Dulane...I cant believe the Buffet thing is taking off...KO short and my many hardware shorts may not be that bad tommorrow...we will see...maybe this is the catalyst to drain some liquidity
Subject:
WALL ST WEEK AHEAD-Oil deal spells stock trouble
Date:
Sun, 22 Mar 1998 15:34:44 -0800 (PST)
From:
staff@quote.com
To:
quotecom-users@quote.com
News Alert from Reuters via Quote.com
Topic: (NYSE:AMR) AMR Corp, (NYSE:DAL) Delta Air Lines Inc DEL, (NYSE:U) US
Airways Group Inc, (NASDAQ:INTC) Intel Corp, (NYSE:CPQ) Compaq Computer Corp,
(NYSE:MOT) Motorola Inc,
Quote.com News Item #5850872
Headline: WALL ST WEEK AHEAD-Oil deal spells stock trouble
======================================================================
By Jennifer Westhoven
NEW YORK, March 22 (Reuters) - An agreement to cut global
oil production should send stocks lower Monday morning, but the
news might not be enough to overcome the roaring bullish
momentum on Wall Street, analysts say.
"This is obviously bad news for the stock market tomorrow
morning," said Hugh Johnson, chief investment officer at First
Albany Corp.
In Riyadh on Sunday, Saudi Arabia, Venezuela and Mexico
said an agreement was reached between OPEC and some non-OPEC
members to remove up to two million barrels per day (bpd) or
2.7 percent of supply from a glutted world oil market.
The deal is expected to send oil prices soaring to $16 a
barrel and possibly higher when they open for trading on the
New York Mercantile Exchange's (NYMEX) out-of-hours ACCESS
system at 1900 EST/2400 GMT. Bellwether oil futures for May
delivery on the NYMEX closed Friday at $14.61.
The deal will certainly rap transportation stocks,
especially airlines, but energy stocks should jump.
"There's no question this is a negative for transports,"
said Peter Canelo, U.S. equity strategist for Morgan Stanley
Dean Witter. "Some of the industrial companies like utilities
and basic industries may also not be terribly happy."
Falling oil prices, which have declined 45 percent since
October 1997, have been one of the main reasons behind the jump
in transports and airlines, analysts say.
The Dow Jones Transportation Average touched new highs last
week, setting a closing high record of 3652.7 on March 17,
given a strong leg-up by gains in airline stocks.
American Airlines' parent AMR Corp. (NYSE:AMR), Delta Air
Lines Inc (NYSE:DAL) and US Airways Group (NYSE:U) are all trading
near historic highs, although the stocks closed lower Friday
amid rumors of a possible OPEC cutback.
Michael Metz, chief investment strategist for CIBC
Oppenheimer & Co., said the oil pact was only a modest,
short-term negative for the stock market.
"The price of oil would still be within reason, and it is
only one commodity among many," so it should not cause a spike
higher in inflation, he said.
In fact, the deal removes the threat that the countries hit
hardest by lower oil prices, such as Russia, Venezuela and
Saudi Arabia, could suffer a Southeast Asia-like recession.
"It really could be positive from a macro-economic viewpoint
because that could have been a snowball on top of Southeast
Asia. This removes that danger," Metz said.
Whether the deal is just a stumbling block or a brick wall
in the path of the Dow on its way to 9,000 is still unclear,
analysts said. The momentum of Wall Street's latest buying
spree may outweigh the negative news on the oil front.
The Dow Jones industrial average topped off the week by
jumping 103.38 points Friday to 8,906.43, crossing 8,900 for
the first time and setting its fifth straight record. For the
week it rose 303.91.
Portfolio "window-dressing" could help stocks this week as
money managers who have underperformed the benchmark Standard &
Poor's 500 Index rush to put cash into stocks before the end of
the quarter, some said.
But if the market turned more bearish because of the oil
news, it might react more swiftly to profit warnings or any
hints of inflation, analysts said. No major economic data are
due out next week.
Thom Brown, managing director of Rutherford Brown and
Catherwood, said the market has gotten overbought because it
has been ignoring a "wishy-washy" earnings outlook.
The stock market has shrugged off a slew of corporate
profit warnings from heavyweights including Intel Corp.
(NASDAQ:INTC), Compaq Computer Corp (NYSE:CPQ) and Motorola Inc
(NYSE:MOT). The pace could pick up as the quarter winds down.
For the quarter, the nation's largest companies are
expected to report average earnings increases of 1.7 percent
from last year, down sharply from the 10.4 percent growth
analysts were forecasting at the start of 1998, according to
companies that track Wall Street profit forecasts.
It would be the slowest growth since the 1991 fourth
quarter, when profits for S&P500 companies were flat.
"The market has so much momentum behind it, it is going to
be tough to see any meaningful sell-off until the enormous
amount of domestic and foreign money stops pouring into it,"
Brown said.
At least one analyst, Johnson, said the OPEC deal might be
just the thing to slow down the inflows.
"It's always an outside event that sparks a correction, and
maybe this is it," he said.
The Nasdaq composite index rose 17.5 points to 1,789.16 for
the week. The Standard & Poor's composite index of 500 stocks
rose 30.57 to 1,099.16. |
