Posted on: Sunday, September 30, 2001
Downturn not likely to trip up Wall Street
Associated Press
NEW YORK — Now we might find out just how resilient Wall Street can be.
In a single week, the market recovered the worst of the devastating losses from the Sept. 11 terrorist attacks. Now, can it weather the economic fallout on corporate profits when companies start reporting third-quarter earnings in the coming week?
It could actually do better.
While profits promise to be even poorer in aftermath of the terrorist attacks, analysts are optimistic that the market will remain fairly stable. It's entirely possible, they say, that Wall Street has already factored weaker earnings into stock prices.
"It won't be like the prior quarters where a key company in technology disappoints (investors), and you have a massive selloff. We know we are in a recession. We know corporate earnings are going to be poor," said Joseph V. Battipaglia, chief investment strategist for Gruntal & Co. "So, investors' expectations are extremely low. That leaves you with all upside and very little downside."
The market took greater advantage of the upside this past week as the Dow industrials climbed 611 points, or 7.4 percent. In points, this past week was second only to the week ending March 17, 2000, when the blue chips rose 666.
The Dow also recouped close to half of the 1,369 — the steepest-ever weekly point drop — it lost the previous week when trading resumed on Wall Street after the attacks on the World Trade Center and the Pentagon.
And there was more proof of strength and stability: The Standard & Poor's 500 index, the stock market's broadest gauge, rose 7.7 percent this past week, its biggest weekly percentage gain since August 1982, when the index rose 8.8 percent in one week, said Arnie Kaufman, a spokesman for S&P.
"The market made significant strides over this past week," said Brian Belski, fundamental market analyst for US Bancorp Piper Jaffray. "It has made people feel a little better that there is a low in place."
And if investors are feeling better, that, more than earnings, could be key to the market's recovery analysts said.
"Earnings are a problem. But so is investor confidence. Investors need to have confidence to get them back into the market," said Ralph Acampora, director of technical research at Prudential Securities.
Wall Street is looking for the market to gain even greater footing in the coming week when the Federal Reserve is expected to cut interest rates for the ninth time this year and by as much as half a percentage point.
Of course, the political uncertainty is the big unknown factor lingering over Wall Street, and making it extremely difficult for anyone to forecast the market's future.
Analysts said the past week's buying was particularly encouraging, because it came amid another slew of layoffs, earnings warnings, and stock downgrades.
The Dow rose 611.75, or 7.4 percent, for the week; the Nasdaq composite index gained 75.61, or 5.3 percent; and the S&P gained 75.14 or 7.8 percent.
The Wilshire Associates Equity Index — which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues — ended the week at $9.562 trillion, up $662.48 billion from last week. A year ago the index was $13.613 trillion.
