| Show t I Thy Salt Lake ME WALL Taunt BUSLNTSS SuntLiy mthry I 2144 STREET JOURVIL The Weekly Guide to Managing Your Money 0200 1 1)flir http:sundaywskom JOneit ES So last week the Russell 2000 BROWNING the stock market hope and can go hand in hand That's what is happening now as investors try to decide whether to buy stocks because of the strong economy or sell because of worries that the market has gone up too fast and rising interest rates are due to put a damper on it Few people doubt that the economy is out of the woods Profits at big companies appear to have grown something like 25 in the fourth quarter of 2003 compared with a year ago which is triple the average rate A preliminary estimate released Friday by the Commerce Department suggested that the economy grew at an annualized rate of 4 during the fourth quarter slightly less than hoped but above the historical 35 average Economists were a little unhappy that the fourth quarter wasn't stronger but they pointed out that the data are preliminary They also worry that jobs aren't being created as fast as in a normal recovery But slow job creation actually offers a silver lining for stocks since it boosts productivity and profit margins The general expectation is that the economy and profits are headed up "We still are in a sweet spot where we have a very strong economy" and rapid growth in corporate profits says Alfred Kugel chief investment strategist at Chifirm cago Stein Roe Investment Counsel So why worry? One big concern is that stocks rose so much last for the Dow Jones Indusyear-- 25 trial Average and 50 for the Nasdaq Composite Index Not since the Iraq war 10 months ago has the market pulled back in any serious way That makes many analysts worry that stocks now are overdue for at least a pause Some wonder whether the In US G7 to Discuss Deficits: European government ministers have said they will use Friday's Group of Seven meeting in Boca Raton Fla to complain to the US that its trade and budget deficits are threat111 ening the global economy 0 Big the Dollar: The greenback may be in for a zigzag as speculation rises that European finance ministers may take action to halt the euro's rise But the dollar could also lose value if the WE Week for WAIL grao JOURNAL David Crook Entrion Lawrenre Rout SPOOR 31g11 EiWINIR Mark 1Sdier Nit WPM Brian L ('rink NEvra Eiwroa ANT rillephotte: 8hItfl entail: mutiny( Kkatevleom 4100 Route I North South lirunirtviek NJ II8822 illintn VI( I F PlIVAIDENT Caney Jr SITA 11 EinTioNs (21214111-402- 3 billrantlitdonjonetcom John R tamplwil AME111141S(l 1)1111111)11 (2031 johncitniphelkokhrojonenc)m OtliP0RATE i iE AREERS 200 iAlierty Stmet New I'mk NV 10281 Fist MPH iii J d OITIR ('11: A i Si kmultIVIIIN I MIA Wed Jan 281 big-stoc- for intra-da- Fed statement snapshot) 10650 i 100 10550 050 10500 WrIlt'Y3PA'd 03 0 -- tid' 10600t 150 10450 10 30 23 18 oir 10400itiliiii 0 50 2 noon 11 Sources: January pause may have begun last week when the Dow began by hitting a high its highest level since before the terrorist attacks of Sept 11 2001 and then sagged finishing 0870 lower for the week High Above the Average The skeptics worry that the broad Standard & Poor's index now trades at 24 times its companies' earnings for the past 12 months according to calculations by research and firm Birinyi Associates in Westport Conn That is far above the historical average of 15 or 16 The S&P 500 trades at an elevated 19 times forecasts for earnings over the next 12 months The Nasdaq 100 which groups the largest stocks traded on the Nasdaq Stock Market trades at 54 times past earnings and 35 times forecast earnings Adding to the concern was last week's surprise shift in the Federal Reserve's stance on interest rates Since August the Fed has been regularly reassuring investors that it planned to leave its tar k money-manageme- WSJ 2 1 3 4 Grow Reuters Market Data rates are iPss attractive than people thought So bond prices fell Higher rates would also be bad news for smaller companies whose stocks have been soaring almost as much as tech companies for the past 15 months Small companies are more dependent on cheap bank loans than are larger which have other companies cheaper sources of money such as commercial paper interest rate unget short-terlow of changed at a 170—"for a considerable period" On Wednesday following a regular Fed meeting policy makers revised that language to say simply that they would be "patient" about raising rates The semantic difference was small but the message seemed loud: The Fed was putting investors on notice that while it won't raise its rate target right away that day is coming Many figured that the Fed was setting itself up to boost the rate target in the spring or early summer on the theory that it would like to avoid raising rates too near the November election Money managers spent the rest of the week arguing about how much importance to give to that tiny shift in language Bond investors for their part knew what to think Interest-ratprospects are by far the most important driver of their market If higher rates are coming sooner than people thought it means that existing bonds with their lower Silver Lining Some analysts however think the Fed shift might not be such bad news for big established companies The Fed statement sugAlan that Chairman gests Greenspan and his colleagues no longer worry as much about deflarecession tion and double-diEven if the Fed does raise its rates rates still will be a bit short-terclose to their lowest levels in decades Such an environment—stilllow rates strong economy—could be good for big companies especially multinationals whose international operations benefit from the weaker dollar e My - TIP steal your passwords THE WEEK de credit-car- tails and more But financial transactions online aren't necessarily less secure than the offline version that leaves a paper trail Here are a few precaution any steps: II Look for the padlock Before entering any information in a financial site such as your bank check for a small padlock symbol at the bottom of the browser border and see if the Web address starts with https instead of the usual http Both cate you have a secure connection Don't open it Most viruses are transmitted attachments by Never open attachments you don't recognize or have not specifically is requested even if the from a friend—they may unwittingly be sending you a virus Especially watch Out for program files or any file in a format you don't recognize Stay up to date With perhaps a dozen new viruses every day make sure you update your virus protection software regularly Most providers let you set up your computer to download updates automatically at regular intervals and many packages also come with a firewall that provides additional security Change your password You should change your password about once a month and make it some- MI thing difficult to guess--addi- ng numbers or symbols helps thwart hackers Also never your password—banks and port people generally never it but scammers do What other surprises do you think are in store for the stock market? Write to: forumsunday03vistcom to give out tech ask supfor By Andrew Blackman CALENDAR 1ON:1r Bush's 2005 Budget: President Bush will submit his budget proposal for fiscal year 2005 to Congress tomorrow as Opposition to yawning deficits grows The budget calls for overall discretionary spendin large part to ing to rise 4 cover the Increasing costs of defense and homeland security The package will Include many new tax proposals Big Day for the Democrats: Tuesday's seven primary contests could John be crucial for front-runne- r Kerry in the Democratic presidential race The states set to decide are Arizona Delaware Missouri New Mexico North Dakota Oklahoma and South Carolina Jan 20041 200 WEEK Jobs In Focus: The monthly unemployment report due Friday will be particularly important Last week bond yielos surged and stocks plunged after the Federal Reserve appeared to hint at a rise in interest rates sooner rather than later and any sign of strength could reinforce that impression 1DJIA 10100 Jan 2g (see chart right INVESTOR'S THIS Thanks to a Bad Day Dow Stocks Finish the Month Almost Mat Doom- virus sweeps millions of computers this is a good time to think about protecting your financial data The latest virus installs a prorn gram that can let hackers take control of your computer meaning they could record whatever you type in on your key board and OF small-stoc- Last Wednesday the Federal Reserve dropped a pledge to keep interest rates low for a considerable periodThe surprise shift immediately jolted the Dow Jones Industrial Average which spent the next two days trying to recover 250 the A sthrough index gave up 26(4 and the Nasdaq Composite which is filled with volatile technology stocks sank 2:7'I Those declines were much sharper than those of the Dow or the