Whatever You Call It, It Hurts
LIKE THE DENTIST WHO PROMISES, "This won't hurt a bit," stock market commentators have been calling for a routine, regenerative pullback in the indexes for months. But, as with many unpleasant but necessary procedures, it can feel more painful and perilous than healthy while underway.
Blue-chip stocks last week logged a 5% retreat from their highs for the first time since the present rally began, almost exactly a year ago. Though some sort of correction was in the game plan of even the widest-grinning bulls, the heavy and lopsided selling intensity during Thursday's terrorism-influenced tumble brought some indications of short-term panic that had been absent in prior market drops.
Given the way the indexes got their feet back beneath them Friday and recovered a small measure of their recent losses, the weakness is generally being viewed as corrective rather than topping action, even if a couple of the chief motivators of the buyers have been compromised.
The Dow Jones industrials slid 355 points, or 3.4%, to 10,240 on the week, settling 4.6% below the recent closing high of 10,737 on Feb. 11. The Standard & Poor's 500 gave up 36, or 3.2%, to reach 1120.
The Nasdaq Composite had begun its pullback earlier, in the final week of January when semiconductor shares and other aggressive sectors surrendered leadership. After dropping 62 points, or 3.1%, to 1984 last week, the Nasdaq is 7.8% from its Jan. 26 peak but actually resumed outperforming the broad market late in the week.
The buckling of the semiconductor stocks was a bright signal that the momentum chasers were tiring, animal spirits were cooling and the supply of new cash heading into stocks was slowing.
Other areas that continued to do well, such as industrial stocks and consumer cyclicals, retained the benefit of investors' doubts based on two factors: economic numbers continued to improve and the stocks' charts showed a resilience that emboldened the buyers.
In the last couple of weeks, though, employment data has been soft, manufacturing gauges have eased off peak levels, gasoline prices are surging and consumer confidence measures have receded. This has presented a hazard for professional investors, who, according to a Merrill Lynch study, have outsized bets on the consumer discretionary sector, including retailers. As for the strong charts, last week's swift downswing on high volume fractured the solid technical picture.
The very recent retreat from cyclical areas has benefited the consumer staples and utilities, two groups that have been "under-owned" by the pros, even if they have hardly been neglected outright. Indeed, around three-quarters of all S&P 500 stocks not in the tech or telecommunications sectors are already trading above their levels of March 2000, even though the S&P 500 remains nearly 30% below its all-time peak set that month.
The bulls' firmest hope is that the current sloppiness in the market turns out the way the late-summer decline did, with the leading sectors re-loading for another thrust higher, because, if the focus turns toward safety and valuation, the picture isn't particularly encouraging.
For a resumption of the cyclical and momentum trades to happen, investors' attention will have to settle on first-quarter earnings results and the supply/demand interplay of the market will need to turn back in stocks' favor.
This profit season is firmly expected to show strong annual gains, thanks to continued productivity advances and easy comparisons to the war-constrained first quarter of 2003. Earnings forecasts for current and future quarters have continued to trend higher in recent weeks.
Demand for stocks was powerful in January, when cash rushed into equity mutual funds at a half-trillion-dollar annual rate and helped the markets scale new rally highs out of the gate. The pace of inflows has slowed substantially, but you can count on Wall Street anticipating the fund-buying binge before the IRA-contribution deadline next month. This activity is far from the considered behavior of the smart money, of course, but it creates buying power all the same.
Supply of new stock is an issue worth watching. Corporate insiders, of course, have been purging shares for months without amounting to a swing factor. Yet the market's tone early last week wasn't helped by General Electric's $3.8 billion secondary stock offering. (GE shares themselves skidded by 6.6% to 30.60.). And in a telling shift of investor tastes, a debut for a Chinese Internet stock, TOM Online, fell flat and is now trading below its offering price.
Table: A Good Year's Work
With a sharp but low-volume rebound Friday following a few days of torrid and lopsided selling, it's not apparent whether the worst is past or something nastier is imminent.
Says Tony Dwyer, the generally bullish strategist at FTN Midwest Research: Corrections "by nature have to look like something worse or they wouldn't happen to begin with." Quite so, and it's also the case that very few powerful, unyielding rallies such as this one have been halted at their first 5% decline.
Of course, it's also true that all market tops begin as something that appears healthy.
