OT:
Abbey Cohen turning bullish on samll caps.
"Market Monitor"-Abby Joseph Cohen Of Goldman Sachs
PAUL KANGAS: Joining us now from New York City, my guest market monitor thi= s week is Abby
Joseph Cohen, U.S. stock market strategist and chair of Goldm= an Sachs' Investment Policy
Committee. And welcome back, Abby.=20
ABBY JOSEPH COHEN, U.S. INVEST. STRATEGIST, GOLDMAN SACHS: Thank you, Paul.=
=20
KANGAS: Now that about two-thirds of the first quarter corporate earnings r= eports have been
released, do you feel the figures are good enough to suppor= t a stock market well above the Dow
10,000 level?=20
COHEN: Paul, absolutely. And it's not just a function of the first quarter= results, but also the
indications we are getting from companies that this q= uarter is not a fluke. We expect 1999 overall to be
a good year for corpora= te profit growth.=20
KANGAS: So that takes care of my question about second quarter. It will be= even better.=20
COHEN: The second quarter may be a little bit better or a little bit worse.= It's really hard to forecast
with precision those sorts of numbers. What r= eally matters for the stock market is whether profit
growth continues throug= h this year into 2000. Investors pay for what they think will be happening o=
ver the next 12 to 24 months. We think the news from companies will be good.= =20
KANGAS: Abby, does the 60 price rise in U.S. crude oil futures in just the l= ast two months concern
you with regard to inflation and won't it undermine c= orporate earnings somewhere down the line?=20
COHEN: Paul, we were taking a very careful look at this possibility before = it happened. Indeed, we
thought that when oil prices were at very low levels= just a few months ago they were not sustainable at
those levels. And so the= increase that we have seen is something that we think is more in line with =
economic reality, but we don't think it continues. Unlike the 1970's, where= it was one 20 percent
increase after another, we expect oil prices to stabi= lize around these levels.=20
KANGAS: OK. Now, do you feel that the Asian contagion has run its course? = Are those economies
really recovering?=20
COHEN: There are many different independent economies within Asia. The larg= est ones we think
have stabilized. Japan seems to have pulled itself out of = recession. Growth is by no means rapid there,
but at least real GDP doesn't = have a negative sign in front of it anymore. And China, the world's most
pop= ulous nation, has also now avoided recession through a combination of public= works spending
and so on. That is also an economy with positive GDP growth.= And we think that's good news for the
stability of the whole Asian region.= =20
KANGAS: All right. Now back on the home front, do you see the smaller capi= talization stocks
coming out of their bear market anytime soon? And what sec= tors in that small cap arena if any look
attractive?=20
COHEN: Paul, yes, I do think the small cap stocks will perform better going= forward. In fact it began
several weeks ago. The small cap stocks have been= cheap for a long period of time. For the last two
years investors have pref= erred large cap stocks. We've been so worried about Asia, Russia, Brazil
and= so on, that there's been a tendency to focus on large cap and very liquid s= ecurities. Now that
there's less concern about the global economy, investors= are branching out. We think small and
mid-cap stocks will benefit.
KANGAS: All right, now, your last visit with us as a market monitor was Jul= y 17, last summer. The
Dow was at 9337. It's going to go much higher, you sa= id. And a leading market bull at that time.
Your old recommendations like IB= M, Microsoft, Intel, Citicorp at that time, and Travelers which
linked toget= her, and AFLAC (NYSE:AFL) American International Lexmark, all way up. Are you t=
aking some profits finally?=20
COHEN: Paul, no I am not. I think the mistake that some investors make is t= hey cut the flowers and
they water the weeds. This in my view is still an on= going economic and profit expansion. If there are
good companies in your por= tfolio, you should hold on to them.=20
KANGAS: Let the profits run. OK. Any new suggestions at this stage?=20
COHEN: Well we have been looking in the small to mid-cap area and of course = looking for new value
opportunities. A few months ago, we began to look at s= ome energy names and some basic materials
names, ALCOA (NYSE:AA) being one exampl= e. Of course in the small cap area, we see many
opportunities among the fina= ncial services names. One name would be AFLAC (NYSE:AFL) which I
think we've men= tioned.
