NEW YORK (AP) - Investors nursing whiplash symptoms after watching the
market's recent wild swings may find that Wall Street will deliver some relief
in the coming weeks.
While volatility isn't going to disappear overnight, some experts suggest
the market may be near the beginning of a recovery.
"I think we've seen a bottom," said Alfred E. Goldman, chief market
strategist at A.G. Edwards & Sons Inc., a division of Wachovia. "It's probably
not 'the' bottom," he said, "I think it would be presumptuous to call it 'the'
bottom."
Some might consider any positive view contrarian, especially given the shock
caused Friday by news of a bailout needed by investment bank Bear Stearns Cos.,
but Goldman said he thinks long-term investors have reason to start expecting
some relief ahead.
"I think what we have is a Bear Stearns crisis, not a stock market crisis,"
he said of the Wall Street bank's liquidity problems, which stemmed from
investors, customers and lenders withdrawing their business and pulling back on
credit lines. "Right now, I'm not aware of any other major brokerage firms or
banks that have this type of solvency problem."
Still, Goldman said, such news can generate further negative feelings. "The
level of pessimism, the calls I'm getting, are it's like the end of the Western
world."
"The market is very nervous."
Those nerves were reflected in the market's moves this past week, as stocks
on Monday sold off for the third straight day, then bounced back Tuesday after
the Federal Reserve said it would put up cash to help loosen tight credit
market. After a modest decline Wednesday, it got a lift Thursday from Standard &
Poor's prediction of an end to massive write-downs of mortgage-backed
securities, then dropped sharply Friday following Bear Stearns' revelation.
For the year, the Dow Jones industrial average is down about 10 percent, and
off nearly 16 percent since its October high. The S&P 500 index has slipped 12
percent since the start of the year, and about 18 percent since October. The
Nasdaq composite index is down about 16 percent for 2007, and off more than 22
percent since its October high -- officially within "bear market" territory.
David Wyss, chief economist for Standard & Poor's said he thinks several
factors will likely mean the markets should hit their low point soon. "I think
the economy is going to hit bottom in the summer," he said. "Normally, the
market leads the economy by about three months," which would put the bottom
sometime near the end of March, he suggested.
While there's still plenty in the economy to be worried about, Wyss said, he
thinks that signs of a recovery in the market will be helpful in easing investor
fears.
"I think people are going to have a little more confidence," he said,
adding, however, "It doesn't mean they're going to be back to normal."
The coming week could bring some news that helps. Along with the Federal
Reserve meeting that is expected to deliver another big interest rate cut,
several major investment banks, including Bear Stearns, are slated to report
their first-quarter financial results. Most major corporations will follow
starting next month.
Global investment strategist Subodh Kumar expects the earnings reports will
produce some difficult numbers, but that could help in the long run.
"I think there's one more leg of earnings reductions that the analysts
haven't taken yet," he said. "What I'm anticipating is that as the first-quarter
earnings are reported, (analysts) will cut their second quarter estimates and
that will help us find a bottom."
"In terms of the market drop, I think most of that has already been done,"
he said. "In terms of expectations, in terms of earnings, I think there's more
to come."
Brett Hammond, chief investment strategist at TIAA-CREF Asset Management,
agreed that first-quarter results are not likely to be pretty. "Overall, I think
we can expect some fairly negative news on the corporate front," he said, noting
that, among other factors, financial companies are probably not done writing
down the value of certain holdings.
He also said the credit crisis must also play itself out before market
turns.
"The story over the last quarter or so is the 'sound of credit crunching'
can be heard everywhere, and I think that's what driving both reality and
perception," he said. "You have to talk about both reality and perception when
you're talking about turn."
Still, Hammond said, while it might take a few more quarters before the
markets show signs of real strength, "the chances of there being a much further
downturn from here are less than there's going to be an upturn."
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