WALL ST WEEK AHEAD-Will small-caps join the rally?
Reuters Story - February 15, 1998 18:00
%US %STX MSFT DELL LRCX V%REUTER P%RTR
By Huw Jones
NEW YORK, Feb 15 (Reuters) - Investors on Wall Street
expect blue chip stocks to keep moving higher after last week's
record-setting rally, but are still waiting for smaller stocks
to join the party.
"The market is going to go higher, and I think we will get
consolidations along the way," said Jonathan Dodd, technical
analyst at Morgan Stanley Dean Witter Discover & Co.
"Generally speaking, the pullbacks you want to use for
buying in the stronger-acting issues," he said.
U.S. financial markets will be closed Monday in observance
of President's Day and will reopen Tuesday.
The Dow Jones industrial average set four straight records
last week, ending up half a point Friday at 8,370.10, capping a
gain of 181 points for the week. Tuesday's jump of 115 points
put the Dow above the prior record of 8,259.31 set Aug. 6.
The Standard & Poor's index of 500 stocks also made new
highs, continuing a run that began the prior week.
"We will continue higher," said Brad Weekes, managing
director of equity trading at Donaldson Lufkin & Jenrette.
While big blue chips are hot, some investors now expect
smaller stocks, as measured by the Nasdaq composite and Russell
2000 indexes, to make their move.
"I think the Nasdaq will catch up," said Howard Silfen,
managing director of Nasdaq trading at Dain Rauscher. "These
things were beaten up pretty good with the Asia crisis, and
since then it's come back substantially," he said.
"The trend is up for the Nasdaq, and the Russell 2000 is
not that far from a new high," said Morgan Stanley's Dodd.
"It's not a concern at this point. Both of these indexes are in
a position to make new highs."
The Nasdaq and Russell 2000 often trail the broader market
because they contain many smaller stocks. Still, some big
Nasdaq issues such as Microsoft Corp and Dell Computer
Corp hit record highs last week.
The Nasdaq composite fell 3.92 points to 1,710.42 Friday,
below its record 1,745.85 set on Oct. 10, 1997. The Russell
2000 index rose 1.89 points to 454.29, still below its record
465.21 set last Oct. 13.
Michael Murphy, editor of California Technology Stock, said
Asia's economic turmoil will hinder the Nasdaq from making new
highs because tech stocks are vulnerable to the region's woes.
"South Korea is clearly the problem, and has smacked some
folks like Lam Research," Murphy said.
Lam Research Corp , a supplier of
semiconductor-making equipment, slashed 700 jobs last week, or
14 percent of its work force, due to falling orders from the
Asian problems.
The broader market is also stalled in a range, Murphy said.
"It's hard for it to go up when it's starting from
overvalued and earnings are slowing, and it's hard for it to go
down when interest rates are falling," he said.
The stock market as a whole faces some consolidation this
week since corporate earnings reports are over for now and it
is too early to start looking for first quarter results,
analysts said.
"There is nothing to stimulate the buying demand other than
the flow of money from the mutual funds," said Alfred Kugel,
senior investment strategist at Stein Roe & Farnham.
The market may get a boost if the Japanese government
unveils an impressive economic stimulus package Friday.
Economic reports this week include industrial production
and capacity use for January, due Tuesday, and January producer
prices and housing starts, due Wednesday.
Producer prices are expected to fall 0.2 percent.
In other markets, the dollar will probably react to the
meeting of the seven leading industrialized nations in London
next weekend.
"They talk a lot and have a photo op, but nothing much
comes of it," Kugel said.
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