Wall Street approaching
Sept. lows

Warnings season is exacerbating
worries that investors already
harbor from terrorism

---

By Amy Baldwin
Associated Press

NEW YORK >> Wall Street's losses over the past five weeks have been stunning, with the market's major indicators falling by double-digit percentages, and the Nasdaq composite and Standard & Poor's 500 indexes dropping to levels not seen since the post-Sept. 11 lows.

While concerns about terrorism still haunt investors, the greater influence on trading is the fact that the market is in the throes of one of its most anxiety-producing periods -- warnings season.

Judging by the market's steep losses and what some companies have already said about their second-quarter results, trading is likely to remain turbulent in the coming weeks.

"I am looking for a few days when everyone just gives up," said Al Mirman, strategist at V Finance in Sarasota, Fla.

The market is likely to have some blips upward when some companies issue upbeat second-quarter forecasts, as McDonald's and Qualcomm did this past week. But analysts expect to see losses similar to the declines the market suffered when companies including Apple Computer and Ciena issued warnings, and when Lehman Brothers reduced its earnings estimates for IBM.

"I don't think anyone I have talked with has been especially optimistic. ... I think investors, in general, are waiting to see what the second quarter looked like," said Peter DiTeresa, senior fund analyst for Morningstar, a Chicago-based research and investor services company.

Or more simply put: "It's a show-me market," said Michael Murphy, head trader at Wachovia Securities.

The protracted decline has left the Nasdaq just 1.3 percent away from the low it reached Sept. 21, and the S&P 500 2.4 percent away. The Dow Jones industrial average is holding up better, standing 12.4 percent above its low.

Bottoming out? Here is how the major indexes stand vs. their Sept. 21 lows. Facts -- bar Nasdaq: 1.3 percent, or 17.77 points, away from low of 1,423.19 S&P 500: 2.4 percent, or 23.34 points, away from low of 965.80 Dow: 12.4 percent, or 1,017.98 points, away from low of 8,235.81 Source: Associated Press

The market's big drop looks bad, but there's a contrarian viewpoint that suggests it might be exactly what stocks need. The theory is that a big selloff over the course of several days might give the market a bottom to work up from and would provide investors with cash to reinvest.

Many on Wall Street believe that what's kept the market from really reaching its lows is its resiliency. Days of steep declines have been followed by rallies, such as Monday's 213-point surge in the Dow industrials.

"What we need are a couple of days of a really bad market when everyone gives up. People have to realize their portfolios are composed of the wrong stocks" Mirman said, adding that investors are still too heavily invested in tech issues and too little invested in safer blue chips.

"This throwing in the towel would give them cash to buy better-performing stocks," Mirman said. "That is what really has to happen."

Looking ahead, the market isn't likely to sustain any upward momentum until later this year. Analysts believe third- and fourth-quarter earnings won't just beat lowered expectations but will show some modest growth from last year, when business was still weakening considerably.

"Fewer companies are disappointing now, more are meeting or exceeding expectations. But what that describes is a less bad picture, rather than a clearly good picture," said Jim Weiss, chief investment officer for equities at State Street Research and Management Co. in Boston. "As we move forward, we should have more concrete evidence that the earnings are turning around and less of a pessimistic attitude."

For the week, the Dow dropped 220.42, or 2.3 percent, after dropping 177.98 to 9,253.79 yesterday. The Nasdaq had a weekly loss of 63.78, or 4.2 percent. Yesterday, it fell 23.79 to 1,440.96. For the week, the S&P 500 lost 18.13, or 1.8 percent. Yesterday, the index fell 17.15 to 989.14. The Russell 2000 index managed a weekly gain of 2.00, or 0.4 percent. Yesterday, the Russell inched up 0.82 to 461.07.

The Wilshire Associates Equity Index, which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues, ended the week at $9.389 trillion, off $159.74 billion from the previous week.