re: U.S futures: Wall St expects further falls! Top Financial...

re: U.S futures: Wall St expects further falls! Top Financial News


07/22 00:07
U.S. Stock Investors, Strategists Say Prices May Tumble Again
By James Hertling


New York, July 22 (Bloomberg) -- Byron Wien, Morgan Stanley's senior investment strategist, said he can spot the effect of the U.S. stock market's decline on the faces of his neighbors on the eastern end of Long Island.

``I'm beginning to see some strain,'' said Wien, who had predicted a third losing year for U.S. stocks, from his summer home in Bridgehampton, New York. ``They're telling me they're losing hundreds of thousands of dollars a day.''

There may be more to come. The rout that sent the Dow Jones Industrial Average tumbling 4.6 percent on Friday to its lowest level since October 1998 may resume when markets open today, investors, traders and strategists said.

In Asian trading, September futures on the Standard & Poor's 500 Index fell 3.60, or 0.4 percent, to 840.40, rebounding from drop of 1.4 percent earlier.

Friday's slide in stocks capped the market's steepest two- week drop since October 1987, and was driven by revelations of corporate misdeeds and concern that economic growth may slow.

For a few investors, the market's performance recalled the prelude to its October 1987 crash. Back then, the Dow industrials followed a 4.6 percent loss on a Friday with a 22 percent plunge on the following Monday.

While investors aren't expecting a drop of that magnitude this time, they weren't certain how far prices may fall.

``There's the potential for the kind of panic selling that happened in 1987,'' said Kevin Connellan, head of equity trading at Northern Trust Corp., which oversees $340 billion in Chicago. ``The critical time is the first hour after the open Monday,'' when traders complete share sales that were requested over the weekend, he said.

`Going to Bonds'

While some investors said a morning plunge may give way to an afternoon bounce, few predicted the losses will end any time soon. The market has erased $7.7 trillion in shareholder wealth from the peak of almost $17 trillion in March 2000, as measured by the performance of the Wilshire 5000, the broadest index of U.S. share prices.

``People are tired of losing money,'' said Seth Glickenhaus, senior partner at Glickenhaus & Co., which manages $1 billion for wealthy people and institutions. ``They're worried about losing their jobs, and they're selling their stock positions and going to bonds,'' he said, predicting the Dow may drop as low as 6500.

He said a handful of stocks have plunged too low amid the declines. These include Texas Instruments Inc., CIT Group Inc. and Williams Energy Partners LP.

Treasuries, considered a haven in times of market turmoil, rose on Friday. Some investors said the securities may extend the gains today. They added that the U.S. government's plan to sell $27 billion of two-year notes this week may limit the advance.

Gold Glistens

The benchmark 4 7/8 percent, 10-year note climbed 5/8, or $6.25 per $1,000 face amount, on Friday to a price of 102 23/32. Its yield fell 9 basis points to 4.52 percent, the lowest level since Nov. 13. The benchmark two-year note rose 5/32 to 100 7/8, sending its yield down 8 basis points to 2.41 percent. A basis point equals 0.01 percentage point.

Gold may be the biggest beneficiary of any further drop in stock prices, some investors said. On Friday, futures for August delivery had their largest one-day gain since Feb. 5. They closed at $323.90 an ounce, up $6.80.

Shares of gold miners may rise as well. Clay Hoes of American Express Financial Advisors said he called his firm's trading desk every half-hour on Friday to place buy orders for his $65 million AXP Precious Metals Fund. The fund, up 49 percent this year, added shares of companies such as Gold Fields Ltd. and Harmony Gold Mining Co., two South African producers, he said.

`Fire Sale'

The dollar, on the other hand, may steepen a decline that has brought its value below one euro for the first time in two and a half years. The U.S. currency's value partly reflects the demand for dollar-denominated assets, such as stocks.

``We're having a fire sale in U.S. assets,'' said Bill Sterling, chief investment officer at Trilogy Advisors LLC, which manages $4.8 billion. ``The euro will continue to strengthen against the dollar'' as a result, he said.

U.S. stocks are mired in their third year of losses, which hasn't happened for more than six decades. The S&P 500 has fallen 44.5 percent from its March 2000 record and 26 percent so far this year.

Even before Friday's dive, withdrawals from U.S. stock mutual funds were at almost double the record pace from last September, according to TrimTabs.com Investment Research Inc. More than $23 billion was pulled from stock funds in the two weeks ended Tuesday, TrimTabs said. The record for an entire month was September's $27 billion.

On the Phones

At T. Rowe Price Group Inc., the number of calls from customers on Friday was one-third higher than projections, spokesman Steven Norwitz said. Some investors with the Baltimore- based mutual-fund company, overseeing about $149 billion, were switching into bond or money-market funds from stocks, he said.

Not everyone is looking for safety. Some investors said the market's drop provided an opportunity to go shopping.

``I am looking for a significant rally in the market before this quarter ends,'' said Joseph Zock, president and chief investment officer at Capital Management Associates, which oversees about $1.5 billion in San Francisco. He says he was buying technology stocks for the first time in 2 1/2 years the end of last week. He wouldn't name them.

Manic and Down

Charles Biderman, president of TrimTabs, said Friday's announcements by companies such as American International Group Inc. and PepsiCo Inc. that they will buy back shares are a sign that stocks may be near a bottom.

Others said prices have further to fall as investors try to dodge any further losses.

``Monday won't be another black Monday, but it will be manic,'' said Diane Garnick, global investment strategist at State Street Global Advisors, which oversees $770 billion. ``And it will be down.''

Out at the eastern end of Long Island, buying on the dips has given way to bailing out.

Friday's plunge ``did feel like capitulation for the first time,'' said Wien.

Andrew Lassman, 32-year-old Manhattan neurologist who plays golf in Southampton during the summer months, said he sold his holdings of Sun Microsystems Inc., Cisco Systems Inc., Microsoft Corp., FleetBoston Financial Corp., Capstone Turbine Corp. and AOL Time Warner Inc. on July 12 -- all at a loss.

``Before I get back into the market,'' said Lassman, ``everybody has to think the stock market is the worst thing ever.''




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Another thought: with all the nervousness experienced in the time up to and including the 4th July, what is the bet that that Sept. 11th will also be a time of uncertainty?

GZ