Posted on 12/14/2003 7:47:41 AM PST by jern
Wall Street to Rally on Saddam's Capture 41 minutes ago Add Business - Reuters to My Yahoo!
By Bill Rigby and William Kemble-Diaz
NEW YORK/LONDON (Reuters) - Stocks look ready to rally when the market opens on Monday after the capture of former Iraqi President Saddam Hussein (news - web sites).
In fact, analysts believe Saddam's capture will give a general boost to equities around the globe, as well as to the U.S. dollar and U.S. Treasuries.
"It's broadly positive for equity markets," said Hilary Cook, director of investment strategy at Barclays Stockbrokers. "Concerns over the situation in Iraq (news - web sites) have weighed on sentiment and help explain why shares haven't rallied by as much as they could have in the face of some pretty positive economic data."
So U.S. troops' capture of Saddam, who was found hiding in a hole near his home town of Tikrit, could give the blue-chip Dow Jones industrial average (^DJI - news) reason to extend last week's gains above the psychologically sensitive 10,000 mark.
London's FTSE-100 index (^FTSE - news) and the FTSE Eurotop 300 index (^FTEU3 - news) of pan-European blue chips also could get a lift from the news of the Iraqi dictator's capture.
"U.S. and UK markets could have the most to gain because war is expensive," Cook said, referring to investor concerns that occupying American and British forces might get bogged down by a worsening security situation in Iraq after Saddam Hussein's regime was toppled this spring.
Spirits also should be lifted by the Dow holding onto its five-figure finish and the prospect of closing out the market's first winning year since 1999.
But some may think it's time to sell as valuations peak.
"I would love to see some consolidation in the market," said Sandy Lincoln of Wayne Hummer Asset Management in Chicago, who manages about $1.2 billion of assets for wealthy individuals and institutions. "It's a perverse wish -- but some of these valuations, particularly on the tech side, seem hard to fathom."
Stocks like the world's biggest chip maker Intel Corp. (Nasdaq:INTC - news) and Internet high-flyers Yahoo Inc. (Nasdaq:YHOO - news) and eBay Inc. (Nasdaq:EBAY - news) have led the market higher over the past nine months or so. But some investors worry that stock-price growth is getting ahead of profit growth, like in the ill-fated tech bubble of 2000.
This week could be the crunch time to decide whether to sell before the end of the tax year, or hang on in the hope of more gains.
"Valuing the market, based on historical reported earnings, makes it look very expensive," said Gordon Fowler, chief investment officer of Glenmede Trust Co. in his weekly outlook. "Valuing it, based on projected operating earnings, makes it look reasonably priced.
"The truth lies somewhere in between."
TEMPERING HOPE WITH CAUTION
Further huge gains may not follow like the first time the Dow broke 10,000. Back in late March 1999, when the Dow first held above 10,000, the index took barely two months to add another 1,000 points and top 11,000.
This time around, investors are a bit more cautious after weathering more than three years of a bear market.
Now that the Dow has cleared the 10,000 hurdle again, few seem to expect it to make a run up to 11,000 again any time soon. But there's no sign investors are ready to bail out of stocks, either.
"There's a lot of momentum in this market," Lincoln said. "Clients have been wanting to get on this bandwagon, and really reluctant to get off it."
Last week, stocks gained, pushing the Dow safely above the 10,000 mark and the Standard & Poor's 500 to an 18-month high, thanks to broadly good economic signs and the U.S. Federal Reserve (news - web sites) commenting that inflation is not a problem, suggesting that it won't raise rates for some time to come.
The blue-chip Dow Jones industrial average (.DJI) ended the week up 1.82 percent at 10,042.16, its highest closing level since May 24, 2002. The broader Standard & Poor's 500 Index (^SPX - news) rose 1.19 percent for the week, to 1,074.14, its highest close since May 28, 2002.
The technology-focused Nasdaq Composite Index (^IXIC - news) was up 0.57 percent for the week, to 1,949, below the 2,000 level it broke through briefly the previous week.
For the year, the Dow is now up 20 percent, the S&P 500 up 22 percent, and the Nasdaq up 46 percent.
This week investors will focus on Tuesday's Consumer Price Index (news - web sites), due at 8:30 a.m. (1330 GMT), for the latest read on inflation. Economists expect a very modest 0.1 percent rise for November, according to a Reuters poll. Anything greater would be an unwelcome surprise after the Fed minutes from its rate-setting committee's October meeting, released on Thursday, showed the Fed considered inflation under wraps through 2004 and possibly beyond.
Housing starts and industrial production figures are also due Tuesday, with weekly initial jobless claims on Thursday.
Earnings reports this week include tech bellwether Oracle Corp. (Nasdaq:ORCL - news) on Monday and Wall Street heavyweights Goldman Sachs (NYSE:GS - news) and Morgan Stanley (NYSE:MWD - news) on Thursday. (Wall St Week Ahead runs weekly.
You think that's all? A lot of people are going to think of this as mission accomplished.
I'm tempted take profits on anything that goes up 20% or so tomorrow.
Double Lib Suicide Watch pingThis must rank as one of the saddest day for them LIBs... (/sarcasm off)
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