Wall Street fears recent declines are just a warm-up

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Sunday, April 08, 2001, 12:00 a.m. Pacific

Wall Street fears recent declines are just a warm-up

by Amy Baldwin The Associated Press NEW YORK - One of the greatest fears on Wall Street is that the past few weeks of earnings warnings and triple-digit declines have just been a rehearsal - and that the market is likely to endure more turmoil this month when companies actually issue their first-quarter reports.

The numbers that will trickle in during the coming weeks are expected to be the weakest year-over-year quarterly results in about a decade. And while investors might think they're prepared for the worst, analysts expect Wall Street to react negatively.

"There is a time when the nervous selling has been done, and when there is a scintilla of improvement ahead and when bad news tends to roll off. But we're not there yet," said A.C. Moore, chief investment officer for Dunvegan Associates in Santa Barbara, Calif.

A big question is what constitutes good or bad news?

If companies can simply meet lowered expectations, investors might consider that positive news, analysts say. It's less clear whether investors will drive prices higher based on such reports, and, if they do, whether those gains can last.

"Six months ago, if you just said you were going to meet expectations, your stock would have been trashed," said Ronald Hill, investment strategist at Brown Brothers Harriman & Co. "Now meeting expectations is the best anyone can hope for. ... Just making numbers is probably going to be viewed as good news."

This past week, Dell Computer proved that just standing by weaker estimates can be enough to propel stocks higher.

Desperate for good news, investors sent the Dow soaring 402 points Thursday after Dell said it still expects to earn 17 cents a share on $8 billion in revenue. And the Nasdaq had its third-biggest one-day percentage gain.

Wall Street was so hungry that investors ignored Dell's note of caution that there's a month left in its first quarter and that it cannot offer earnings projections for the remainder of the year.

"The market was looking for some reason to bounce," said Charles White, portfolio manager for Avatar Associates, who called Thursday's run-up a bear-market rally.

The boost from Dell was enough to erase Tuesday's earnings-related sell-off, in which the Dow fell nearly 300 points on warnings from Ariba and Broadvision, two smaller tech companies.

Friday's trading session seemed to confirm that the Dell-inspired surge was indeed a bear-market rally - another spate of warnings brought the Dow lower, sending it down 126.96 to 9,791.09 and giving the blue chips a loss of 87.69, or 0.9 percent, for the week.

Like the Dow, the market's other major indexes ended the week with losses.

The Nasdaq fell 119.90, or 6.5 percent for the week. It closed at 1,720.36 after slipping 64.64 on Friday.

The Standard & Poor's 500, the market's broadest measure, lost 31.90, or 2.7 percent, for the week. It closed at 1,128.43 after losing 23.01 Friday.

Sunday, April 08, 2001, 12:00 a.m. Pacific

Wall Street fears recent declines are just a warm-up

by Amy Baldwin The Associated Press NEW YORK - One of the greatest fears on Wall Street is that the past few weeks of earnings warnings and triple-digit declines have just been a rehearsal - and that the market is likely to endure more turmoil this month when companies actually issue their first-quarter reports.

The numbers that will trickle in during the coming weeks are expected to be the weakest year-over-year quarterly results in about a decade. And while investors might think they're prepared for the worst, analysts expect Wall Street to react negatively.

"There is a time when the nervous selling has been done, and when there is a scintilla of improvement ahead and when bad news tends to roll off. But we're not there yet," said A.C. Moore, chief investment officer for Dunvegan Associates in Santa Barbara, Calif.

A big question is what constitutes good or bad news?

If companies can simply meet lowered expectations, investors might consider that positive news, analysts say. It's less clear whether investors will drive prices higher based on such reports, and, if they do, whether those gains can last.

"Six months ago, if you just said you were going to meet expectations, your stock would have been trashed," said Ronald Hill, investment strategist at Brown Brothers Harriman & Co. "Now meeting expectations is the best anyone can hope for. ... Just making numbers is probably going to be viewed as good news."

This past week, Dell Computer proved that just standing by weaker estimates can be enough to propel stocks higher.

Desperate for good news, investors sent the Dow soaring 402 points Thursday after Dell said it still expects to earn 17 cents a share on $8 billion in revenue. And the Nasdaq had its third-biggest one-day percentage gain.

Wall Street was so hungry that investors ignored Dell's note of caution that there's a month left in its first quarter and that it cannot offer earnings projections for the remainder of the year.

"The market was looking for some reason to bounce," said Charles White, portfolio manager for Avatar Associates, who called Thursday's run-up a bear-market rally.

The boost from Dell was enough to erase Tuesday's earnings-related sell-off, in which the Dow fell nearly 300 points on warnings from Ariba and Broadvision, two smaller tech companies.

Friday's trading session seemed to confirm that the Dell-inspired surge was indeed a bear-market rally - another spate of warnings brought the Dow lower, sending it down 126.96 to 9,791.09 and giving the blue chips a loss of 87.69, or 0.9 percent, for the week.

Like the Dow, the market's other major indexes ended the week with losses.

The Nasdaq fell 119.90, or 6.5 percent for the week. It closed at 1,720.36 after slipping 64.64 on Friday.

The Standard & Poor's 500, the market's broadest measure, lost 31.90, or 2.7 percent, for the week. It closed at 1,128.43 after losing 23.01 Friday.



-- Carl Jenkins (somewherepress@aol.com), April 08, 2001


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