Posted on 09/09/2001 5:31:10 PM PDT by Davea
Sunday September 9 11:53 AM ET
More Data, More Falling Stocks Loom
By Haitham Haddadin
NEW YORK (Reuters) - Don't expect the clouds over Wall Street to lift this week, when stocks are likely to slide further from the almost three-year lows that the broad Standard & Poor's 500 index hit at the end of Friday's session.
The Street will pick apart a slew of economic reports for clues on when the world's largest economy might start springing back from its sluggishness, with focus on the government's report on Friday on August producer prices.
Also expected on Friday are: August retail sales, industrial production and capacity utilization, and consumer sentiment.
The numbers will take on more importance after a grim employment report last Friday put the U.S. jobless rate at a four-year high, prompting a steep sell-off in stocks.
``This week can be a climactic week for the market, in terms of the indexes breaking down substantially, and pessimism building as it did in late March and early April,'' said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
Investors will also stay on guard for the next corporate earnings bombshell, as the so-called ``pre-announcement'' season heats up this week, before going into high gear next week.
``The market is going to have to deal with companies continuing to talk down earnings for the rest of the year,'' said Henry Herrmann, chief investment officer of Kansas-based Waddell & Reed, which manages about $32 billion.
``It's going to continue to be a struggle.''
KEY DATA: RETAIL SALES, PPI, CONSUMER SENTIMENT
The mood darkened on Wall Street when stocks tumbled on Friday, capping a dismal week, after the jump in the jobless rate blindsided investors already reeling from a steady diet of poor corporate earnings. The Labor Department said the unemployment rate rose to 4.9 percent in August from 4.5 percent in July as companies slashed 113,000 workers from their payrolls.
The anxiety over the jump in the jobless rate will carry over to this Friday, when August retail sales figures and the Producer Price Index are due before the market's open.
The retail sales report will indicate whether American consumers -- whose spending accounts for two-thirds of the U.S. economy -- continue to keep their wallets open.
With those wallets fattened recently by tax-rebate checks, pundits say people may have kept on spending last month. Economists polled by Reuters expect a rise of 0.3 percent in August sales from a flat reading for the previous month.
The Producer Price Index, a measure of wholesale inflation, is expected to have risen 0.2 percent in August from July, while the core PPI, which excludes volatile food and energy prices, is forecast at up 0.1 percent, according to economists polled by Reuters.
Investors will closely watch consumer confidence, to see if it has been dented by all the doom and gloom of layoffs.
The University of Michigan will issue its reading on August consumer sentiment on Friday morning, after stock trading has been under way for about a half hour. Economists expect that gauge to fall to 90.8 from 91.50.
``The sentiment number has the possibility of being upsetting to the market, if it were to be weak,'' Herrmann said.
``Everybody, even the Federal Reserve, is very concerned how the consumer is going to be doing,'' he said. ``Everybody has got their fingers crossed,'' hoping ``the consumer holds up. If this sentiment indicator shows there's deterioration in the outlook, they will be worried that the consumer is going to weaken.''
August industrial production and capacity utilization will be reported Friday before the regular trading session starts.
FEAR RULES THE STREET
Fear ran rampant down Wall Street last Friday, when the S&P 500 sank 20.62 points, or 1.86 percent, to finish at 1,085.78 -- its lowest close in almost three years. The S&P 500's previous closing low for 2001 was 1,117.58, set on March 22.
The blue-chip Dow Jones industrial average (^DJI - news) sank 234.99 points, or 2.39 percent, to 9,605.85. The tech-laden Nasdaq Composite Index fell 17.94 points, or 1.05 percent, to 1,687.70, within sight of its 2-1/2-year low of 1,638.80 set on April 4. The Dow also stands close to its March 22 closing low of 9,389.48.
``The great fear is that we will break those earlier lows,'' said Michael Farr, president of Farr, Miller & Washington, which manages about $375 million. ``The trend is negative and doesn't bode well for a bounce. Yet I think this market has been unpredictable enough to know that we have reason to be hopeful. But certainly we need to be prepared for the worst.''
