stocks may tumble

Stocks may tumble

January 12, 2003
THE stock market may continue its losing streak given Wall Street managed to close barely better than break even on Friday.

News that the US' unemployment rate was stuck at an eight-year high put a damper on an exuberant New York market.

The blue chip Dow Jones industrial index closed up less than nine points at 8,784.9, while the Nasdaq composite index gained nine points to 1,447.75.

The Standard & Poor's 500 stock index barely budged, closing the week down .03 of a point at 927.55.

Locally, the benchmark S&P/ASX 200 index finished the week on a lower note for the fourth straight session, down 1.4 points at 3063.5, while the all ordinaries index fell 0.6 of a point to 3035.









Commonwealth Securities senior analyst Craig James said the profitability of major US companies will be uppermost in the minds of domestic investors this week.

The US reporting season begins in earnest on Tuesday with earnings from Intel, while Apple Computer follows on Wednesday.

IBM and General Motors are slated to report in the US on Thursday.

"An absence of negative earnings surprises together with encouraging comments on the future would keep investor minds off war fears and maintain the more buoyant mood on global markets," Mr James said.

On the data front this week, the January reading on consumer confidence is due on Wednesday but little change is expected to have occurred.

Consumers appear upbeat given retailer reports of solid Christmas spending.

Confidence levels are also supported by the strengthening Australian dollar.

The Australian dollar's gains last week to just shy of 58 US cents have put the currency in sight of values not seen for two and a half years.

The local dollar rose to 57.90 US cents late last week.

Australia's dollar appears to have finally found some favour with investors, having lagged other currencies such as the New Zealand dollar in making substantial gains against the US unit in late 2002.

Brokerage Salomon Smith Barney believed the Australian dollar has begun the new year on a solid footing based on good demand from international investors, especially Japanese; and a run up in commodity prices.

"While the path higher for the Australian dollar is unlikely to be smooth, we expect a return of more confidence in the global economic outlook to see the Australian dollar trade around $US0.60 in the second half of 2003," Salomon Smith Barney's Paul Brennan said.

Meanwhile in corporate circles this week, NRMA's long-awaited meeting to decide its board's fate could set a record with up to 4000 of the motoring body's two million members expected to show up on Tuesday.

NRMA remains wracked by two factions - one, the Members First Group, associated with former president Nick Whitlam, and the rival Motorist Action Group led by Richard Talbot.

Elsewhere, the likely fate of key players in the $5.6 billion demise of HIH Insurance will be aired in public for the first time tomorrow.

HIH royal commission lawyers last month handed the parties a 4,236-page written submission after digesting around 1.2 million documents and more than a year of testimony.

The insurance giant collapsed in March 2001, becoming Australia's largest corporate failure.