SO 500 a broad index that fell 09 for the week Some analysts still are persuaded that stocks have gotten way ahead of themselves They point out that just as investors start getting used to strong double-digi- t earnings gains those gains are likely to taper off By the second half of this year sharp earnings gains will be much harder to achieve because the gains at the end of last year were so strong As the analysts put it "comparisons" will be tougher It wasn't so hard to show a big jump from the weak earnings of late 2002 Showing another big gain on top of the earnings increase put in late last year will be more difficult If people are disappointed by the slowing pace of earnings gains this year their selling could cut the rally short One popular view is that stocks could peak some time in the spring or summer and decline into year's end But optimists say all this worry is another sign of how many pundits underestimate the strength of the rally In their view analysts were chastened by the excesses of the late 1990s and still tend to miscalulate earnings power now If they are right then earnings gains could continue to impress investors and a small rise in interest rates wouldn't matter much Few analysts however think that the year will see a repeat of last year's huge gains and that helps explain why the Fed news last week made people so nervous It is one more reason for stock growth to slow down this year Words Can Hurt 'tights Ill'serred 111 Stay Ahead Of Hackers The Market Is Shaken But Still Stirring By Me Company FIMA R K EtiMi 08 a rough week for stocks while the Nasdaq Composite Index (right scale) shaved off 27 in 10800 v DNA 2200 10600 2150 10500 4 2100 10400 ier7 2250 10700 Nasdaq Mad:11 COMOICIDICOSINIMININCIIS P 2050 103001 29 30 Market Me ' tt - st (st 1 1 F---- WSJ PMIW I 12000 I I 26 27 28 January Source: taiaore JERRYSEINER PRESSURE DROP: The Dow Jones Industrial Average (left scale) slipped :1t- Group 04 -t" c - 1 4 01' 1 —11- Bank of England raises interest rates Thursday as many expect Iti-- ) 4443 LAST WEEK ' Wain GDP Growth Slows: The economy grew at a 4 annual rate in the fourth quarter according to the government's advance estimate of gross domestic product This was slower than the 82 in the prior quarter but still showed signs a rer GDP covery was in motion growth in 2003 was MSRP i stk90630 1 mum I i 'rri-- - ' 'ÉTI' 11 lwr-- r-- IW 4"""--91- 1 o mi - -- kg 1 g i 4 :riept: ':' Lt 01 1 i 41 1 s ' - - - 1641wwwww4aftwit 'kin' r !Inn 1: ( i 4 i 1 '' ! ! i Mutual-FunInvestors Pile In: Investors plowed $153 billion of new cash into stock funds last year the strongest cash flow since 2000 Much of the money went into relatively conservative funds -- -- r 7- - ---r1I '-kg 1 1 - ' i two-yea- In 1 be ' ' I 1 ) ' - - t - ' ------ --- r t41 V""rdio- r 1' - -' I 41' '1 1 imonniamloOttasolifilAluoimomall T kr1‘-- i '' Ilityliii i -0 v 4- -- - 'ci-- 1 r---- F w -- -t A1 - - 1 p Chev Utility Truck 211103 r- ------ 7-- f LA--- I 4 - IF11 Iv -l-e e- ' - - 4i: e ' r--- - 'i -- i 1 P 1 ci it I k film '' -J t -- t - 06rp w 4) Includes all Incentives plus MI Earnings Are Strong: Amazon first-eve- r full-yeprofit as free shipping spurred fourth-quarte- r sales Time Warner posted a profit versus a big loss a year earlier helped by strong results at its f 1st $34922 027170 posted its 1 14 On 'buck 31 and cable businesses Procter & Gamble's profit jumped 22 from a year earlier Exxon Mobil's profit rose 63 In the fourth quarter boosted by a huge onetime gain from a tax settlement Boeing's profit jumped 88 as a $11 billion tax refund helped to rer verse a downward trend y --- e"I - 471 Auto ale stereo 1 service body iocking Cliff 4 d Briefly: The employment-cos- t index rose by the smallest amount In a year during the fourth quarter— good news for the inflation outlook but bad news for workers Consumer sentiment improved In January to its best level in more than two yearsPixer ended talks with Disney about renewing a lucrative partnership that produced such blockbusters as 'Toy Story- - "Monsters Inc and °Finding Nmno" 020618 '1 - — - - ERRY EINER tSOUTHVORDANI ta) Sates: Open 8:30am to 8pm Mon - Sat Service: Open 7ant to 6pm Mon-F- L & Sam to 3pm Sat 10487 South Jordan Gateway 801-495-68- hit iideaall lareallVe‘ plus Ihl 00 Um 'ERRY EINER OSADTIVAKENO Saks: Open 8am to 8pm Mon- - Sat Service: Open 7om to MIDNIGHT Mon PK es Sam to 3pm Sat 1530 South 500 West 801-952-57- 00 t |