Companies in the S&P 500 index are expected to report earnings fell 14.3 percent in the third quarter from a year ago, according to market tracker Thomson Financial/First Call.
Last week wireless technology giant Motorola Inc. warned of yet another sales shortfall and 2,000 more job cuts, while Intel Corp., the world's top computer chip maker, said its third-quarter revenues will be at the lower end of a range it set in July. Intel cited slower PC sales.
``Investors are waking up to the fact that without profits, (stock) valuations look very high,'' said Tony Rosenthal, portfolio manager with TimesSquare Capital Management, which oversees about $2 billion in assets.
``Investors have lost a lot of money this year and they are scared. There's fear and greed in these markets and they are dominated by a lot of fear right now,'' Rosenthal said, adding investors are waiting for something more concrete than announcements that things are not getting much worse.
The market indexes likely will test the spring lows as the path of least resistance stays on the downside, he said.
But he added some stocks are coming into very attractive territory.
Others went a step further, saying the recent battering could prompt a rally in the near term.
``I think we are actually getting fairly close to a pretty significant interim rally, one that may last for a couple of months,'' James Oberweis, portfolio manager of Oberweis Asset Management, said. ``That could be within one or two weeks''.
Yet stocks' valuations in general are still high and could leave the upside limited somewhat, Oberweis said.
``I don't think we're going to start a new bull market until earnings begin to look significantly better than they are right now,'' he said. -----
There is a financial "bubble" in there from about 1997 to mid 2000. Those were Clinton-dollars in the Clinton-economy. They are all gone now. Time to get back to work.
DAILY MAIL
September 10, 2001
SMALL investors were warned yesterday that they are facing five years of shrinking savings.
Plunging stock markets will hit many millions of people through pension schemes, endowments and savings accounts.
City analysts said the 'glory days' of savers cashing in on a buoyant stock market are over.
Share prices in both London and New York recorded sharp falls last week and there are fears that more bad news is on the way. Worries about the world economy are likely to send the FTSE-100 index of the most important companies in the UK as low as 4,500 - a far cry from its high of nearly 7,000 in 1999 and well down on its 5,070 value on Friday.
Investment guru Tony Dye warned yesterday that shares may not keep pace with inflation for the next five years.
'We think we're in for a pretty tough time for a long period,' said Mr Dye, the former chief investment officer of top fund manager Phillips and Drew. 'Investors should put on their tin hats.'
Mr Dye, who left Phillips and Drew after he refused to buy into the boom in technology shares and now runs his own fund management group, described recent runaway investment returns as 'the most excessive financial bubble in history'.
His stark prediction will dismay millions of people who have put their money into the City and could see much of it wiped out.
Over half the wealth owned by UK households is directly or indirectly in stocks and shares, including millions of pension schemes, endowments, life assurances, PEPs and Individual Savings Accounts.
Collapsing share prices have already slashed the total by GBP 300billion in the last 12 months - equivalent to GBP 5,000 for every man, woman and child in the country.
Some holders of endowment mortgages have been warned that their investment may not cover their home loan, while many pension schemes are facing cash shortfalls.
The latest predictions will raise fears that Britain is set for a full-blown recession. Plunging investment returns would hit consumer confidence and put an end to booming High Street sales.
The collapse comes after years of soaring share prices, with booming economies around the world largely driven by hi-tech companies.
Between the beginning of 1997 and the end of 1999, UK shares rose a staggering 70 per cent - or almost 3,000 FTSE points.
Some investors gained as much as 20 per cent a year more than inflation and the continued rises tempted many newcomers into the stock market.
Some 12million people now have pensions heavily linked to stocks and shares, and millions more have savings tied to shares in schemes such as PEPs, unit trusts and ISAs. Many are 'tracker' funds directly following stock market movements.
There are also six million households relying on endowments to pay off their mortgages. Almost all are likely to be badly hit by falling share prices.
The FTSE 100 index reached an all-time high of 6,930.2 in December 1999, but has fallen back as the technology bubble burst.
On Friday it plummeted 134 points, or 2.6 per cent, to 5,070.3 - more than 270 points down on the week and the lowest for three years.
