WORST IS OVER, MARKET GURUS SAY
The stock market, battered last week by turmoil in Asian
economies and a slide in markets around the world, may see
more losses in the days ahead, though the worst of the rout is
over, investors and market analysts said.
Fund managers overseeing about $165 billion in assets said
Monday's 7.2 percent slide in the Dow Jones industrial
average was an overreaction to the events overseas.
Southeast Asian markets, while some of the fastest-growing
on the globe, don't yet account for a large portion of U.S.
exports.
What concerns these big money managers more is the trend
among some investors to sell stocks first and ask questions
later. A 30 percent rally in share prices this year has made
some shareholders trigger-happy, they said.
"The issues in Asia won't have that big of an impact on the
U.S. economy itself, but the market needed an excuse to go
down," said Vernon Winters, chief investment officer at Mellon
Private Asset Management in Boston, which oversees about
$38 billion. "For so long, equities were the things to own. So
something was bound to come along and disturb the market."
Winters said investors don't want to find themselves behind
the latest trend in prices. "What investors are saying is, 'I'm
going to sell now because you may be nervous about all this
turmoil, and you may want to sell later. And I want to get out
before you get out.' "
Helped by a rally Tuesday, the Dow Jones industrials
recovered 60 percent of the previous day's loss and ended the
week down 273.33 at 7442.08, a 3.5 percent loss. Monday's
554-point decline, which caused the shutdown of the stock
market for the first time since President Reagan was shot in
1981, was the biggest one-day point drop in history.
For the year, the 30-stock average is up 15 percent.
The Standard & Poor's 500 Index slid 27.02 points, or 2.9
percent, to 914.62 for the week, while the Nasdaq Composite
Index fell 57.31, or 3.5 percent, to 1593.61.
Thomas O'Neill, chief investment officer at Fleet Investment
Advisors, said his money managers used the drop in prices
on Monday and early Tuesday to put some cash to work. In
Fleet Investments' personal accounts, which comprise about
half of the $50 billion of assets, the percentage of cash was
cut to about 20 percent of assets from 25 percent.
Should the market rally back to its October highs - the S&P
500 reached 983.12 - O'Neill wouldn't hesitate to raise cash
again.
"Would we go back to 25 percent? Absolutely," he said.
The decline in U.S. stocks was as broad as it was deep. Only
76 stocks in the S&P 500 Index ended the week with a gain.
Of those, only 47 advanced more than 1 percent.
"If you were to determine what drove stocks lower this week,
you'd find that it was 95 percent a result of emotion and 5
percent based on fundamental concerns," said Alfred Kugel,
senior investment strategist at Stein Roe & Farnham Inc.,
which oversees about $30 billion. "We're past the worst.
Monday was the selling climax."
The rout in global stocks was triggered by a slide in Hong
Kong share prices. The Hong Kong Monetary Authority raised
interest rates last week to defend its currency, a move that
sent borrowing costs higher and raised the prospect of a
slowdown in economies throughout Asia.
But while fund managers scrambled with their buy/sell
decisions, some investors bought or sold little, preferring to
wait for the volatility to subside. About 3.98 billion shares
changed hands for the week on the New York Stock
Exchange, making it the busiest week in history.
"I like to sit back and see things stabilize, see what level the
stock market is going to stabilize at before committing much
new capital to the market," said Howard Ward, manager of the
$900 million Gabelli Growth Fund.
Ward said he expects the yield on the 30-year U.S. Treasury
bond to fall below 6 percent in the next week or so, which
should trigger a big rally in stocks. The yield is at 6.15
percent now.
Stocks have some catching up to do. A $1 million investment
in 30-year Treasury bonds made on Sept. 30 would be worth
$1,039,000; a similar investment in a basket of stocks
represented by the S&P 500 Index would be worth $965,000.
Meanwhile, as the financial world keeps an eye on
developments abroad, key economic reports at home this
week could boost investor sentiment on the buy side. Among
them is the monthly report on unemployment, due out Friday.
Analysts said if job growth appears moderate, expectations
for lower interest rates will rise and that could give a big boost
to the market.
North America, United States of America, Central United
States, South Central United States, Louisiana
The New Orleans Times-Picayune
Author: HAL PAUL Bloomberg News
December 02(????), 1997 |
