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To: Alan Hume who wrote (3706)	6/15/1998 3:42:00 AM
From: LK2	Read Replies (1) \| Respond to of 9256

*OFF TOPIC* I don't know if we are going to have a summer rally. But one thing is for sure: the Asian stock markets are still getting crunched. South Korea is currently down almost 5 %, at 288. quote.yahoo.com It's really scary. All the gains the South Korean market made since Jan 1987 have been wiped out. The article below says the US market could ignore or even benefit from Asian market problems. But I wouldn't place much reliance on this type of article. If the market goes up, there will be experts claiming credit for their market forecast. If the market goes down, there will be experts claiming credit for their forecast. And if the market disappears altogether, there will be experts claiming credit for that, as well. dailynews.yahoo.com Sunday June 14 7:34 AM EDT Wall Street wonders about summer rally By Pierre Belec NEW YORK (Reuters) - The Wall Street summer forecast: rising stocks that will weather the Asian storm clouds. Investors are turning their thoughts to the prospect of a summer rally, something that has reappeared with unusual regularity since 1964. The experts say the odds are good that the rally will be explosive rather than a disappointing wet firecracker, thanks to the Asians and a strong U.S. economy. They are betting that as much as the Asians hate their own disintegrating stock markets, that's how much they love the rock-solid U.S. stocks. The worse the situation gets in the Pacific Rim, the more attractive the United States will be to global investors looking for shelter. The Asians have two other choices -- stuff their money in bank accounts or mattresses. Other factors are expected to boost stocks on Wall Street. The Asian mess will discourage the Federal Reserve from raising short-term interest rates, thereby offsetting some of the drag on U.S. corporate earnings from shrinking sales in the Pac Rim. The latest flare-up in Asia was on the minds of investors this week, as they pushed the 30-year Treasury bond to the lowest level in 30 years at 5.65 percent. Even Fed Chairman Alan Greenspan was exuberant about the economy, describing it as the best he has seen in 50 years. There are few signs that the good times will end soon. The buoyant economy will again work its magic on the stock market, Peter Canelo, U.S. equity strategist at Morgan Stanley Dean Witter, said. "The economy is doing great," he said. "The Federal Reserve is out of the interest-rate-raising picture and this all sounds like a good environment for the stock market. He said personal consumption is growing while capital spending and residential construction are rising, painting a positive picture for an economy that is consumer-driven. Sales of new homes surged to a record high in April as low interest rates and rising incomes stoked demand in the sizzling housing market. Canelo said the housing boom will give new legs to this aging economic boom. "The housing demand will make for a stronger economy," he said. "Under the normal cyclical pattern that follows large drops in interest rates, people who buy houses eventually go out to acquire washing machines, furniture ... and we'll again see this year that consumers are still alive and well." Investors are also looking beyond the earnings valley and they expect corporate earnings to improve later in the year. Analysts forecast an increase of 4.9 percent in second- quarter earnings, which is up slightly from a first-quarter gain of 4 percent. But their estimates are brighter for the second half, with earnings expected to jump 13 percent in the third quarter and 18 percent in the fourth quarter. Some experts believe the stock market will first have to overcome anxieties over eroding earnings before launching into a summer rally. "Since (corporate earnings warnings) began early, maybe the disappointments will end sooner than they have in recent quarters," said Greg Smith, chief investment strategist for Prudential Securities. How much stock should investors put in a summer rally? To some people, it's just another Wall Street theory, that includes the Hemline Market Indicator, which says that when short skirts are in vogue, the stock market will be bullish, while long-length skirts bring bear markets. According to the Stock Traders' Almanac, the summer rally -- defined as from the lowest close in May or June to the highest finish in July, August or September -- has averaged 9.4 percent over the past 33 years. The summer of 1997 brought one of the more spectacular gains for stocks. The Dow set an early low watermark of 7,085 on May 7, and then zoomed to a high of 8,259 on Sept. 6, a gain of 16 percent. While the economy is benefiting from a strong dollar, the experts said there will be a downside to a high-flying currency, which will cut into the earnings of U.S. multinational companies. For the week, the Dow Jones industrial average was off 202.77 points at 8,834.94, and the Nasdaq composite index lost 37.87 to 1,745.05. The Standard & Poor's 500 index was off 15.02 at 1,098.84 and the NYSE composite index was off 8.70 at 566.67 for the week. The American Stock Exchange index was off 15.72 at 697.40. Copyright c 1998 Reuters Limited.