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To: Dale Baker who wrote (35156)	10/11/2003 11:38:33 AM
From: Dale Baker	Respond to of 118717

Weekly Wrap : Several things were made apparent this week. First, the market continues to feel good about earnings prospects. Second, the bullish bias continues to persist. Third, buying interest remains broad-based. Fourth, there is still plenty of vitality in the American consumer. Fifth, there has been modest improvement in employment conditions. And sixth, a weaker dollar is a positive for the market. We will now elaborate on these developments, beginning with the dollar's performance. Remember a couple of weeks ago following the G-7 meeting when the media was up in arms about the dollar's weakness portending bad things for the stock market? Well, we said then don't believe the hype and reminded readers that a weak dollar is good for U.S. business as it helps exports, raises the cost of imports, and produces a favorable translation of overseas profits for multinational companies. It would appear that market participants understand the connection, and press reports notwithstanding, have handled the pace of the dollar's decline in textbook fashion. To wit, the major indices ended higher this week (and last week) despite the dollar losing ground against the yen and the euro. In fact, the S&P 500 hit a new 52-wk high this week along with the Dow and Nasdaq. The breakout to new highs was fueled by encouraging earnings news/commentary from the likes of Alcoa (AA) and Yahoo! (YHOO), as well as a batch of encouraging same-store sales results from the retailers for the month of September and a better than expected initial claims report for the week of Oct. 4. In the wake of the economic data, it was clear that the consumer remains alive and well and that the job market is beginning to improve as the 4-wk moving average for initial claims dropped to its lowest level (i.e. 393.5K) since February 7, 2003. While there is still plenty of room for improvement in the job market, the claims data were an encouraging follow-up to the September jobs report that showed a 57K increase in non-farm payrolls. One of the more notable disappointments during the week was the General Electric (GE) earnings report. Although the Dow component met expectations for Q3 (Sep) when it reported on Friday, it cut its earnings outlook for Q4 and FY03. The revision took some wind out of the market's sails, but GE's news didn't sink the market as management's acknowledgment that it is guardedly optimistic about the economy fit well with the market's bullish mindset about economic prospects. That mindset was evident in the broad-based participation in the market's advance. Gold stocks comprised a standout group as they benefitted from the rise in gold prices that was tied to a weaker dollar. Other notable winners included the homebuilding, aluminum, semiconductor, airline, retail, and banking groups. On the flip side, the gaming, drug, utility, telecom, and railroad groups were among the weaker performers. Separately, waves were made in the oil market this week as the price of crude oil topped $32/bbl amid supply concerns. Oil settled Friday at $31.97/bbl, which is 18.0% higher than where it was trading 3 weeks ago. The action in the oil market will bear close watching as rising oil prices are bad for the economy in that they create an added tax for the consumer and put a crimp in corporate profit margins. Next week, the market will get a good sense of the corporate profit picture as more than 200 companies are scheduled to report their quarterly results. They represent a multitude of industry groups with technology, financial, and airline among the more prominent groups represented. Six Dow components - JNJ, INTC, GM, IBM, KO, and HON - highlight the earnings calendar. Briefing.com expects the Q3 earnings reporting period to be a good one and we said as much in The Big Picture Stock Brief this week. Given how far the market has run ahead of the actual reporting, though, it is possible that a big earnings season rally may not happen. Nevertheless, we believe the earnings news, in aggregate, will continue to support our moderately bullish outlook and leave market participants inclined to view corrective activity as a buying opportunity.-- Patrick J. O'Hare, Briefing.com