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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Gary Korn who wrote (32029)	1/25/1998 9:57:00 AM
From: Jeff Jordan	Read Replies (1) \| Respond to of 61433

Sunday January 25 7:24 AM EST Clinton Scandal May Trigger Dow Pullback By Huw Jones NEW YORK (Reuters) - The White House sex allegations, coming on top of Asian financial turmoil and clouds over corporate earnings, may be just too much for what some analysts say is an overvalued stock market. The unfolding story in Washington, analysts said, may be the catalyst that triggers a downside correction as overall market sentiment turns more bearish. "The markets are a tad overvalued, and whenever you have a market overvalued, it's much more susceptible to any type of news pushing it towards a knee-jerk reaction," said Robert Froehlich, chief investment strategist at Kemper Funds. Analysts noted that Clinton, who denies the latest allegations about a White House affair, has survived many setbacks largely unscathed. On Friday, jitters about the scandal -- as well as rumors, quickly denied, that Treasury Secretary Robert Rubin might resign -- were enough to kill an early rally and push the Dow Jones average lower. The Dow Jones industrial average fell 30.14 points to 7,700.74 Friday, bringing its loss to 52.81 in the holiday-shortened trading week. "If our market was sitting today at 7,000 instead of 7,700, I don't think they would care about what's going on in Washington. I think we are extremely vulnerable to a 500-point drop if we get the wrong news coming out of Washington," Froehlich added. A turn for the worse in Clinton's situation could force a downside correction in a very short time, said Michael Metz, chief investment strategist at CIBC Oppenheimer. "It would compress it into a very short time, particularly as the impact on foreign investors could be very significant, more so than on domestic ones. In the last few months the market has been very dependent on foreign demand, that is the stock and bond markets," Metz said. The stock market is too expensive because the Asian slowdown and strong dollar's effect on this year's corporate earnings have not been factored in properly, Metz said. Traders expect more analysts to cut their profit estimates for companies as the current earnings reporting season draws to a close in mid-February. High-profile companies such as International Business Machines Corp. and Microsoft Corp. have already warned Asia's turmoil will crimp profits this year. Investors also face a slew of economic indicators next week and an update on the economy from Federal Reserve Chairman Alan Greenspan when he testifies before the Senate Budget Committee on Thursday. Clinton will also give his State of the Union address to Congress on Tuesday evening. Next Friday, Greenspan, along with Rubin and Deputy Treasury Secretary Lawrence Summers, will testify before a House Banking Committee on the impact of the Asian turmoil on the United States. So far, the Clinton scandal has served to cap any stock market advance rather than push indexes significantly lower, said Charles Payne of Wall Street Strategies. "If this thing gets any hotter with Clinton, then that has a psychological effect that takes the market down, but it just creates a buying opportunity because it does not change the fundamentals of any company." Payne said. Investors may be in for a bumpy ride until the latest crisis blows over. "I think you will see a lot of volatility because markets don't understand very well what goes on from a political perspective," Froehlich said. The closely watched employment cost indicator for the fourth quarter of 1997 and January consumer confidence index are due Tuesday. Durable goods orders in December are due on Wednesday and the gross domestic product and price index for the fourth quarter are scheduled for Friday. The Nasdaq composite index fell 0.58 of a point Friday but ended the week up 13.05 points at 1,575.93. The Standard & Poor's composite index of 500 stocks fell 5.46 to 957.58, resulting in a loss of 3.93 for the week. The NYSE composite index of all listed common stocks lost 3.11 to 500.68, down 2.99 points for the week.