WITHOUT ENGAGING IN THE FUTILE exercise of proposing what, precisely, triggered the market's latest selloff, one thing seems clear: Investors are pointedly questioning the "cyclical trade." This is the popular pattern of buying those stocks most tuned to an accelerating economy, including heavy industrials, retailers and semiconductor shares.
The Morgan Stanley Cyclical Index tumbled by 4.1% last week and is down 6.2% from its high of 709 Jan. 21. There was a broad consensus that the cyclical trade would continue to work in the first part of 2004, before giving way to the "quality trade," in which more stable consumer names would gain favor. But, in the market's way, the shift may have taken hold earlier and with less warning than investors had hoped.
It could be that the market is just adjusting its expectations for cyclical strength downward from excessive levels, in the wake of a series of lukewarm economic numbers.
As suggested here a few times in recent months, if non-cyclical, "defensive" stocks are going to outperform, it may well be in the context of a weaker overall market, and absolute gains even in these stocks could be hard to come by.
A big reason for this view is that even the sensible, stable blue-chip consumer names are far from cheap, thanks to a market that has floated nearly all stocks with a surfeit of liquidity.
To illustrate the point, consider the valuations of three widely admired, well-managed, consistent earnings growers: Procter & Gamble, Wrigleyand Anheuser-Busch. All three stocks have edged higher since the broad market hit its recent high Feb. 11, and all promise solid double-digit percentage earnings growth this year.
Yet these stocks are more expensive relative to earnings than they were when the overall market hit its ultimate peak of overvalued silliness in March 2000.
P&G, which raised its earnings view last week and is showing good fundamental momentum, has already gotten the credit from investors for the good news. The stock trades at 23 times earnings for the fiscal year ending in June. Back in March 2000 -- granted, after a nasty drop due to a profit warning -- the P/E was closer to 17. Similarly, Wrigley now commands 27 times 2004 profits versus 21 at the bubble peak. And Anheuser-Busch is at 19 times this year's forecast, compared with under 17 four years ago.
Looking at another historical haven, the stocks in the Dow Jones Utility Average yielded 4.5% in March 2000 versus 3.4% now. Of course, Treasury yields were above 6% back then and are below 4% now, so the comparative yield might look okay today.
Still, relative value and absolute value are quite distinct. All these numbers underscore the fact that, in the present environment, almost nothing is demonstrably cheap -- not cyclical stocks, noncyclical names, bonds or real estate.
IT'S NOT TOUGH TO UNDERSTAND WHY financial stocks have outrun the overall market over the last couple of years.
Financial companies sell one of America's most coveted products -- debt. Short-term interest rates remain at multidecade lows and the spread between short and long rates has delivered generous spread profits to lenders. Mortgage demand has reached historic heights and low rates have kept many would-be deadbeats afloat.
Now, one of the toughest but most crucial questions for investors is whether this set of conditions means the climate for financial shares is as good as it gets.
The fate of the financial sector has probably never been quite so important to the overall market as it is now. Financial stocks comprise 22% or the S&P 500 market capitalization, and an even larger portion of earnings. And the stalwart performance of bellwether financial stocks has kept market analysts from becoming overly concerned with the ultimate severity of the recent pullback in the indexes. Any crack in these stocks and a vital prop for the broad indexes would be compromised.
Strategists at Smith Barney, who are taking a generally defensive posture toward the market, last week moved to an underweight recommended position in bank and other financial stocks. This runs counter to the generally complacent and forgiving posture that most professional investors are taking toward the group.
The rationale for the shift at Smith Barney was that the beneficial effects of a steep yield curve are already well known, mortgage refinancing activity has ebbed and the stocks' relative valuation has ascended to levels that has historically preceded periods of underperformance.
UBS Investment Research analyst John McDonald points out, too, that the long-awaited growth in demand for commercial loans hasn't yet arrived. He also notes that large-cap banks are trading at about 79% of the market's price-earnings multiple, well above the group's historical relative multiple of 68%. J.P. Morgan's global strategy team adds that financials are one of the sectors that remain "vulnerable to disappoint" earnings expectations this year.
The Slides of March: Concerns about the economy, plus renewed terrorism worries, sent the Dow lower by 355 points last week, as cyclicals GE, Caterpillar and Honeywell suffered.
Another component of the bear case on financials, of course, is the near-universal expectation that interest rates are bottoming and will have rise -- at some point. This gets to the core of the debate on these stocks, because the bond market has repeatedly been forced by soft employment conditions to defer its best guess of when the Fed will boost rates.
