Newspaper article The Christian Science Monitor

Wall Street Braces for Turbulence Last Week's Stock-Market Drop Has Some Analysts Predicting More Trouble in Short Term

Newspaper article The Christian Science Monitor

Wall Street Braces for Turbulence Last Week's Stock-Market Drop Has Some Analysts Predicting More Trouble in Short Term

Article excerpt

THE blizzard of '96 that roared through the canyons of Wall Street last week left more than piles of snow in its wake. At major investment houses, a discernable chill has set in, with talk that a stock-market downturn may be just around the corner - or perhaps already beginning.

A downward "correction" of 5 or 10 percent is possible for several reasons, some analysts say: slower growth in the US economy; smaller-than-expected corporate earnings; and the federal-budget impasse between the White House and Congress.

Not everyone here expects a correction. Low interest rates and tame inflation have some saying the market can shrug off a bit of bad news. But even without a correction, financial markets are expected to be far more turbulent in 1996 than they were in 1995, because share prices for many companies are high.

"You have to give sellers, not buyers, the benefit of the doubt in this market environment," says Gregory Nie, chief statistician for Everen Securities Inc. in Chicago.

"These next two weeks will be crucial," says Mr. Nie. He sees the possibility that the Dow Jones industrial average, which ended last week at 5,061.12, could slide as low as 4,800 points. Volatility will also increase, he says.

"Just a one point change {a dollar in share price} in all the stocks listed in the Dow industrial average means a change of 87 points in the average itself," Nie says. Why? Because "25 of the 30 stocks in the Dow are now fairly expensive, costing over $40 a share. Fractional moves in share prices can quickly lead to large shifts in the Dow average."

Investors hardly have to be reminded. Prices dropped sharply last week - 165 points on Tuesday and Wednesday alone - representing a decline of 3.2 percent in overall market value and the shedding of millions of dollars in wealth. For the week, the market shifted downward 120.31 points. Though the market opened yesterday on up note, more bumps are possible as investors sort out everything from the budget talks to the appropriate value for technology stocks.

Yields on long-term Treasury bonds, which had been falling steadily, inched up last week, reflecting unease over the federal-budget impasse. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.