Wall Street digs in for war

Associated Press

NEW YORK – A year and a half ago, the markets seemed invincible. The Dow Jones industrials had soared as high as 11,722, while the Nasdaq composite index had just peaked at 5,048. Now, those days are distant memories and the likelihood that investors will push the markets back to those lofty heights is, at best, a long-term proposition.

Even more modest targets of 10,000 on the Dow and 2,000 on the Nasdaq are questionable in the short term, says a group of market veterans, who have studied the markets and the way they move.

The analysts recently discussed the markets with The Associated Press.

Here’s what they had to say:

  • Ralph Acampora, director of technical research, Prudential Securities:

    “We might see 10,000 over the next month, but the big question is whether we’ve seen the bottom and will stay high, and I don’t think so. We’re at war, and that’s a big deal. … Would we have had as dramatic a drop without the terrorist attacks? No, but we were already rolling over. The market was saying there was going to be a crisis of confidence. We started to see signs of potential recession before this happened. And what we got with terrorists is a guaranteed recession.”

  • Al Goldman, chief market strategist, A.G. Edwards &Sons Inc.:

    “The market is as deeply oversold as I’ve seen in my 40 years. But I can’t tell you when we’re going to go over 10,000 and, if I did, you ought to hang up on me. Before Sept. 11, we were seeing a lot of economic indicators saying that the economy was starting to bottom. … Now we’re going to be in a recession in the third and fourth quarter, but it was created by an aberration. I think the market is about 20 percent undervalued here – I’m using the Dow. If we got up 20 percent we’d be at 10,560 … and I’m looking for that this year. But I certainly would not guess that. Do I think we’ll be there by the middle of next year? Maybe. But the market always goes to extremes, and I’d have to have my head examined to make any more predictions beyond that.

    “For the Nasdaq to get back to 2,000 this year would be a pretty hefty move. It could happen, but do I project it? No. And of course it’s going to be a long time before it’s up around 5,000 again and that will be very difficult because a lot of companies that helped the Nasdaq get high – the dot-commers – are all history.”

  • Arthur Levitt, former Securities and Exchange Commission Chairman:

    “What we’re seeing today is overdone pessimism rather than irrational exuberance. (Investors should) look at the market intellectually rather than emotionally and be patient. I don’t try to predict the direction of the market, where it’s going to go and when it’s going to go. But no, I’m not concerned. I believe the market has acted very well.”

  • Jeffrey Applegate, chief investment strategist at Lehman Brothers:

    “We changed our predictions for the Dow after the terrorist attack. For 2002, we now have a target of 10,000 for the Dow; before we were expecting 11,500. I don’t predict the Nasdaq.

    “We did that because the attacks increased risk, making the equity risk premium higher. The last time this happened was around the Gulf War in 1990, although it didn’t increase risk permanently and stocks eventually went up. That may happen here, but until we have evidence of the success of the anti-terrorist campaign, of which I’m absolutely certain we’ll have eventually, I think the equity risk premium will be higher. We’re also in a recession, so profits are going to be lower.

    “Our projections for the Dow are conservative. I think 11,000 would be a stretch for next year. It’s more likely that you could maybe get back to that number in 2003. We need to have a very good recovery and the anti-terrorist campaign has to be successful. Virtually everything has to go right.”

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