The 10-year Treasury bond yield, now around 3.7%, indicates a benign rate environment might last a lot longer. In that case banks may be able to milk those spread profits for a good deal longer, delivering decent earnings growth and keeping the stocks aloft.
The latest retreat in rates could well spur another round of mortgage refinancing demand, and the persistent buying of Treasuries by foreign central banks has kept the credit cycle in a healthy spot for longer than would otherwise be expected. There have also been renewed expectations that a spate of bank mergers will arise, which could lend a bid to those banks considered more likely to sell than buy.
Financial stocks seem likely to remain for a while at the centerline of the bull/bear tug-of-war. To position aggressively in bank shares requires an implicit bet that rates won't rise quickly any time soon or that a merger wave will arrive to bail out so-so fundamentals. When the punch bowl begins to look near empty, though, that's a bet that will face even longer odds.
LIKE INDULGENT PARENTS, INVESTORS for most of the last year have rewarded both good and bad behavior by companies, seldom penalizing the stocks of those with earnings shortfalls. More recently, though, investors have been loath to spare the rod, which means scouting for potential earnings disappointments has become important again.
Gary Tapp, a quantitative market analyst at SunTrust Robinson Humphrey, has a model for determining potential earnings shortfalls, which, he says, has been about 65% accurate in the past. The hazard of a weak earnings report is exacerbated when the stock in question appears expensive relative to the market's own history. Combining these measures, Tapp generates a list of stocks embedding high investor hopes yet with above-average risk of pulling up lame in their next earnings report.
Among S&P 500 members, Tapp's watch list includes ad agencies Omnicom and Interpublic, Noble, U.S. Bancorp, Schering-Plough, Paychex, Great Lakes Chemical, Rowan, Circuit City and Allegheny Technologies.
难以避免的阵痛
就像牙医总是向患者保证说"这一点都不疼"一样，股市评论者们几个月来也是一直在对投资者说，股市上行过程中出现短暂回落实属正常，很快又会重拾升势。然而，正如拔牙和其他所有不舒服却无法避免的经历一样，股市的回落让人们感受到的更多是痛苦和危险。
