Aardvark Week ( ants in me pants)
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Saturday, April 5th, 2003, 12:01 EDT
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~ Portfolio Update
SYMBOL Wk. Close Wk. Chg. Wk. %Chg. Wk. High Wk. Low
AMD 7.10 +0.88 +14.15% 7.40 6.00
AOL 11.55 +0.20 +1.76% 11.60 10.80
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JNJ 57.84 +0.46 +0.80% 58.68 56.75
PFE 32.80 +0.99 +3.11% 33.09 31.01
RGR 8.96 +0.11 +1.24% 9.14 8.76
SPH 27.58 -0.27 -0.97% 27.98 27.40
SUNW 3.34 -0.09 -2.60% 3.58 3.25
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~ Mutual Funds*
SYMBOL Wk. Close Wk. Chg. Wk. %Chg. Wk. High Wk. Low
JAENX 23.45 +0.14 +0.60% 23.65 22.96
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VGSIX 12.05 +0.13 +1.09% 12.19 11.84
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WRGCX 8.11 -0.03 -0.37% 8.30 8.07
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~ Market Indices
Index Wk Close Wk Chg Wk %Chg YTD Chg YTD %Chg
DJIA 8,277.15 +131.38 +1.61% -64.48 -0.77%
NASDAQ 1,383.51 +13.91 +1.02% +48.00 +3.59%
S&P 500 878.85 +15.35 +1.78% -0.97 -0.11%
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Research
~ Market News
StocksView War story may seal stocks' fate
By Pierre Belec
NEW YORK, April 4 (Reuters) - Stock investors are sick and tired of feeling
bad.
They want to anticipate a sustained rally, but it's hard to see how it could
happen any time soon because the market is twisting and turning on the media's
wall-to-wall coverage of the war with Iraq.
There is a perception the market has hit bottom or is close to it.
The war in Iraq could prove the pivotal event that will prompt stock investors
to cry "Enough already!" after more than three years of a bear market.
Last month, stocks fell close to multiyear lows before rallying like crazy in
the days immediately before and after U.S.-led air assaults on Iraq began on
March 19. By the close on Friday, March 21, the Dow Jones industrial average
scored its best week in more than 20 years with a gain of 8.4 percent.
The next week, of course, investors sobered up and sold stocks after TV,
newspapers and the Web showed the bombing of Baghdad was not a video game but a
real-life conflict that might not end in a flash. For the week, stocks fell.
"The markets are trading entirely on the events in Iraq," says Kent Engelke,
capital market strategist for Anderson & Strudwick Inc. "The current myopia
makes the economic data meaningless."
This week, stocks have been on a seesaw. The most dramatic turn came with the
Dow's 215-point jump on Wednesday after a daring rescue of an American prisoner
of war from an Iraqi hospital and news that two Iraqi divisions had been
defeated.
The next day, some weak economic data and bad corporate news offset optimism
about the war and stocks slipped, showing about as much life as a wet noodle.
On Friday, the government reported a worse-than-expected drop in payrolls in
March, while the unemployment rate held steady at 5.8 percent. But that data
may not be telling the whole story. The number of first-time claims for jobless
benefits jumped to its highest level in almost a year, the government said on
Thursday. Stocks rose and fell like a yo-yo on a string of Iraq war headlines,
ignoring the data.
A CONFIDENCE GAME
Here's what's getting lost in all the news and noise of Iraq around the clock.
The cooler heads say the world is not looking down the barrels of a major war.
The real problem is the stock market's lack of confidence in the economy.
At some point, stock investors will start to factor in what could go right
instead of what could go wrong.
Even if the war is prolonged, Engelke says consumer spending won't fall off a
cliff and the incipient economic recovery won't stumble.
"Iraq will fall, but perhaps not in the time frame that the media wishes it
would," says Engelke, who sees the current mindset as an extension of America's
"I want it now" culture.
"Afghanistan and its two-camel army took several weeks to crumble," he says.
"To expect a more modern power such as Iraq to fall in seven days is silly."
Steven Wieting, economist for Salomon Smith Barney, says the war has been the
main distraction to keep investors' minds off the economy. But it's a safe bet
that once the military campaign is completed, some of the things that have been
a drag on growth will become a stimulus.
"If the economy can muddle its way through this shock with a sixth straight
quarter of GDP growth, doubts about its ability to grow in less agonizing times
will likely fade," he says.
Wieting says investors should stop speculating on the length of the war or the
degree of damage.
"While progress in war has historically been measured in months or years, the
public appears to have raised expectations for signs of progress by the hour,"
he says.
Few traders are making big bets on a sustainable rally in the stock market
until all of the war stuff is removed. The best strategy for investors is to
keep their powder dry and wait for the "all clear" to sound.
The smart money says: Don't get flustered or make hasty decisions.
Some people may not be lucky enough to "buy" the market at the absolute bottom
after watching stocks slide for the last three years. Perhaps the best they can
hope for is they'll move back in to the market at levels close enough to the
turning point. The trick for investors will be to correctly spot a crucial low
in stock prices.
Most of the stock market's rallies for the last three years have been head
fakes. The rally from the October lows was an example of such a "window of
buying opportunity." It set the stage for a quick run up and an eventual
relapse close to multiyear lows.
POINT OF EXHAUSTION
Stock investors have had their faith in the cult of equity badly shaken after
watching their portfolios get bloodied and bruised by more than three years of
a bear market.
It may be time to tell them: You ain't seen nothin' yet.
Signs of a selling climax may come once fear is pervasive.
So far there hasn't been any wholesale liquidation of stock mutual funds. For
example, during the turbulence in late March when the Dow Jones industrial
average suffered its biggest one-day point slump of the year after zooming to
its steepest weekly gain in more than 20 years, daily trading volumes on the
New York Stock Exchange were unusually subdued.
The lesson: In times of Stockalypse, people tend to run to the sidelines,
buying fewer stocks while holding back on selling until the smoke clears.
Hey folks, what could be a louder wake-up call than a bugler's blast at
reveille? A big jump in the nation's unemployment rate.
Investors have already weathered scores of scary headlines about massive job
cuts. Those layoffs could push consumer confidence, already near decade lows,
further into the basement.
It's simple: No paychecks, no confidence in the economy.
For the week, all three major stock indexes rose. The blue-chip Dow Jones
industrial average gained 1.6 percent to finish at 8,277.15, while the
tech-laden Nasdaq composite index advanced 1 percent to end at 1,383.51, based
on the latest figures. The broad Standard & Poor's 500 index closed at 878.85,
up 1.8 percent for the week.
(Editing by Jan Paschal)
04/04/03 18:46 ET
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