffic at Kmart's stores. ``Kmart is positioned head-to-head with Wal-Mart,'' said Frank Badillo, senior retail economist at Retail Forward, a research firm in Columbus, Ohio. ``That's a tough place to be.'' Wal-Mart Stores Inc. (NYSE:WMT - news) reported at the end of last month that same-store holiday sales would reach the high end of its 4 percent to 6 percent range of estimates. JEWELERS A POSSIBLE BRIGHT SPOT In a sign of resilience, two major jewelers on Tuesday reported results that while mixed, offered some signs of recovery in the luxury goods sector, which has suffered as consumers reined in spending in the aftermath of the Sept. 11 attacks. Zale Corp.(NYSE:ZLC - news), North America's largest specialty jeweler, said sales at stores open at least one year, a key indication of retail performance, rose 1.8 percent in November and December as it sorted out inventory and merchandising problems. Tiffany & Co.(NYSE:TIF - news), which focuses on affluent consumers, said its same-store sales for the period were down 2 percent, a decline analysts said was less steep than expected as traffic picked up later in the holiday season. The BTM/UBSW Weekly Chain Store Sales Snapshot is compiled from seven major discount, department and chain stores across the country that report their weekly results, including J.C. Penney (NYSE:JCP - news), Sears(NYSE:S - news), Target, Kmart, Wal-Mart, Federated Department Stores Inc.(NYSE:FD - news) and May Department Stores Co. (NYSE:MAY - news) The Redbook Retail Sales Average is a sales-weighted average of annual growth in same-store sales at discount, department and chain stores that report their results on a weekly basis. The index is released weekly by Instinet Research, a division of Instinet, a Reuters-owned electronic brokerage.