上周，美国蓝筹股一度从高点回撤了5%，自股市在大约一整年之前开始本轮强劲反弹以来，出现这么大的回撤幅度尚属首次。尽管就连最乐观的市场人士也早就料到会有这一天，但是，上周四西班牙恐怖袭击事件在市场引发的沉重抛盘还是带来一些阵痛，这在以前的几次市场回落过程中是很少见的。
上周五各指数略有回升，稍稍抵消了近期的部分跌幅。有鉴于此，尽管市场上刺激买家的一些主要因素已发生动摇，但人们还是普遍相信，近期的弱势只是回调，并非见顶后的反应。
道琼斯工业股票平均价格指数上周累计跌355点至10,240点，跌幅3.4%，较2月11日创下的近期收盘高点10,737点低4.6%。标准普尔500指数跌36点至1120点，跌幅3.2%。
那斯达克综合指数早在1月份的最后一周就率先开始了回调走势，当时半导体和其他冲劲十足的类股从领涨市场的位置退了下来。那斯达克综合指数上周下挫62点至1984点，跌幅3.1%，较其1月26日创下的近期高点低7.8%；不过到上周后期，该指数实际上已经恢复了强于大盘指数的走势。
半导体类股的近期走势说明，市场中的跟风者已经有所收敛，过热的人气有所冷却，新资金进入股市的速度也开始放缓。
工业类股和周期性消费品类股等其他领域表现仍很不错，在目前经济数据继续呈现改善势头和技术图表显示股市具备相当后劲的情况下，投资者选择看好这些类股。
然而在过去几周里，就业数据一直差强人意，制造业指数也已经从最佳水平滑落下来，汽油价格一直在回升，同时消费者信心指数有所下降。这对专业投资者而言相当危险，因为根据美林公司(Merrill Lynch & Co.)的研究结果，目前专业投资者正重仓持有包括零售类股在内的消费相关类股。而技术指标方面，上周的放量下行破坏了技术图表上稳固的上行形态。
周期性股票近期的回撤反倒让日用品和公共事业类股受益，专业投资者尽管没有完全忽视这两类股票，但持有量一直较少。实际上，标准普尔500指数成份股中四分之三的非科技和电信类股目前的股价要高于2000年3月份时的水平，而与此同时，该指数本身要比当时创下的历史高点低近30%。
最令看涨者们最希望看到的是，当前市场的颓势同去年夏天十分类似，市场中原来领先的类股已经重整旗鼓，做好重新上扬的准备。如果市场的重点转向风险较小、估价尚有余地的类股，那么情形就没那么乐观了。 若要市场恢复对周期性股票的兴趣，并重新开始追风买进，投资者的视角必须落到公司第一季度业绩之上，市场中的供需关系也需要转至对股票有利的方向。
预计本次收益季节中，公司业绩按年对比很可能实现强劲增长，原因是近来生产率显著增强，且上年同期受战争影响各公司的对照基数都较低。近几周发布的当前和未来季度的业绩预期都继续表现出上调的趋势。
1月份股市的需求很强劲，当时进入股票共同基金的现金流折合成年率为5,000亿美元左右，帮助市场创下了新高。如今资金的流入速度已经明显放缓，而在下个月个人退休金帐户(IRA)最终缴费期限到来之前，估计市场上不会出现狂热的基金购买浪潮。这虽然不同于基金经理们经过深思熟虑的买入行为，但同样能够在股市中产生购买力。
新股供应值得关注。近几个月来，公司内部人士一直在清理手中的股票，这对市场并未造成重大影响。不过,上周通用电气公司(General Electric Co., GE)通过大股东转售向市场配售了38亿美元的股票，该公司的股价因此下挫6.6%至30.60美元。而中国互联网公司TOM Online新上市的股票也在那斯达克市场受挫，跌至其发行价之下，这也是投资者的兴趣发生转变的一个写照。
在连续几个交易日一边倒的猛烈下跌后，上周五市场大幅反弹，但成交量不大。现在尚不清楚是最糟糕的时候已经过去，还是即将面临更惨烈的局面。
托尼?德怀尔(Tony Dwyer)基本上算是FTN Midwest Research最乐观的策略师了，而他也表示，回调从本质上来说应该不是件好事，否则从一开始就不会发生了。的确如此，而且事实证明，很少有哪次调整（像这次这样）在出现第一个5%回撤后就嘎然而止。
当然，市场见顶时的初期表现往往看上去都是正面的。
不必无谓地争论具体是什么原因引发了市场最新一轮抛盘，有一点已经很清楚：投资者正越来越尖锐地质疑所谓的"周期类股交易"模式。这种颇为流行的交易模式就是买入那些在经济加速增长时期表现最好的股票，其中包括重工业类股、零售类股以及半导体类股。
摩根士丹利周期类股指数(Morgan Stanley Cyclical Index)上周下跌4.1%，而且自1月21日达到709点的高点以来该指数累计跌幅已经达到6.2%。市场此前曾有广泛共识，认为"周期类股交易"在2004年上半年将继续大行其道，此后将逐步让位于"稳健股交易"，在后一种交易模式下，那些稳健的消费类股将获得市场青睐。但是，市场实际表现证明，这种交易模式的转换发生得早于投资者的预期，而且事先也没有足够的警示信号。 可能的一种情况是，在一系列不佳的经济数据发布后，市场将此前对周期性类股的过高预期向下调整。
正如本栏目最近几个月来所屡次提及的那样，如果非周期性"抗跌股"的表现开始强于大盘，那么股市的总体表现这时很有可能较为疲弱，而且即使是抗跌股这时也难以成为绝对的赢家。
作出这种判断的很大一部分原因是，由于市场内流动资金过于充足，几乎所有股票都出现了较大涨幅，因此即使那些稳定的蓝筹类消费类股也很不便宜。
