Market’s anxiety is not expected to subside soon
With Wall Street falling precipitously almost by the day, investors are asking what it will take to revive it. Market experts are increasingly coming to the same answer: time.
There is no piece of economic data, no corporate earnings report, no move by the Federal Reserve and no government tax plan that will be able to soothe the market’s anxiety in the next couple of weeks over the weakening economy.
That’s not to say the stock market will keep plunging the way it has been. To be sure, bargain hunters will probably see Wall Street’s recent slides as buying opportunities, particularly if encouraging news comes along like a hefty interest rate cut or better-than-expected profits at the nation’s big-name companies.
Upbeat financial results in the coming week from some of the large, multinational companies that make up the Dow Jones industrials -- Microsoft Corp., AT&T; Inc., Johnson & Johnson, Pfizer Inc., Caterpillar Inc. and Honeywell International Inc. -- could lead to some rallies.
But no one should be surprised if the gains evaporated as soon as they developed.
Investors simply have too many questions to buy into stocks with confidence -- questions that are not going to be answered until all fourth-quarter results are in, and until Wall Street has a better sense of how the still-young first quarter is going.
“We’ve baked in a lot of bad news. But we don’t know the magnitude of the bad news yet. We don’t know if we’ve overdone it,” said Arthur Hogan, chief market analyst at Jefferies & Co.
“I don’t think there’s any combination of things next week that will necessarily turn things around.”
The Dow sank 4% last week, the Standard & Poor’s 500 index dropped 5.4% and the Nasdaq composite index plummeted 4.1%.
Last week brought exactly what investors feared: a wretched manufacturing reading from the Philadelphia Fed, dismal home construction data from the Commerce Department, a worse-than-expected profit at Intel Corp. and historic losses at Citigroup Inc. and Merrill Lynch & Co.
Even the more profitable banks, such as JPMorgan Chase & Co. and Wells Fargo & Co., said they were bracing for more problems in a wide swath of consumer credit, from home equity loans to auto loans to credit cards.
This week will bring earnings from more banks, notably Bank of America Corp. and Wachovia Corp. Companies outside the financial sector with a strong global presence might ease some of the anxiety about America’s corporate muscle, but it is unlikely they will cure it.
“There is an earnings recession,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors, noting that S&P; 500 operating earnings growth was lower in the third quarter of 2007 than in the second quarter, and is sure to be lower in the fourth quarter of 2007 than in the third.
“The real key question is not whether there’s going to be an economic recession. It’s not when the economic recession is going to end,” Johnson said. “It’s when is the earnings recession going to end?”
Martin Luther King Day today is a market holiday, and after that, the government will release only a few economic reports ahead of the Fed’s Jan. 29-30 meeting on interest rates. Wall Street will probe those that do come out more closely than usual for clues about how deflated the economy is and how that might affect business.
The Labor Department’s weekly jobless claims data will also be watched, as will the National Assn. of Realtors’ report on December sales of existing homes.
Economists expect existing home sales to slip again after inching up in November.
With market pessimism at heights not seen in years, it is possible the market is near its bottom. But there are few investors eager to bet on when stocks will resume their climb, and how long it will be before new records are reached.
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At a glance
Today
Financial markets closed because of Martin Luther King Day.
Tuesday
Senate Finance Committee hearing on economy and a stimulus plan.
Quarterly results from AK Steel Holding Corp., Ambac Financial Group Inc., Apple Computer Inc., Bank of America Corp., CSX Corp., DuPont Co., Johnson & Johnson, Lee Enterprises Inc., Norfolk Southern Corp., STMicroelectronics, Texas Instruments Inc., UAL Corp., UnitedHealth Group Inc., Wachovia Corp.
Wednesday
Quarterly results from Abbott Laboratories, Capital One Financial Corp., ConocoPhillips, Delta Air Lines Inc., EBay Inc., Freeport-McMoRan Copper & Gold Inc., General Dynamics Corp., Motorola Inc., Netflix Inc., Pfizer Inc., Qualcomm Inc., SLM Corp., Southwest Airlines Co., Sovereign Bancorp Inc., Symantec Corp., United Technologies Corp., WellPoint Inc.
Thursday
Labor Department reports on weekly jobless claims.
National Assn. of Realtors reports on existing-home sales.
Freddie Mac reports on mortgage rates.
Senate Budget Committee hearing on economy; Senate Finance Committee hearing on economy.
Quarterly results from Alaska Air Group Inc., AmeriSourceBergen Corp., Amgen Inc., AT&T; Inc., Baxter International Inc., ChoicePoint Inc., E-Trade Financial Corp., Ford Motor Co., Hershey Co., Juniper Networks Inc., Kimberly-Clark Corp., Lennar Corp., Lockheed Martin Corp., Microsoft Corp., Northrop Grumman Corp., Nucor Corp., Sun Microsystems Inc., Union Pacific Corp., US Airways Group Inc., Xerox Corp.
Friday
Quarterly results from Caterpillar Inc., Harley Davidson Inc., Honeywell International Inc.
Source: Times staff and wire reports
