By Clyde Noel
Stock Report
Looking back, we saw the Enron and WorldCom dominoes fall, Arthur Anderson’s figures become depressed, Martha Stewart’s salad wilt and GE’s former CEO Jack Welsh get caught in some scandalous doings. Now what?
Now the wild card in the stock market game is possible war with Iraq. President George Bush’s comment, “action will be unavoidable” disturbs the market. Investors fear a conflict would spread into other countries in the Gulf region, which pumps one quarter of the world’s oil supply.
The threat of terrorism and the prospect of war with Iraq have reduced the “risk” price investors are willing to pay to get back in the market. Any increased defense spending will keep the United States in a budget deficit and that will also affect stocks and any positive return. These events keep investors worried and the result is low volume in trading.
For the 9/11 anniversary week, the Dow fell 115 points or 1.4 percent, Nasdaq was down 0.3 percent, and the Town Crier stock index was flat.
Last Friday Adobe Systems rallied $2.32 or 12.5 percent to $20.77 and ranked among the largest percentage gainers on Nasdaq because its earnings rose over the previous year. Other increases of note for the week were: Agilent Corp., 5.8 percent; Network Associates, 9.55 percent; and Symantec, 4.14 percent.
Stocks are heading into a tense week with mounting talk of war and steady excuses for profit warnings. With three weeks of declines, investors continue to sit on the sidelines. There is no urgency to jump back in the market, especially since President Bush said that Saddam Hussein would not meet any conditions to avert military action. Investors will wait for word from the United Nations before they lay out big money.
Federal Reserve Chairman Alan Greenspan said the terrorist attacks of a year ago and the recent steep drop in the stock market were continuing to exert “depressing effects” on the economy.
While Greenspan gave no hint as to whether the Fed might cut interest rates when policy-makers meet on Sept. 24, many analysts said the strength in Friday’s retail sales make any rate cut less likely.
On the brighter side, consumers stepped up their purchases of new cars, furniture and big-ticket goods in August. Retail sales were up for the third straight month. That eased the fear the country was going into a recession. Retail sales help dispel the darkest scenario that we will go into a double-dip recession.
The absence of inflationary pressures has been a primary reason that the Federal Reserve has been able to leave interest rates at a 40-year low throughout this year in an effort to boost the tepid recovery.
Noel, a seasoned investor, covers the stock market for the Town Crier.