为了解释这一点，我们不妨看看三只在市场广受尊重、公司管理良好而且收益持续增长的股票：宝洁(Procter & Gamble)、Wrigley和安海斯(Anheuser-Busch)。自从大盘于2月11日达到近期高点以来，这三只股票都有小幅上涨，而且三家公司都预计今年每股收益将出现两位数的增幅。
然而，与2000年3月份整体市场因股价过高而出现泡沫时相比，上述三只股票的本益比现在甚至更高。
宝洁上周调高了收益预期，同时该公司基本面形势也呈现良好势头，但这些好消息早已被市场提前消化。该股目前价格为本财政年度每股预期收益的23倍，而在2000年3月时，当宝洁因发布利润预警而导致股价大幅下挫之后，该股本益比当时接近17倍。与宝洁类似，Wrigley目前价格为2004财政年度每股预期收益的27倍，而2000年股市泡沫高峰期时为21倍。安海斯目前股价为本财年每股预期收益的19倍，4年前的水平为不足17倍。
再看看另一个传统的避风港，道琼斯公用事业股平均价格指数在2000年3月份的涨幅为4.5%，高于现在3.4%的涨幅。当然，当时国债收益率高于6%，而现在为低于4%，因此该指数当前的相对涨幅看起来还算可以。
当然，相对价值和绝对价值截然不同，但这些数字表明了一个事实，即眼下几乎没有什么投资工具是便宜的，不管是周期性类股、非周期性类股、债券还是房地产。
金融类股过去一两年中表现要领先于整体市场其实不难理解。
金融公司承销美国最令人垂涎的产品之一──债券。目前短期利率处于数十年低点，因此短期和长期利率之间的利差为出售债券的公司带来了丰厚的利润。抵押贷款需求达到历史高点以及低利率水平使得许多本来无法还债的人仍得以维持。
眼下，对于投资者来说，最难以回答但却最至关重要的一个问题就是，当前的利率环境是否意味著金融类股的好局面还会维持下去。
金融类股的命运可能还从未像现在这样对股市的整体走势起著如此至关重要的作用。在标普500指数成份股中，金融类股的市值占到22%，而每股收益所占的比例更大。金融类股领头羊的坚定表现使得市场分析师对股指近期回落的严重后果没有过度担忧，但是，一旦这些股票受到打击，那么整体市场将失去一支至关重要的支撑力量。
美邦(Smith Barney)的策略师总体上对整体市场持看跌观点，上周他们将银行和其他金融类股的评级调整为减持。这跟大多数专业投资者对金融类股总体的乐观看法完全不同。
美邦对金融类股作出调整的理由是，利差扩大给金融类股带来的有利影响早已为市场所共知，按揭贷款再融资活动已经减缓，而且金融类股的相对估价已经达到了历史上该类股表现弱于大盘之前的水平。
UBS Investment Research的分析师麦克唐纳(John McDonald)也指出，市场期盼已久的商业贷款需求增长并没有出现。他还表示，银行类大型股目前的本益比水平为市场总体水平的79%左右，远远高于68%的历史平均值。JP摩根(J.P. Morgan)的全球策略团队也表示，如果今年的收益预期令人失望，那么金融类股将是容易因此而受到冲击的类股之一。
另一个对金融类股不利的因素是，市场几乎一致预期，利率已经触底并将在某个时间上调。这触及了市场对金融类股相关争论的本质，因为受就业形势疲软影响，债券市场投资者已经多次将其预期的美国联邦储备委员会(Fed)加息时间向后推迟。
10年期美国国债收益率目前在3.7%左右，这表明市场预计低利率形势将继续维持相当长一段时间。在这种情况下，银行就可以在更长时间内享受利差带来的丰厚利润，从而获得强劲的利润增长和并使股价维持在较高水平。
利率下降可能会引发又一轮抵押贷款再融资热潮，而外国央行对美国国债的持续买盘使得信贷市场得以在更长时间内处于良好水平。另外，市场中对于银行业内部将出现大量并购的预期再度高涨，这将使那些被认为更可能出售资产而不是买进资产的银行在股价方面获得支持。
看来，金融类股在一段时间内仍将成为决定市场未来走势向好或者向坏的关键力量。大量买进银行股需要投资者绝对相信利率短期内不会上调，或者银行间并购浪潮将及时到来并推高那些基本面形势一般的银行类股。
在去年的大多数时候，投资者表现得有些像纵容的父母，不管公司发布好消息还是坏消息，大多数公司的股价都有良好表现，那些收益低于预期的公司也很少受到投资者抛售股票的惩罚。但最近以来，投资者不得不变得严厉一些，这意味著分辨出哪些公司的收益可能令人失望再次变得至关重要。
SunTrust Robinson Humphrey的定量市场分析师塔普(Gary Tapp)建立了一个可以区分哪些公司收益可能会低于预期的模型，他说，这个模型在过去的准确率大约是65%。如果一只收益可能低于预期的股票相对于整体市场来说价格有些偏高，那么该股因收益报告疲软而遭到打击的程度就将放大。综合运用各种衡量指标，塔普列出了一个名单，其中都是投资者寄予厚望、但下一个收益报告表现不佳的风险高于平均水平的公司。
塔普名单上的标准普尔500指数成份股包括：Omnicom、Interpublic、Noble、U.S. Bancorp、先灵葆雅(Schering-Plough)、Paychex、Great Lakes Chemical、Rowan、Circuit City以及Allegheny Technologies。
