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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: RTev who wrote (20287)	4/11/1999 4:08:00 PM
From: taxman	Read Replies (1) \| Respond to of 74651

Big Companies Will Still Lead: U.S. Stocks Outlook (Repeat) (Repeats story from April 9, updates market close.) New York, April 11 (Bloomberg) -- Big companies have led the market higher for almost five years. Professional investors see no end to the trend. Money manager Cambridge Financial Group Inc. has been buying stocks such as Dell Computer Corp. (up 157 percent in the past year), Lucent Technologies Inc. (up 82 percent) and, among others, EMC Corp. (up 268 percent). ''We buy high and sell higher,'' said President Buck Newsome, whose firm oversees $350 million. ''These trends will continue for quite a while.'' Gains in big stocks such as Citigroup Inc. helped the Dow Jones Industrial Average add 341 points, or 3.5 percent, last week. The Standard & Poor's 500 Index gained 4.2 percent and Nasdaq Composite Index jumped 4 percent, their best performance since the week ended Jan. 29. The largest companies have been among the most profitable of late. They're also the most ''liquid,'' meaning investors can easily trade in and out of them without disrupting the prices. Everything seems to be going right for stocks. Interest rates, already near historic lows, have been falling. Profits for Standard & Poor's 500 Index companies are projected to grow a respectable 6 percent in the first quarter. And the news keeps getting better. Earlier in the week, the European Central Bank lowered its benchmark interest rate one- half percentage point. The cut was larger than expected. The Dow rallied 112 points amid expectations that the cuts would help revive slowing European economies and revive Asia and Latin America, much of which is in recession. ''It sets the stage for greater growth going forward, and that's important,'' said Robert Morris, director of equity investment at Lord Abbett & Co., which oversees $30 billion. ''The environment is still very positive.'' Profits About three dozen companies have announced earnings for 1999's first quarter. Many more report this week, including semiconductor maker Intel Corp., newspaper publisher Gannett Co., International Paper Co. and AlliedSignal Inc. One ominous sign: Compaq Computer Corp. said after the close of trading its first-quarter profit will be about half what analyst forecast because of falling prices and weak demand. The warning knocked down Compaq and Dell in after-hours trading. If the analysts are right and S&P companies report a 6 percent increase in earnings, that would exceed the year-earlier quarter's 3.8 percent rise. S&P 500 profits for all of 1998 climbed just 3.7 percent, according to First Call Corp. Stocks may seem quite expensive, with the Dow average well above 10,000 and the Nasdaq up 18 percent year to date. Yet with the average New York Stock Exchange and Nasdaq Composite stock down by about a third from its high, professional investors are finding bargains. ''Reasonably priced stocks are easier to find,'' said Robert Bissell, chief investment officer at Wells Capital Management in Los Angeles, which oversees $45 billion. More Bullish Wells Capital recently raised its official stance on stocks to ''positive'' from ''neutral.'' Accounts that hold stocks and bonds now keep 70 percent of their assets in stocks, up from 65 percent two weeks ago. The benchmark Russell 2000 Index of small and mid-size companies is off 15 percent in the past year. Morris of Lord Abbett said there's no immediate ''catalyst'' to boost the group, which has lagged larger stocks for the past few years. He added, though, that if the European rate cut succeeds in boosting growth worldwide, small and mid-size companies may get a lift. Meanwhile, investors are finding opportunities within the small-stock group. Lord Abbett recently bought shares in Orbital Sciences Corp., which makes launch vehicles and other space-related products (off 37 percent this year) and Plantronics Inc., which makes communication headset devices (down 27 percent in 1999). Kosovo Virtually all investors and analysts agree stocks, particularly those that have led the market higher, are fraught with risk. The latest fear, as yet unrealized, is that NATO air strikes in Yugoslavia will undermine the confidence of U.S. investors. ''Historically, military conflicts have caused at least a temporary downturn because they increase uncertainty,'' Morgan Stanley Dean Witter & Co. investment strategist Byron Wien wrote to clients. He said while money managers don't expect an extended Vietnam-like war, ''Kosovo is turning into a quagmire much faster than Vietnam did.'' From 1968 through 1974, the Dow lost about a third of its value. At the time inflation was the market's worst enemy. Today prices are stable. But Wien points out that the war ''played a role in the difficult markets.'' ©1999 Bloomberg L.P. All rights reserved. Terms of Service, Privacy Policy and Trademarks.