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Show DAILY E2 HE Sunday, January 9. 2005 R A L D THE WALL STREET JOURNAL The Weekly Guide to Managing Your Money WM 2005 Dow Jones WSJ.comSunday 6 Company, Wall Street Turns Into Heartburn Alley By E.S. A fJl Browning Out of the Gate lot of investment pros were taken aback by the ,stock If the Dow Jones Industrial Average stumbles at the start of the year, chances generally are higher that stocks will fall during this certainly isn't always the case. Here's how the DJIA performed in the first five days of the remaining 51 weeks-altho- ugh trading vs. the full 52 weeks in the past few years, along with its start so far in 2005. JL market's poor start this year. They might as well get used to it. . 2002 JANUARY After rising almost 11 during the last 10 weeks of 2004, the Dow Jones Industrial Average fell 1.7 in the first week of the new year, its worst start since 199J.. This reversal of fortune is making some brows furrow on Wall Street. January is supposed to be a strong month for stocks, and the start of January typically is a time when new retirement money begins pouring into individual savings plans and pension funds. Past experience shows that if stocks fall at the start of January, it can be a sign that something isn't quite right. Stocks tend to rise , in most years, even after they stumble at the start of January. But over the past 100 years, ,the Dow Jones Industrial Average has had a much higher chance of falling during the year's last 51 weeks if it does so in the first week. This year could go down in history as a "purple pill year," says Robert Morris, chief investment officer at the Jersey City, N.J., group Lord Abbett, referring to a popular heartburn medication.. Mn Morris, one of the more bullish prognosticators, thinks big stocks will finish with gains of as much as 13 this year, above the historical average. But !if the year's opening is any guide, he says, there will be plenty of thrills and chills along the way. "It will be a year where you will see some purple pills consumed on Wall Street, but I think we will work higher," Mr. Morrissays. Why is a supposed bull so wary? Because this bull market is getting a little long in the tooth. It began back in October 2002, more than two years ago. Sirice then, the Dow has risen more than 45. JANUARY 6 6, 4 4 ' ' ' ' 1st 5 days 2002: FuHar2002:-1- 7 ill ' i 1st 5 1.3 JANUARY yrv five-da- y 6' 2003 Full i ' ' JANUARY 6 6 4 4 i dtp 2003: 2004 i i zL l i 1st 5 dap 2004: 1.3 Full tear 2004: 3 3 ar 2003: 25 1st 5 days 2005: -- 1.7 Sources: WSJ . The bull market no longer is raging ahead at the same pace. Profits aren't rising at the breakneck 20 rate that prevailed a year ago. Interest rates, which hit lows in 2003 and which surprised investors by remaining stable last year, are widely expected now to keep rising, possibly putting a brake on economic growth. Although the weak dollar has been rebounding somewhat at the start of this year, currency analysts don't have a lot of faith that the greenback's gains will last. Two Sides ' Wall Street is divided into two camps: those who see oil prices continuing to fall this year, and those who think that limited supplies,' heavy demand and Middle East instability will combine to push oil and gas prices back up. Mr. Morris is one-qthose predeclines, but dicting more even those will be "choppy," he says, contributing mightily to Wall Street angst. A lot of people are less optimistic than he is. "This year is going to be a tough slog," says Stuart Sch weitzer, global investment strategist at JPMorgan Fleming Asset Management in New York. He thinks stocks simply overdid it at the end of last year, which helps explain the January pullback. He expects stocks to face a tough road this year as the Federal Reserve steadily pushes up interest rates in order to stave off inflation. He thinks stock gains will be in the mid to high single digits perhaps touching 10 if you include dividends. One concern: Mr. Schweitzer believes that one major way companies will boost profits will be by cutting costs, which means they will be laying off employees and holding down wage gains. If that goes too far, it could bode ill not only for employees' welfare but also for consumer spending. Another problem stocks will face is that unlike in the 1990s, investors no longer seem content to stick with stocks for the long run. Many still are bruised after the beating they took between 2000 and 2002, following the implosion of the technology-stocbubble in March of 2000. k 2005 Market Data Group; ThomsonBaseline Last year, investors were willing to funnel money into stock mutual funds at the end of the year, when they saw signs that stocks had a head of steam. But during the week that ended Jan. 5, a time when people typically are moving new retirement cash into stocks, they unexpectedly got cold feet and moved money out of mutual funds, according to TrimTabs Investment Research, which estiflows. , mates mutual-fund Building Up Reserves . Carol McMullen, who heads Eastern Investment Advisors, the investment-managemearm of Eastern Bank in Boston, says she has been selling some stocks and building up cash reserves in many of the investment portfolios she manages. She bought stocks in the second half of last year, considering them bargains after their summer swoon. But now, after the hefty gains, she has been taking some profits and waiting for stocks to become a little cheaper before she dives in again. Moving in and out of stocks that way can be a risky strategy, but this hasn't stopped a lot of people from trying it. "The stock market got kind of overheated at the end of last year," Ms. McMullen says. "People got too positive and now you are giving some of it back." She adds that she thinks the market may also be suffering from shock at the devastation of the Asian tsunami. Overall, though, the tsunami appears to have had little direct impact on the world economy or on financial markets. Even insurance companies say that because the coastal areas involved weren't heavily insured, the impact could be less than that of the hurricanes that struck south Florida. "There is an element of psychoid ogy that probably has nothing to do with the market but is very dampening more generally, and I think