Stocks Set to Rise as Portfolios Are Adjusted

Stocks are poised to wrap up this week on a bright note as investors do a bit of last-minute shopping to spruce up their portfolios before 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 in assets. “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 today at 10 a.m. PST and is closed Tuesday for Christmas. Many traders will opt to take a few extra days off this week--the last trading week of 2001--to spend time with family after a tumultuous year for the market and the nation.

“Monday will be a day you’d want to forget. The volume will be anemic,” said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. “The rest of the week we’ll try to decipher any near-term earnings warnings and try to end on a positive note.”

The confessional season--when companies warn that results will miss estimates--should continue this week.

Corporate earnings may suffer their worst drop of the year in the fourth quarter.

S&P; 500 companies posted a 21.6% tumble in profits for the third quarter, marking the biggest drop in earnings since the recession of 1991, according to Thomson Financial/First Call. Analysts are forecasting a 20.7% drop in earnings in the fourth quarter. But the research firm believes that number could widen to 22%.

“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,” said Stanley Nabi, managing director at Credit Suisse Asset Management.