KANGAS: Still like it, yeah, OK.
COHEN: And then a smaller cap technology stock is Lexmark (NYSE:LXK), the compan= y that makes
printers.=20
KANGAS: You liked that last time. You staying with the winners. =20
COHEN: Yes we are.
KANGAS: All right, so 11,000 no problem for you on the Dow apparently.=20
COHEN: Well, we have not upgraded our forecast at this point Paul. When we = have more information
on the companies, we will do so.=20
KANGAS: All right, thanks very much, Abby. We appreciate your sharing your = ideas and thoughts
with us.=20
COHEN: Thank you.=20
KANGAS: Our guest monitor, Abby Joseph Cohen of Goldman Sachs.=20
Nightly Business Report transcripts are available on-line post-broadcast. T= he program is transcribed
by=20
FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessaril= y represent the views of
Community Television Foundation of South Florida, I= nc. Nightly Business Report, or WPBT.=20
Information presented on Nightly Business Report is not and should not be co= nsidered as investment
advice.
(c)1999 Community Television Foundation of South Florida, Inc.
Keeping Portfolio Perspective During Market Mayhem
PAUL KANGAS: And finally tonight, changing your portfolio to accommodate ma= rket swings is a
losing proposition. So says tonight's commentator, Allan Sl= oan, Wall Street editor of "Newsweek"
magazine.=20
ALLAN SLOAN, COMMENTARY: I'm beginning to think stock market news should ca= rry the same
kind of labels cigarettes have, something like "warning, the ma= terial here may be hazardous to your
wealth." It's not that I have anythin= g against market news. I better not, consider how I make my
living. But all= this obsessing about every twitch in the market bothers me. Do you remember= the hype
over Dow 10,000? Think of the trees we killed and airwaves we clut= tered to chew over this great
event. Now that the Dow has made it above 10,0= 00, has your life changed any? I think not. With the
Dow 10K story over, the= latest obsession is whether you should sell your big cap stocks to buy smal=
l caps. If you're a market pro, maybe you can get this right, but for the re= st of us, changing our
portfolios every time the market twitches is a good w= ay to lose money. Just remember that we news
types have to have something t= o say. To report that the Dow did thus and so yesterday for no reason
would = violate the journalistic law that each effect must have a cause. In fact, th= e Dow may rise or
fall on any given day because of computerized trading prog= rams, or index funds playing with their
portfolios. Random stuff, but we ke= ep finding rational-sounding reasons for it. So please keep my
wealth warnin= g in mind, except of course for the NIGHTLY BUSINESS REPORT, or for anything=
I say or write. I'm Alan Sloan.=20
Nightly Business Report transcripts are available on-line post-broadcast. T= he program is transcribed
by=20
FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessaril= y represent the views of
Community Television Foundation of South Florida, I= nc. Nightly Business Report, or WPBT.=20
Information presented on Nightly Business Report is not and should not be co= nsidered as investment
advice.
(c)1999 Community Television Foundation of South Florida, Inc.
Paul Kangas' Wall Street Wrap Up
PAUL KANGAS: Stocks on Wall Street opened moderately lower today as profit = takers moved in
following a 278- point run-up in the Dow Industrial Average = to record highs in the previous two
trading sessions. Over a 3 point opening= loss in AT&T stock on fears its bid for MediaOne group, if
successful, woul= d dilute earnings, was a major factor in sending the Dow to a 77-point defic= it
shortly before 11:00 a.m. when the NASDAQ Index was off 16 1/4 points. Th= e relatively mild early
sell-off, which saw New York Exchange Breadth just b= arely negative, brought buyers off the sideline
for the rest of the morning,= especially after the NASDAQ market staged an impressive comeback. By
1:00 p= .m. the Industrial Average bounced back with a 1.5 point gain and the NASDAQ= Index was
sporting a 35 2/3 point advance just below its record closing hig= h. Despite another stellar performance
by IBM (NYSE:IBM) stock, the market couldn= 't shake off pre-weekend selling pressures, so the
Dow Industrial Average sl= umped to a closing loss of 37.51 points putting it at 10689.67. The Dow
fell= twice and rose three times this week for an overall net advance of 195.78 p= oints or 1.9 percent.