you are seeing some of that," Ms. McMullen says. The immediate challenge facing stocks is the flood of corporate r announcements of profits that is slated to begin this week. So far, few companies have issued warnings of problems to come which has given a glimmer of hope to investors that the profit news will be upbeat. But at the same time, profit gains are expected to slow this year into the range of 10 or less, overall. That is slightly above the historical average of 7 but isn't the kind of thjng that generates excitement. Some investors are waiting to see what some big companies have to say before deciding how much more money to put into stocks. "It is going to take some time for the buyers, who I think are there, to decide how they are going to deploy their cash," says Todd Clark, head of listed trading at Wells Fargo Securities in San Francisco. fourth-quarte- How do you think stocks will do in '. Give us your market forecast. Write tp: foram.sunday03dwsj.com 2005? Inc. AU Rights Reserved, College Aid Goes Early have children going If you this year, get that . Nations: Helping The British government will ask the U.S. and other rich countries at a creditors' conference to declare an immediate halt to collection-- of debts from nations affected'by the tsunami. Separately, the U.S. will g propose an system for tsunamis, at a United Nations conference in Japan. i; . Tsunami-To- , Detroit Powers Up: Auto makers plan to unveil a slew of new;mod- els with giant engines and super-fas- t acceleration at the North' American International Automobile Show beginning in Detroit today. Some of the cars on tap are a new Saturn roadster, BMW's M5 sedan, and a Range Rover SUV with 38 more power than the current model. Apple's In the Spotlight: The buzz is that Apple Computer will introduce a new Mac computer priced below $600 at the MacWorld conference in San Francisco. Apple hasn't commented, but it should be a big week for the company anyway, as It reports fourth-quarte- r Wednesday amid tions for iPod sales. earnings expect h Sales Tally: Thursday brings the Commerce Department's official reading on December retail sales. Last week, most retailers posted mediocre sales, as shoppers put off purchases until first-com- d basis," says Ben Kaplan, founder of Scholarship-Coach.co"If you wait until April or May, you'JI be very far back in the line." Applying now, on the other hand, would put you right at the front. Jan. 1 was the first date on which FAFSA form for finanthe cial aid could be submitted, and many colleges start processing applications based on these forms in February. Some colleges have "priority deadlines" in February and award higher amounts of aid to those who apply early.' Because the form requires information on the previous year's income and assets, many people wait until spring, when they do their taxes. But Mr. Kaplan recommends submitting it right away, giving esti- mates of some figures if you don't know them. You can make corrections later on if necessary. Filing the application online at www.fafsa.ed.gov ensures faster processing and guides you through the process, minimizing the possibility of mistakes. When you're done with the FAFSA, make sure the financiakiid staff at each school have all the information they need. Most simply take information from the federal form, but some may have a separate application. Also check for merit scholarships through free Web sites such as FastWeb.com and CollegeBoard. compay. By Andrew Blackmail David Croiik Mark Aht I)ikutr I I I I 4 5 6 7 Sell your car in the Daily Herald for only JANUARY 2009 SourraiTtorraonBawl! the last minute and scoured stores for bargains. Trade Gap: The November mea- sure of the nation's trade deficit comes out Wednesday. It widened more sharply than expected in October to $55.5 billion, and more increases could intensify pressure on the dollar and heighten fears of an Imbalance in the global economy. WEEK Job Market Improves: U.S. employers added 157,000 new workers to their payrolls in December, a little short of economists' esti- total mates, bringing the year-en- d of new jobs to 2.2 million, the best showing in five years. ing a pause after five consecutive rate increases, but the current federal-fund- s rate of 2.25 now seems likely to move higher. K. Caaey Jr. Via; Pntsmivr. Spkiial Editions 3 bill.cawyllowjoiies.Cv .1 John K. Campbell Advertising Director (2031966-700- 3 includes 4 lines, Photo, Online posting, Community Weeklies. Some restrictions apply: private party only 90 day limit Fed Points to Higher Rates: Federal Reserve policy makers are wary about Inflation and so may keep raising interest rates, according to minutes of their Dec. 14 meeting. Markets had been expect- Tyiter Route 1 North Brunswick. N.J. 088.52 (212) Nasdaq 4 Crook 430(1 William ozw -- 3 was quickly followed by Northwest Airlines and US Airways. A Merrill Lynch analyst estimated that matching Delta's price cuts could cost the industry up to $3 billion a year. Telephone: IflOQ) 520r400O email: 8uuday03((i'wqj.com South TTTf1 :" - Airline Price War: Delta Air Lines Editor Editor - Nkws 0 JMM (STFTTTT 1 slashed fares on many routes, and TlIEWAIlSlTOMlNALuJiQ'I Lawre nee Hout Skmdk Km nut ki biggest weekly decline in live months. LAST More Earnings: Also posting earnings this week are Dow component Alcoa on Monday, Intel Tuesday and Sun Microsystems Thursday. Brian L. The Nasdaq Composite Index, dominated by tech stocks, fell 4 the first week of trading in 2005, Its WRONG. FOOT: 8 1 Briefly: U.S. auto sales surged In December from a year earlier as car buyers responded to the Industry's aggressive said it will begin offering free software for combating 'spyware" and other viruses... Krtspy Krenw Doughnuts said it will restate Its fiscal 2004 results. Your Town. Your Neighbors. Your Newspaper. 573-645- year-en- d COKPOKATK HMIMtaRTEHS 200 Liberty Street . For New York, a Spec i.m. N.Y. 10281. Julhnal SuwcRimos OfWiH CaLU . a Or 0 d application sent in early. Although there's plenty of time to apply for federal aid, a lot of the state and private money gets doled out much sooner. So if you apply now, you'll have a much better chance of get- ting aid. TIP OF -'JL-Za lot of L THE WEEK schools award money on a INVESTOR'S CALENDAR THIS WEEK to financial-ai- |
