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

To: RR who wrote (53552)	7/8/2002 12:10:20 AM
From: Dealer	Read Replies (2) \| Respond to of 65232

Stocks Seen Rising on Profit Outlook - Reuters (Jul 7, 2002) Stocks Seen Rising on Profit Outlook Sun Jul 7,12:55 PM ET By Chelsea Emery NEW YORK (Reuters) - Look for stocks to creep higher this week as an improving profit outlook helps restore confidence to a market battered by accounting worries, corporate skullduggery and fears of more attacks on the United States. The next several weeks will bring a slew of earnings reports from companies, including the world's biggest aluminum producer, Alcoa Inc., and Wall Street is looking for firms to mostly beat lowered forecasts. "Earnings are starting to see incremental revisions upward and people are starting to isolate those accounting issues," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Banking, which oversees $7 billion. "We'll see the market head higher as we go into the earnings period." One bright spot is the falling ratio of profit warnings against positive forecasts -- 1.3 versus one, according to market research firm Thomson First Call. That's the slimmest ratio since First Call began tracking such data. To be sure, investors are still jittery more companies will admit to accounting irregularities and say any attacks on U.S. citizens will hurt a tenuous feeling of security. If such problems emerge, traders will likely sell into last week's rally that pushed up the Dow Jones industrial average<.DJI> on Friday to its biggest one-day percentage gain in nine months, snapping a six-week losing streak for the blue-chip gauge. "There aren't a lot of believers out there -- any rally we've had, it's just been thrown back into our face," said Brian Finnerty, senior vice president for Melhado, Flynn, which oversees $1.5 billion. "In a heartbeat, we could go back down." But barring more bad news, investors will take heart that stocks in the Standard & Poor's 500 index <.SPX> are selling for 18.8 times earnings expected for the next four quarters, according to First Call. "The mood right now is one of quiet patience," said Weston Boone, a listed trader for Legg Mason Wood Walker. "The past three weeks, we've really had a crisis of confidence, but as long as there are no more accounting blowups, we will stabilize." COMING UP In coming days, investors will scrutinize quarterly earnings reports from Internet media company Yahoo! Inc., drugmaker Abbott Laboratories and technology firm Rambus Inc., among others. "It's important to listen to comments the companies are making about the future, rather than their past results," said Fitzpatrick, who recommends shares of companies that benefit from an economic upturn, such as Honeywell International Inc. Investors are starting to take heart from signs the rate of positive pre-announcements is rising against profit warnings. At this time last year, 4.3 companies had said results would miss forecasts for every company that said it would beat expectations, said First Call. That's about three times more than now. Wall Street will also scrutinize economic data including a preliminary inflation indicator, the producer price index ( news - web sites), which is expected to be flat in June from a decline of 0.4 percent the month before. Excluding volatile energy and food prices, the index is expected to rise 0.1 percent, according to economists surveyed by Reuters. Retail sales data for June will also be scanned for signs consumer spending is remaining resilient. Consumers prop up about two-thirds of the U.S. economy. RELIEF RALLY Investors returned from the Fourth of July holiday emboldened by the absence of any major terror attacks, although there was an incident in which an Egyptian man opened fire at an El AL ticket desk at Los Angeles airport Thursday, killing two people before being shot dead by guards. Still, stocks surged on Friday as investors were relieved the shooting appeared to be an isolated occurrence. "There's relief July Fourth has come and gone with no big incidents," said Fitzpatrick. For the week, the Dow average advanced 1.5 percent. The Nasdaq slipped 1.1 percent and the S&P 500 dropped 0.1 percent.