CP Medical Clinic | CP Legal Advisor | CP Ladies | CP Kids | CP Sports
Join The Largest Pakistani Community In the Middle East
|Back to Investment Help Center||Back to FAQs|
stock market's carnage continued last week, leaving many investors
wondering just how much worse things can get.
outlook certainly isn't very encouraging. Amid more signs of a weakening
economy and worsening corporate profits, three of the major stock indexes
skidded to their lowest levels in five months last week. And many market
pros expect stocks to continue falling until the economy shows some signs
Dow Jones Industrial Average tumbled 3.5%, led by Friday's huge drop. That
left the blue-chip average up only 2.3% from its March 22 low and down
nearly 11% so far this year.
Nasdaq Composite Index plunged 6.5% for the week, leaving it up 3% from
its April 4 low and down 32% for the year. The tech-heavy index is now
down 67% from its record high in March 2000.
broader Standard & Poor's 500-stock index fell 4.2% last week, leaving
it at a three-year low. It's now down 29% from its high in March 2000.
caused the sell-off? In part, it's worries that the weak economy may soon
start putting a crimp on consumer spending, which has kept the US out of a
recession so far.
was fueled by Friday's report of a surprisingly big increase in
unemployment last month, to 4.9% from 4.5%. There also was Thursday's
survey from the National Association of Purchasing Management showing
unexpected weakness in the services sector.
reports were very suggestive that the slowdown -- that had been largely
contained in the business community -- is showing evidence of bleeding
outward. As a result,
investors can't necessarily count on consumer spending to keep the economy
is frustrating as an investor buying stocks. For the last year or so, the
companies people were buying are in recession, and there has been
disappointment that things haven't turned. But at least the consumer was
in nervous times like these, however, investors don't have to abandon
stocks entirely. In fact, some pros think there are ways to use all the
negatives to your advantage.
with what's been working," advises Peter Canelo, U.S. investment
strategist for Morgan Stanley. The rising jobless rate makes it likely
that the Federal Reserve will continue cutting interest rates. "So
stick with interest-rate-sensitive and economically sensitive
segments" that will benefit from falling rates, he says. These
include banks, retailers and health-care stocks.
investors fixated on owning technology stocks, Mr. Canelo says you should
consider "old line" telephone companies. He also suggests the
older semiconductor and enterprise-software areas, which he believes have
good prospects of rebounding relatively soon.
in all, say some market watchers, this may actually be a good time to
conduct some old-fashioned research and look for stocks with cheap
valuations and solid fundamentals. That way, you'll be in good shape once
the market eventually recovers.
question now, of course, is when that will be. Some think the recent
sell-off, even if it continues for a while, may be the beginning of the
market reaching a bottom.
seems to be a consensus on the Street that we're going to get some kind of
a cataclysmic, washout type of a selloff," says Todd Clark, co-head
of equity trading at W.R. Hambrecht, "and everyone says that will be
the low." If that's the case, the worst may be nearly over.
it's also possible that the major stock indexes will "continue to
grind lower, which would be truly ugly," Mr. Clark says.
Unfortunately, he adds, "I can't rule that second scenario out."
pros think the market's sharp slide in recent weeks is the beginning of
what is known as "capitulation." That's when investors become so
disgusted with stocks that everyone who wants to sell does, leaving the
market nowhere to go but up.
obviously getting closer to the bottom, and we're starting to see some
capitulation in the marketplace," says Steve Massocca, president of
Pacific Growth Equities. "This bear market is getting to be very long
are other reasons to be optimistic. For one thing, this bear market is
unlike previous ones in that inflation is low -- as are interest rates. So
some experts believe the market could rebound as soon as there is evidence
that corporate profits have merely stopped worsening, rather than are
real saving grace here for the equity investor is that it is a
profit-driven bear market," says Mr. Paulsen.
the outlook for third-quarter profits isn't very promising, it may not be
as bad as some fear. So far, 403 companies have issued negative profit
warnings for the quarter, down from 433 at this point a year ago,
according to Joseph Kalinowski, equity strategist at Thomson
of the warnings have been in technology, though there also have been some
in retailing and even energy, which had held up well so far.
happens, there's certainly no shortage of advice about what investors
defensive," says Jeffrey Applegate, chief investment strategist for
Lehman Brothers. Which means, "stay in the more defensive sectors:
utilities, foods, banks, [or] cosmetics."
"if you think this is not something worse than a cyclical
event," he adds, "then you should focus in on the stocks and
sectors that typically do well when we finally see a rally." These
include finance, industrial, consumer and even some technology stocks.
We are a community driven site
- Send your articles, stories and event reporting to
ContactPakistan.com. We publish such contents within 24 hours!
NO POLITICAL REPORTS - WE HAD ENOUGH!
ContactPakistan offers FREE hosting to all community contests.
If you like to sponsor a competition such as sporting events quiz,
Children Essay, Drawings etc. then drop an Email to Webmaster for more
details. We will design complete contest and advertisement campaign Free!!
Let us build virtual community and your business together