The NASDAQ Composite today finished with a gain of 29.= 08 points at 2590.69. In its 108-point
trading range, the Composite settled= only 12.5 points below its best level of the day.
=20
Big board volume, way down from yesterday, 741.4 million shares, so much vol= ume earlier in the
week I think that traders were exhausted and about 83 mil= lion more shares of down volume than up
volume. =20
The Dow Transport Index fell about 20 1/4 points.
Utilities down 1.17.
But the Closing Tick slightly bullish at +599.
Standard & Poor's 500 fell nearly 2 points.
A loss of 2.60 in the 100.
MidCap 400 edged up .64.
Bridge Futures Price Index gained exactly 1/4 of a point.
New York Stock Exchange Composite Index down 1 2/3 points.
But the Value Line gained just over 1 point.
While the Russell2000 Small Cap Index was up 2.88. =20
The broadly based Wilshire 5000 down 13.43.
After several days on the downside, bond prices moved higher in a technical = rebound this morning,
but the rally lost its momentum in the absence of any = fundamentally positive news, although an easing
in precious metals and oil f= utures did keep the market on a firm note, resulting in little change in tax=
free and corporate issues while Treasuries managed to show an upward bias.= =20
The 5-year notes edging 1/32 lower.
But then a 1/32 gain in the 10-year note.
Bellwether 30-year bond up 2/32.
And the Lehman Brothers Long-Term Treasury Bond Index was up 2.31.
All right. So the Dow took a little breather today. It wasn't a bad one, dow= n only about 37 1/2 points
and for the week remember, we're up 195 3/4-point= s on the Dow. That's 1.9 percent. The broader
market just barely higher, 15= -to-14 ratio positive. 59 new yearly highs as against 22 new lows.
Topping the active list, AT&T (NYSE:T) on 43.9 million shares, down 3 3/8. That = MediaOne
acquisition could cause some earnings dilution is the fear.
Compaq Computer (NYSE:CPQ) down 9/16.
MediaOne Group (NYSE:UMG) itself up 7 7/8 in reaction to AT&T's bid which as of t= oday is worth
about $81.50 a share cash and stock.
America Online (NYSE:AOL) down 1 11/16.
And IBM (NYSE:IBM) up another 5 1/4. It traded as high as 206 9/16, but even thi= s on the close is a
record high for big blue.
Pepsico (NYSE:PEP) down 11/16.
Lucent Technologies (NYSE:LU) lost 11/16 as well.
Philip Morris (NYSE:MO) gaining 5/8.
And then Kmart (NYSE:KM) down 5/8, very narrow movement here.
Cendant (NYSE:CD) had good earnings out yesterday and was up nearly 2, backed off= 11/16.
FDX Corp. Holdings (NYSE:FDX), the old Federal Express, down 4 1/8, the biggest l= oser in the
Dow Transport Index lending to that 20 1/4 point loss there.
International Paper (NYSE:IP) in that strong forestry products group, up 1 11/16.= It had good
earnings recently.
JP Morgan (NYSE:JPM), the financials a little on the weak side today, down a litt= le over 3 there. =20
Merck (NYSE:MRK) was off 2 1/4, in with first quarter earnings, $0.54, in line wi= th estimates. Sales
were up 24 percent but the stock down apparently on con= cern over some expiring patents on some of
its major drug products.
Mobil (NYSE:MOB) down 7/16. The company in with first quarter earnings, $0.59 an= d that was
about $0.05 above the street estimate. But the stock still on a = little weak side; of course it had been
strong recently.
Monsanto (NYSE:MTC) up 4 1/4 points today, even though it had a 33 percent drop i= n first quarter
earnings reported yesterday. Today, the Sutrow Brokerage i= ssued a "buy" on Monsanto with a
one-year target of $76 a share.
Chock Full O Nuts (NYSE:CHF) the star of the day, look at that gain, 51 percent w= ith 3 1/4 points.
