Next week: More uncertainty: Experts say impeachment threat, earnings, will weigh global investors down
September 11, 1998: 6:20 p.m. ET
Coping with market loss - Sept. 10, 1998 Dow dive: Advice to investors
NEW YORK (CNNfn) - Volatility and uncertainty will continue to reign on Wall Street next week, as jittery investors devour details of President Clinton's sex scandal on the Internet amid a looming impeachment threat. Still reeling from a nasty correction that sent U.S. stocks spiraling in August, investors will also be paying close attention to troubling events roiling Russia, Asia and the emerging markets. Making matters more complicated, the market will get buffeted by earnings warnings in the days ahead. Dow component Walt Disney Co. (DIS) announced on Friday, after the market's close, that its earnings would fall as much as six cents below expectations for the fourth quarter.
"We go into next week with continued uncertainty and wall-to-wall worries," said Alan Ackerman, senior vice president and market strategist at Fahnstock & Co. in New York. "The month of August was full of negative surprises, and September seems to be headed in that direction." What a week on Wall Street. The Dow Jones industrial average rose 380.53 points on Tuesday, only to fall 155.76 points Wednesday. On Thursday, investors again went running for cover, sending the Dow down 249.48 points. Friday, as the world seemed mesmerized by details in Independent Special Kenneth Starr's report to Congress posted on the Internet, the Dow closed up 179.96, or 2.36 percent, at 7,795.50. "While the president may be in trouble, the U.S. economy does not appear to be in trouble as of now," Ackerman said. "We have a positive economic backdrop, with low inflation, low interest rates . On balance, the American economy, while slowing down, continues to be strong."
On the horizon
Meanwhile, the Group of Seven leading industrialized nations are eeting Monday in London, and some analysts think the countries are considering easing interest rates to help emerging markets. On Wednesday, U.S. Federal Research Chairman Alan Greenspan and Treasury Secretary Robert Rubin will testify on the state of the global economy before the House Banking Committee. The Fed is releasing its "Beige Book," a primer on current economic conditions, on the same day. The U.S. Labor Department on Thursday issues the closely-followed Consumer Price Index for August and weekly jobless claims. And in Japan, the country's banking woes will unfold within the next four weeks or so, said Lou Ehrenkrantz, president of the Brokerage Ehrenkrantz King Nussbaum Inc. If Japanese banks fail, they'll likely sell U.S. Treasurys and U.S. stocks, which could trigger another sell off on Wall Street, he said. "Japan is a serious situation, more so than Russia and emerging markets," Ehrenkrantz said. The election of Prime Minister Yevgeny Primakov in Russia and nagging instability with the ruble is less of a factor moving the U.S. market, Ehrenkrantz said. "Russia hasn't had a stable economic environment since 1903," Ehrenkrantz said. "Nothing has changed there."
More volatility on the way?
Al Goldman, chief market strategist at A.G. Edwards in St. Louis, Mo., thinks the volatility is here to stay. He said institutional investors and arbitrageurs will continue to move the market, comparing them to "The possessed kid in 'The Exorcist,' whose head spins around." "It's going to be back and forth, and we better fasten our seat belts," Goldman said. Investors will look for shelter in big-name, large capitalization companies in the pharmaceutical, retail, and energy sector, Goldman said. "When you've had a real shock to your system, you're not going to be aggressive in your investing," Goldman said. Richard Bernstein, chief quantitative strategist at Merrill Lynch, said investors should steer clear of any securities remotely connected to the commodities market in light of the latest producer prices reported Friday that show a steep decline in August. He'd avoid semiconductors, and chemical and paper companies. "If you're in the equity market, you want to focus on the largest cap, highest quality companies," Bernstein said.
Politics and Wall Street
Analysts seemed to disagree on the impact of the Clinton imbroglio, however. Kirk Barneby, a portfolio manager at PaineWebber, thinks politics will cause only short-term waves in the market. (412K WAV) or (412K AIFF) "Political events can impact the market.but the events are likely to be transitory," Barneby said. The effects will be long-lasting only if they influence interest rates and corporate earnings, the true movers of the market, he said. By contrast, Peter Canelo, U.S. Investment Strategist at Morgan Stanley Dean Witter, thinks Clinton's troubles will trigger volatility through the November elections. "People are worried about the economy," Canelo said. "This Clinton thing is not going to go away. It's just starting. The probability of his resignation is 50-50 now." -- by staff writer Martine Costello
cnnfn.com
Sounds pretty awful. Buy on weakness.
InvestRight
Regards, Jeff
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