New York market: Investors fear a slowdown
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Your support makes all the difference.Neither bombs over Baghdad nor a US president battling for his political life distracted investors for long from a string of earnings reports by some of the biggest US companies. The Dow Jones Industrial Average and S&P 500 index had their first weekly gain in three weeks, after General Electric and Chase Manhattan gave positive profit forecasts.
"Impeachment may occupy our attention for the moment, but that doesn't affect what corporations do from day to day," said Gary Campbell at Commerce Bank in St Louis. Mr Campbell likes consumer-related stocks because of high consumer confidence and spending.
Investors who say they don't watch the impeachment hearings aren't necessarily bullish. "This means nothing to the market," said Jack McCarthy, former partner at Lord Abbett & Co. "The market is going to move on its own." What will move the market is concern about earnings, and profits for S&P 500 companies may fall as much as 8 per cent next year, he said.
"We've only seen the tip of the iceberg of what's going to happen in Asia," he added. "You have companies that are the cream of the crop telling you that they're being put through the wringer."
Mr McCarthy reckons that weakness in Japan will continue to weigh on Asia. "The stock market isn't reflecting that we're in a slowdown," he said. He still expects further gains if Federal Reserve rate cuts are in store. Then, after the first quarter of 1999, the major indexes could fall 15 per cent.
For the week, the Dow average rose 0.9 per cent to 8,903.63, the S&P 500 1.9 per cent to 1,188.03, and the Nasdaq Composite index 2.8 per cent to a record 2,086.14. The Fed isn't expected to lower interest rates at Tuesday's policy meeting, according to Wall Street's biggest bond firms. It has cut rates three times since 29 September in an effort to calm turbulent financial markets.
This year US government securities were the place to be, turning in their best performance in three years as long-term yields fell to a 31-year low of 4.69 per cent in October. Thirty-year bonds with total returns of 19.5 per cent even topped the Dow for the first time in five years. Junk bonds were the worst performers this year, returning just 2.8 per cent.
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