The company received an unsolicited buyout bid for $10.50= a share from Sara Lee (NYSE:SLE). Sara
Lee stock dropped 1/2.
Total Renal Care (NYSE:TRL) up 2 1/8, good percentage gain, but no officers of th= e company
available to talk to us. No news on the wires.
First American Financial (NYSE:FAF) up 3 5/16. Yesterday it had lower first quar= ter earnings,
$0.40, down from $0.79, but that was still $0.04 above the str= eet estimate. And Merrill Lynch last
Monday, upgraded the stock and this we= ek's Barron's Financial had positive comments about the
company.
Big loser, Richfood Holdings (NYSE:RFH). This is a grocery distributor. The com= pany said it lost a
contract with Giant Foods. It won't be renewed and that= 'll cut earnings in fiscal year 2000 by $0.15 to
$0.20 a share.
Unova (NYSE:UNA) was down 2 1/2 points. The company makes industrial computer sy= stems. First
quarter earnings, sharply lower, $0.06 down from $0.14 last ye= ar as higher operating expenses offset
a 48 percent jump in revenues.
And Varco International (NYSE:VRC) which makes oil drilling tools, down 1 5/8. F= irst quarter
earnings $0.18 down from $0.23 due to lower oil prices.
NASDAQ trading, a gain of 29.08 in the Index. For the week it was up 106.65 = points or 4.3 percent.
Trading volume a little over a billion shares, down = a bit from yesterday. 21 stocks higher for every 17
lower. =20
Amazon.com (NASDAQ:AMZN) topped the active list, up 19 1/16. That company will rep= ort
earnings next week.
Microsoft (NASDAQ:MSFT) up 1 1/16.
Cisco System (NASDAQ:CSCO) gained 4 3/16.
And eBay (NASDAQ:EBAY), which will have earnings out next week, up 28 1/8.
Intel Corp. (NASDAQ:INTC) gained 1/4.
Dell Computer (NASDAQ:DELL) up 1 1/8.
ComCast (NASDAQ:CMCSK) moved up 3/16.
Yahoo! (NASDAQ:YHOO) gained 3 11/16.
E*TRADE Group (NASDAQ:EGRP) up 8 1/16.
And 3Com (NASDAQ:COMS), tenth in volume, up 3 1/2.
Net Perceptions (NASDAQ:NETP) went public today. Internet software provider, 3.65 = million
shares, offered at $14. Opened at 34 3/8. High of the day, 35. Th= en it backed off a bit.
Launch Media (NASDAQ:LAUN) up 6 3/8. This is a digital media company focusing on n= ew popular
music on the Internet, 3.5 million shares offered in an IPO at $2= 2. Opened at 32 3/4. High of the day,
36 11/16.
And then Avid Technology (NASDAQ:AVID) down 5 3/16. First quarter earnings sharply= lower
$0.10 versus $0.31 last year. Those earnings were $0.12 below the st= reet estimate.
The American Exchange Index at a record high for the second day running with= that nearly 12 point
gain. For the week, that Index rose 24.95 points, or = 3.3 percent.
Media General (BB:MEGA) up 10 5/8. Of course, after the close last night, as w= e reported, Cox
Communications (NYSE:COX) says it will pay $1.4 billion for the M= edia General cable
operations.=20
And then, Allou Health & Beauty (AMEX:ALU) down 3 9/16. The company sold its con= trolling
interest in its Internet fragrance subsidiary. Even though it was = a money loser, the stock is still down.
Finally our index shares, Diamonds Trust (AMEX:DIA) off 3/8.
NASDAQ 100 (AMEX:QQQ) moved up 1 1/2.
And the Standard & Poor's Depositary Receipts (AMEX:SPY) down 11/32.
And that is our Wall Street Wrap-Up.=20
Nightly Business Report transcripts are available on-line post-broadcast. T= he program is transcribed
by=20
FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessaril= y represent the views of
Community Television Foundation of South Florida, I= nc. Nightly Business Report, or WPBT.=20
Information presented on Nightly Business Report is not and should not be co= nsidered as investment
advice.
(c)1999 Community Television Foundation of South Florida, Inc.
NBR story 8
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