Analysts disagree about recovery
NEW YORK – Not long ago, it seemed like the worst was over. As the first quarter wound down, the credit crisis appeared to be easing, the housing market seemed like it might get some footing and Wall Street was growing confident that it had finally found a bottom after months of volatility.
No one expected oil would shoot up 30 percent in just three months.
With new record crude prices almost daily and more negative news for the financial sector combining to generate a new round of volatility, Wall Street is left in disagreement over whether there will be any kind of market recovery soon.
“Frankly, my concern is that some folks may be wanting it too badly,” said Gregory Miller, chief economist at SunTrust Banks. “There is a bottom out there, we are going to get through this, but I’m in the camp that thinks this is a very long process.”
Although the major indexes have gone through some wild swings in recent weeks, they have hovered above the low points seen in mid-March. Sam Stovall, chief investment strategist for Standard & Poor’s Equity Research, thinks the market will stay there for a while. “Until we get more positive catalysts, we will likely meander within the mid-March through mid-May range,” he said, referring to a swing of between 8 percent and 9 percent for the Dow Jones industrial average during those months.
“Because sentiment was so bad at the March bottom, that was one of the reasons our technician thought that the worst was likely over,” Stovall said. “It did improve from then.”
But while the sentiment on Wall Street gained some momentum, consumer sentiment went in the opposite direction as gas prices climbed.
“Consumer confidence … has gotten dramatically worse,” Stovall said. And with gas prices remaining at record levels, he doesn’t expect that measure to improve any time soon.
But Stovall notes that investors tend to be more flexible than pinched consumers. “The confidence of Wall Street, I believe, fluctuates more rapidly than the confidence of Main Street,” he said. “You can’t really compare one to another.”
Barring some new shock, Stovall thinks the market has likely touched, or at least come close to, its bottom. “If we haven’t gone any lower as a result of all these worries,” he said, “it would have to be some new worries that have yet to be anticipated.”
Wall Street is about to get a host of new information that will help it decide what direction to head in. Investment banks start reporting second-quarter results Monday. May producer price and industrial production data, along with new housing figures, will come in starting Tuesday, and the Federal Reserve’s next decision on interest rates comes the following week.
If that combines to even a modest positive, Stovall said, investors might start to take some chances that could boost the market. “Investors, in my opinion, are like hyperactive first-graders playing musical chairs,” he said. “They’re always trying to out-anticipate everybody else.”