By Clyde Noel
Stock Report
If I bought stocks at the lows in July, I would be selling too. That’s what many investors did last Friday after the stock market’s two day rally.
With the market now up about 20 percent from its late July lows, strategists say bouts of profit-taking ,like the one that occurred Friday, are expected.
After all the selling on Friday, the Dow still rose 1.1 percent for the week, the Nasdaq 1.4 percent and the Town Crier index a meager 0.23 percent.
Biggest movers on the Town Crier was Harmonic when it jumped $1.04 up to $2.92 a share. Legato moved up 18.22 percent, Network Appliance 10.25 percent and Rational Software 19.66 percent. These are nice moves for medium cap stocks that have seen terrible lows.
The market has been able to shrug any disappointing economic news the past couple of weeks.
That’s an encouraging sign. But, the real market-moving numbers won’t hit the tape till the first week of September when investors will be forced to munch on a lot of disappointing news on earnings.
Hewlett-Packard is the last of the Dow’s 30 stocks to unveil its quarterly results yesterday.
Investors are waiting for these results since the merger was approved. The future is questionable since Dell Computer said it will go into printers and servers, marketing those products the same as it does its computers.
Now for something different. When President Bush held his economic conference on how to fix the economy and boost financial markets several weeks ago, he suggested eliminating the corporate tax on dividends. It’s a good idea.
Currently, dividend money is taxed twice.
First, when the company’s profits are taxed and when the shareholder receives his dividend check.
Companies are reluctant to pay dividends and prefer to invest the money in research, expansion or buy back the shares.
Instead of paying dividends, CEOs would prefer to see stockholders enjoy rising stock prices. When the investor sells the stock long-term, capital gains would only be 28 percent while the personal income tax rate on dividends can be as high as 38.6 percent.
The problem with this is greedy executives would be bent on stock price gains because it boosts the value of their stock options.
It also promotes more incentives for accounting shenanigans.
Noel, a seasoned investor, covers the stock market for the Town Crier.