Analysts believe it will carry on down through the 5,000 mark this week.
Today's trading is expected to reflect the dramatic falls on Wall Street on Friday, after the UK market closed.
The Dow Jones shed 235 points to close at 9,606 following disappointment at a sharp rise in the U.S. unemployment rate.
Wall Street is expected to fall further this week as investors anticipate more bad news. On Friday, figures will be released on the state of U.S. retail sales, consumer confidence and industrial production.
Experts fear the U.S. gloom will spread to the UK, where investors' resolve will also be tested by a stream of economic data, including unemployment figures for August.
The global slowdown has already sent UK manufacturing into recession and technology companies have struggled to cope.
Other sectors are also in trouble and banks are suffering heavily because of worries that they could be saddled with bad debts.
Jeremy Batstone, head of research at NatWest Stockbrokers, said: 'This is a terrible environment for the long-term investor. It is hard to see how shares will recover.'
I'm with Larry Kudlow, though. Greenspan should be packaged off for an early retirement, and Treasury Secretary Paul O'Neill should go back to playing right field for the New York Yankees.
http://finance.yahoo.com/m2
No, it's a terrible environment for the short-term investor who bought into the marklet in 1999 or 2000 hoping to get rich quickly. Anyone who is a serious long-term investor probably isn't terribly concerned, since the question for them isn't what the stock market will do for the next five years but what it will do for the next 30 years.
Isn't that amazing? Talk about efficiency! Over-valued? No problem. The market will cut it down to size in no time flat! Indeed, all indices are approaching their longer-term (more reasonable growth) trendlines. Although, I am a bit concerned with the Naz as I have found THREE distinct (possible) long-term trendlines that it could correct to ... one of them being significantly below where the Naz currently is.
Not really. With an exit strategy (which most people didn't have), substantial gains in the short term (6-12 months) is actually pretty easy during a bull market. I know many people who did quite well during the tech boom. Don't knock other investment approaches just because you happen to favor another approach.
I wasn't criticizing the strategy (though I know someone who borrowed money to invest in the NASDAQ when it was at 5000 and told him he was a damned fool), but pointing out the results. I simply fail to see how this is a "terrible" market for long-term investors.
Nikkei marks new 17-yr closing low; banks tumble
TOKYO, Sept 10 (Reuters) - Tokyo stocks stumbled to a fresh 17-year closing low on Monday as earnings woes spread from the high-tech sector into traditional manufacturers due to the economy's prolonged slump.
Also weighing on the market were Asahi Bank Ltd and Daiwa Bank Ltd , which lost heavily because investors were unconvinced about benefits of a potential merger between the two lenders.
``Non-tech issues are overtaking high techs to lead the Tokyo market lower, making Tokyo's slide broad-based,'' said Masatoshi Sato, senior strategist at Mizuho Investors Securities.
``Sentiment is getting worse, although this may be an unavoidable phase for this market to go through before hitting a firm floor.''
The benchmark Nikkei average ended down 321.10 points or 3.05 percent at 10,195.69, a level not seen since August 1984. The capital-weighted TOPIX index (^TOPX - news) fell 24.85 points or 2.30 percent to 1,055.98.
Asahi Bank lost 19.25 percent to 130 yen and Daiwa Bank shed 13.58 percent to 140 yen.
On Friday, Asahi asked Osaka-based Daiwa Bank to consider a merger under a holding company structure, but traders said a lack of clarity on the issue had deterred interest.
``For Asahi, this looks like a step in the right direction, but details are sparse and we're still not sure Daiwa would agree,'' said Tatsuyuki Kawasaki, director of equities at Kaneyama Securities.
Major steelmakers fell sharply after slashing their earnings forecast on Friday.
Japan's second-largest steelmaker, NKK Corp , tumbled 7.14 percent to 91 yen after the company revised its group net forecast for the year to next March to a loss of 15 billion yen from a five billion yen profit.
``It seems that Tokyo stocks have fallen to low enough levels. But this downward momentum may not cease until we see the Nikkei dipping below the 10,000 threshold,'' said Shuji Terao, senior portfolio manager at Mitsui Marine Asset Management.
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