NEW YORK, Dec 28: US stock markets will mark their second year of consecutive losses at the close of 2001, battered by the economic slowdown and the September 11, attacks on the Pentagon and the World Trade Center, just blocks from Wall Street.

However, investors are already betting on a rebound in 2002.

Market strategists are more cautious in making projections for the coming year and are nervous about the rise of investor optimism during recent months, because they believe it premature.

Specialists at the famed Morgan Stanley bank count on a return to modest earnings growth among businesses as the US economy recovers from a slowdown that began in March.

Consumer spending, which has been strong despite the bad news and the rise in unemployment, as well as the aggressive interest rate cuts by the Federal Reserve to their lowest levels in 40 years, to 1.75 per cent, bodes well for a jump start for the new year.

From December 2000 to December 26, 2001, the Dow Jones Industrial Average of 30 leading Wall Street stocks fell 6.5 percent or 698.71 points to 10,088.14 points. It lost 6.2 per cent of its value in 2000.

Harder hit by the crisis that shook the technology, media and telecommunication sectors was the Nasdaq composite index, which lost 20.6 per cent of its value, falling 509.82 points to 1,960.70. In 2000, it lost nearly 40 per cent of its value.

The Standard and Poor’s 500, which is a larger sample of businesses, dropped 170.91 or 12.9 per cent, to 1,149.37 points, after a fall of 10.1 per cent the previous year.

We expect the year 2002 to be defined as the year of the turnaround, wrote Brian Belski, chief strategist of US Bancorp Piper Jaffray.

He had equally strong expectations for the principal indices, putting the Dow at 11,500 in 2002, the Nasdaq at 2,600 and the S and P 500 at 1,300.

Goldman Sachs analyst Abby Joseph Cohen looks forward to a 10 per cent earnings growth. She foresees the Dow ending 2002 between 11,300 and 12,400 points and the S and P 500 between 1,300 and 1,425 points.

The September 11 attacks that left around 3,000 people dead and missing, and destroyed the World Trade Center, a stone’s throw from Wall Street, prompted investors to sell their holdings en masse and drove the indices to their lowest level of the year.

Ten days after the attacks and after four sessions of free fall, the Dow closed at just 8,235.81 points, the Nasdaq at 1,423.19 points and the S and P 500 at 965.80 points.

But thanks to their belief that the recession will be brief, investors recovered their appetite for stocks and the three indices rebounded by 22.5, 37.8 and 19 per cent, respectively.

A rapid rise is worrisome to specialists who find the price per share already too high in relation to the expected earnings of US businesses.

By most traditional value measures the stock market is approaching nosebleed levels, said an analyst at Morgan Stanley.

Given current valuation levels, equities could have a tougher time in the near term, said Bruce Steinberg, chief economist at Merrill Lynch. But earnings momentum should start to build by the second quarter.—AFP