January 6, 2002	Sunday	Shawwal 21, 1422

NEW YORK, Jan 5: Expect stocks to climb for the third straight week as investors yank cash out of money market accounts and snap up shares on optimism an economic rebound is around the corner.

The best bets? So-called “cyclical stocks” that benefit from the beginning of an economic uptick, such as shares of industrial and chemical companies and makers of big-ticket consumer items like cars and refrigerators.

We are in a cyclical rally that has more room to go, said Charles Reinhard, senior US investment strategist at Lehman Brothers.

A slew of company announcements that profits will beat forecasts is driving investor optimism. Profit warnings are down sharply from recent quarters, the latest data show.

On the calendar next week: A report on producer prices will help investors gauge whether companies have been able to raise prices, and Alcoa Inc.’s profit report may give a signal of how the battered manufacturing sector is holding up.

Alcoa is the world’s biggest aluminum producer and the first Dow Jones industrial average .DJI>-listed company to report fourth-quarter profits.

For the week, the Standard & Poor’s 500 index rose 0.99 per cent, up for the third straight week.

The Dow average gained 1.2 per cent and the Nasdaq composite index rose 3.6 per cent.

Wall Street will remain on high alert for profit warnings ahead of the official earnings season, which begins mid-January.

So far, the positive tone of profit highlights has lifted investors’ spirits and helped prompt the S&P 500’s three-week rally.

Of the 1,204 early profit announcements so far, 25 per cent have been positive. That’s more than the 16 per cent average clocked during the same time frame of the first three quarters of 2001, according to Thomson Financial/First Call.

At the same time, the pace of warnings has fallen. About 46 per cent of all company preannouncements have been negative, down from 67 per cent in the earlier three quarters.

Investors point to massive cash stockpiles that could send stocks higher. Just look at a liquidity gauge called money at zero maturity, or MZM.

This measures investments that are easily converted into liquid funds, such as savings accounts and money market funds.

Wall Street economists surveyed by Reuters expect prices overall slipped by 0.2 per cent, following a decline of 0.6 per cent in the previous month. Still the core rate, which excludes the volatile food and energy groups, is expected to rise 0.1 per cent, after a gain of 0.2 per cent.—Reuters