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To: craig crawford who wrote (13474)	1/21/1998 11:23:00 AM
From: Glenn D. Rudolph	Respond to of 45548

To: craig crawford who wrote (13474)	1/21/1998 10:56:00 PM
From: Glenn D. Rudolph	Respond to of 45548

FOCUS-Wall Street frets as corporate earning roll in Reuters Story - January 21, 1998 16:41 %US %FIN %RES %BNK %DPR %MAC %CORA %RESF IBM CAT CPQ JPM V%REUTER P%RTR By Richard Jacobsen NEW YORK, Jan 21 (Reuters) - U.S. corporate profits for the fourth quarter have so far matched Wall Street's lowered expectations, but the full impact of the Asian economic crisis may not be felt until results for the next two quarters are in. Soft trading revenues from major U.S. banks and a profit warning from computer giant International Business Machine Corp. are fresh signs that corporate earnings will likely come under pressure in 1998, analysts said. "The fourth quarter is not the story," said Ben Hock, director of equity research at John Hancock Funds. "They'll feel it more as the year unfolds than they've felt it thus far." In fact, of the 117 members of the Standard & Poor's 500 that reported fourth quarter results through Tuesday, 64 percent met or topped analysts' expectations, according to I/B/E/S, which tracks Wall Street forecasts. The results come after Wall Street analysts lowered the profit hurdles as a result of the unraveling of Asian currencies and financial markets over the last several months. On Oct. 1, analysts were forecasting the S&P 500 would show a 13.2 percent rise in operating earnings year-on-year during the fourth quarter, according to First Call, which also tracks analysts' forecasts. But just before the bulk of corporate profits began flowing this week, that forecast had been trimmed back to a 7.8 percent gain. Wall Street has been soothed somewhat by better-than-expected profits from some major corporations including Caterpillar Inc. and Compaq Computer Corp. , which both posted profits Wednesday. But signs of potential trouble ahead have emerged. On Tuesday, U.S. money center banks posted fourth-quarter results that were hurt by the still-unfolding crisis in Asia. J.P. Morgan & Co Inc said it classified about $587 million of "exposure" in Asia as nonperforming. On Wednesday, stocks were rattled after IBM reported earnings that were close to analysts' forecasts. But the company warned its first quarter results would fall short of year-ago levels due to a confluence of unusual factors and the persistently strong dollar. IBM also mentioned Asia and pricing pressure as factors in its outlook for the first quarter of the new year. "A large company like IBM tells you what the direct impact of Asia on sales is, and it hits you like a very blunt object," said Hugh Johnson, chief investment officer at First Albany Corp. "The market tried to put Asia behind it last week, but we are then reminded it's going to be a long time before Asia is behind us," he said. The Dow fell 78.72 points, or 1 percent, Wednesday, closing at 7,794.40. Those wary about the profit outlook note that not only will corporate sales to Asia falter for multinational companies, but corporations may see their profits in the United States squeezed amid tight U.S. fiscal and monetary policies and cheap imports, particularly from Asia. "There's an absolute dearth of pricing power in the U.S. economy," Hock said. But others see the concerns over Asia overblown. They argue that the continued strength in the U.S. economy and growth in Europe will be enough to offset Asian shortfalls. "There's been so much exaggeration thus far as to the impact of this Asian fallout," said Jack Shaughnessy, chief investment strategist at Advest. "So far, it has not proved to be significant." U.S. Treasury Secretary Robert Rubin said Wednesday that Asia's impact on the United States was moderate so far. But he said if the crisis spreads, the impact will be much greater. (--Wall St Desk, 212-859-1721)