Investors Are Bracing for Bear Market Hangover

New-year cheer will be in short supply this week on Wall Street, as investors brace for another round of warnings of lower corporate profits and a fresh battering for U.S. stocks. Last year, ended badly on the stock market, marking the demise of the five-year bull run, as the Nasdaq composite index clocked the worst performance in its 29-year history, amid a slackening U.S. economy. History does not favor a robust opening to the year, given the sharp slide in stock prices in November and December. Add to this the hangover of earnings warnings that were delayed because of the Christmas/New Year holiday period, plus a round of downward forecasts--and the outlook is gloomy. “Better nurse your New Year’s hangover [today] and take a long nap through all those bowl games you were going to watch,” said Chuck Hill, research director at First Call/Thomson Financial, a compiler of analysts’ earnings estimates. In 2000, 43% of fourth-quarter warnings came after Jan. 1, Hill said. The only bright spot on the horizon is the possibility of an interest rate cut by the end of January. The Federal Reserve’s Open Market Committee meets again Jan. 30.

The financial markets will be closed today for the New Year’s Day holiday. Tuesday, however, will be business as usual, with a smattering of earnings reports, key economic data and of course the all-too-familiar earnings warnings.