Star-Bulletin news services
Wall Street may be range
-bound as comeback year
winds downThe fourth quarter is historically
strong but investors may take profits
after a 6-month rally
NEW YORK -- Wall Street typically enjoys a strong performance in the fourth quarter, but analysts say the coming three months might be an exception. That's because the market doesn't usually go into the final quarter having already rallied for six months.
"It is logical that people are going to take profits," said Brian Bush, director of equity research at Stephens Inc. in Little Rock, Ark.
While economic reports have been mixed, they've been increasingly more positive than negative. That's one big reason why analysts say that even if this fourth quarter isn't spectacular, it won't be catastrophic either.
"I don't think we are going to rip-roaring ahead. But the good news is I don't see any disaster," said Gary Kaltbaum, president of the money management firm Kaltbaum & Associates in Orlando, Fla.
Kaltbaum said he predicts Wall Street's major indexes will remain in a tight trading range -- the Dow Jones industrials hovering around 9,600, for example -- during the fourth quarter and that any breakouts will be to the upside.
"I would not be against us flip-flopping around for a while," he said.
Given how the market has been rallying ever since hitting its yearly lows back in March, it could be tough for stocks to keep up that pace from now until year-end. In the past, the months of October, November and December have been among the best for Wall Street.
Since March 11, when this year's rallies' began, the Dow has climbed 27.2 percent, the Nasdaq composite index has surged 47.9 percent and the Standard & Poor's 500 index has advanced 28.6 percent.
For the S&P, the broadest of the major stock gauges, November and December have each produced average returns of 1.9 percent over the last 15 years, according to Jeff Hirsch, president of the Hirsch Organization, publisher of the Stock Trader's Almanac. Only one other month -- May, with an average return of 2 percent -- has been better for the S&P.
Despite its bad reputation for crashes -- in 1929 and 1987 -- October has also been a good month for the S&P, providing an average return of 1.8 percent, according to the Stock Trader's Almanac.
This past week, when the market ended the month of September lower, it was clear that stocks are indeed slowing down.
"I think you have a very mixed bag of (economic) news. That's typical of what we have seen for most of the last month," said Kevin Caron, market strategist at Ryan, Beck & Co. LLC. "The rally in equities that was powerful through the summer is taking a breather to face reality, which is, yes, things are getting better but are not as good as everyone would like."
Stocks spent the past week swapping big gains with big losses as investors reacted to varied economic news. The Dow, for example, fell by 105 points on Tuesday and then gained 194 on Wednesday.
Yesterday's news was surprisingly upbeat with the Labor Department reporting that the nation's jobless rate remained at 6.1 percent in September as businesses added to payrolls for the first time in eight months. That beat economists' forecasts calling for the unemployment rate to rise to 6.2 percent with a loss of 25,000 more jobs.
But on Thursday the Commerce Department said orders to U.S. factories dropped by 0.8 percent in August, the first decline in four months, the Commerce Department said. Economists expected a smaller decline of 0.5 percent.
Not everyone on Wall Street, however, believes stocks will have a hard time in the final three months of 2003.
Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati, is upbeat knowing that investors don't want to miss the next bull market and that they see more risk to being underinvested in stocks rather than owning too many equities.
Johnson said, "As much as you have heard that the market is overbought, there is still room to go."
The Dow ended the week up 259.23, or 2.8 percent, finishing at 9,572.31. For the week, S&P climbed 33.00, or 3.3 percent, to 1,029.85.
The Nasdaq had a weekly gain of 88.50, or 4.9 percent, closing yesterday at 1,880.57.
The Russell 2000 index, the barometer of smaller company stocks, ended the week up 27.59, or 5.7 percent, closing at 512.28.
The Wilshire 5000 Total Market Index, which tracks more than 5,700 U.S.-based companies, ended the week at 9,990.30, up 343.84 from the previous week. A year ago, the index was at 7,598.62.
STOCK QUOTES/CHARTS/DATA
