NEW YORK, Dec 22: Stocks are poised to wrap up next week on a bright note as investors do a bit of last-minute shopping to spruce up their portfolios ahead of the new year.
It should be an up week, because the fundamentals remain positive in this marketplace, said Milton Ezrati, senior economic strategist at Lord Abbett & Co., which oversees more than $40 billion.
Portfolio managers also try to make themselves look good for quarterly reports by buying names that will make their clients smile.
Volume promises to be on the light side with thinly staffed trading floors during the holiday-shortened week. The stock market shuts early Monday at 1800 GMT and is closed Tuesday for Christmas.
Many traders will opt to take a few extra days off next week — the last trading week of 2001 — to spend time with family after a tumultuous year for the market and the nation.
The stock market has taken flight late in the year, propelling the broad Standard & Poor’s 500 index up more than 18 per cent since the market slammed to three-year lows on Sept. 21 in the wake of the attacks on the United States. Investors are betting the economy, mired in recession since March, will pick up momentum by the middle of next year.
I have come to the conclusion that the bear market is over, but I don’t think we are on the cusp of a major bull market yet, said Stanley Nabi, managing director at Credit Suisse Asset Management, which manages more than $100 billion in North America. There are too many stumbling blocks over the next few months for the market to make a run on the way up.
Indeed, corporate earnings may suffer their worst drop of the year in the fourth quarter. S&P 500 companies posted a 21.6 per cent tumble in profits for the third quarter, marking the biggest drop in earnings since the last recession of 1991, according to Thomson Financial/ First Call. Analysts are forecasting a 20.7 per cent drop in earnings in the fourth quarter. But the research firm believes that number could widen to 22 per cent.
Corporate earnings dropped four straight quarters in 1991, but they threaten to fall five straight quarters in the latest recession.
Analysts are forecasting a 6.1 per cent fall in the first quarter, and those estimates could widen to a 15 per cent to 16 per cent fall, according to First Call.
I think the market is anticipating a few more profit warnings, but what has happened with very few exceptions is if the profit warnings are not extreme, then the market has been ignoring them, Nabi said.
Economists and policy-makers closely monitor consumer confidence because it can give hints about future consumer spending, which accounts for about two-thirds of US economic activity.—Reuters
