Transcripts

Stocks Roar Into March

SUSIE GHARIB: March came in like a bull on Wall Street today. Stocks bounced back following yesterday`s big losses, as investors used the pullback to snap up bargains, especially in the technology sector. The Dow rose 60 points and the NASDAQ jumped 33. The major averages are all higher for the year. But as Scott Gurvey reports, experts are divided on where they go from here.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Although they cooled off in February, the major market averages remain solidly in positive territory after the first two trading months of the year. But there is little in the way of consensus when market pundits are asked to forecast the next major move. Most believe monetary policy will be the major driver going forward. For the year so far, Standard & Poor`s reports telecom, energy, materials and utilities as the leading sectors in that order. But S&P sees a change in the lineup in the months ahead.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, STANDARD & POOR`S: In the aggregate our feeling is that you probably should be under weighting consumer discretionary, telecom and materials, consumer discretionary mainly because it is still a wild card. There still is the concern that maybe the consumers will have overspent their abilities. In the telecom area, even though we have seen a nice movement in this area, a lot of these companies still have challenging cash flow environments.

GURVEY: Many of the forecasts call for 9 to 10 percent gains in the major averages by year`s end, with double-digit earnings growth and assume a benign inflation picture. They also see an end to the long string of interest rate hikes by the Federal Reserve by the time the first half comes to a close. But there are dissenting views on Wall Street. Others see a strong economy giving rise to increased inflation expectations and the Fed continuing to raise rates to protect against inflation.

CHARLES BLOOD, MARKET STRATEGIST, BROWN BROTHERS HARRIMAN: The thing about the interest rate story is that most investors think the Federal Reserve is nearly finished raising interest rates. So the surprise will be when they keep raising rates into the summer. We`re looking for the Federal funds rate to get up to 5 1/2, which is considerably higher than the market thinks right now.

GURVEY: Brown Brothers is looking for what it calls a modest bear market with the averages down as much as 15 percent in the third and fourth quarter. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.