By Clyde Noel

Stock Report

Look for stocks to continue rising this week. There is a lot of money sitting around in banks. If corporate earnings continue to be positive, stocks will also rise.

Investors are feeling optimistic since the Dow Jones industrial average rose during the week, in the most awesome rally in 70 years, after plummeting to its lowest close since October 1998.

Can it be the end of the wealth-eating bear market we’ve lived with the last two years, or is it just another hallmark of a typical bear market? The truth is, you can’t expect a fairy-tale ending to the bear market when you have a deteriorating economic outlook like we presently do.

Something is still wrong when headlines read like they did last week: Lucent cutting 10,000 jobs, Sun Microsystems cutting 4,400 jobs and taking a $300 million charge in the next quarter, and Applied Materials cutting 1,500 to 3,000 jobs and 20 percent of the staff.

The numbers show American consumers appear to be saving after single-handedly keeping the economy afloat for more than two years. Retail sales in September posed the biggest drop since late last year, and the University of Michigan consumer confidence sank in October for the fifth consecutive month to a nine-year low. Cutbacks on spending by consumers could knock out the only leg that kept the economy from going down the sink and into a recession.

For the week, the Dow Jones industrials finished up 472 points or 6 percent. The Nasdaq was up 77 points or 6.4 percent, and the Town Crier index was up 7.94 percent.

Forty-one of the 50 stocks on the Town Crier index were up, but Intel, the world’s No. 1 chipmaker, reported higher third-quarter earnings that fell below analysts’ estimates and warned that the profit margin for the current quarter wouldn’t make the forecasts. At the end of the week the stock was down 5 percent, down 54 percent since Jan. 1.

Another negative factor facing us is the sell-off of U.S. Treasury bonds. As the stock market rises, the bottom falls out of bond prices, pushing interest rates higher.

The drop in bond prices couldn’t come at a worse time for investors who bailed the stock market for the bond market. Investors who bailed out of the market when the Dow was in the 7,000s and took big losses to get into bonds will now have another loss when they get out of bonds.

Rising bond yields make other interest rates higher, which include mortgage rates and buying a car on time.

The sharp rise in mortgage rates presently under way will threaten the housing market and kill the refinancing boom. That can limit the cash that consumers expect to get for the holiday spending season.

There are other factors to think about. Few corporations are buying back their stocks at such low levels, and top executives (insiders) are not buying more shares in their companies. They could be skeptical of a sustained rebound in their shares even if they are cheap, because they can go lower.