Transcripts

The Return of the Wall Street Roller Coaster

SUSIE GHARIB: Another tough day on Wall Street as all the major stock averages fell sharply. The Dow dropped 121 points, its sixth loss in the past seven sessions and the NASDAQ fell 26 points. The sell off escalated in the afternoon, reflecting a recent pattern of late day volatility. Suzanne Pratt takes a look at whether that trend will continue and what other factors will drive trading in the weeks ahead.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For weeks, credit problems, the housing downturn, surging energy prices and a sliding dollar, has weighed on investor sentiment. In spite of all the negative news, the U.S. stock market has still been surprisingly resilient, but it has also been extremely volatile. The Dow was up about 5 percent to 2007 though it is 7 percent below the record high of more than 14,000 that it reached on October 9th. Most market pros, including Chief Investment Officer Georges Yared predict the big price swings will continue well into next year.

GEORGES YARED, CHIEF INVESTMENT OFFICER, YARED INVESTMENT RESEARCH: I think there`s going to be a lot of what we saw in 2007, were volatility and volatility. I mean we`re going to have those up weeks and then those disastrous down weeks. Certainly, the retail sector I don`t think is off to a great start in the fourth quarter.

PRATT: As for what will dictate trading in the coming months, some experts say it`s earnings or more specifically, the lack of earnings. Gail Dudack believes financial firms are about halfway finished issuing write downs related to sub-prime mortgage debt. But that`s still a large overhang.

GAIL DUDACK, CHIEF INVESTMENT STRATEGIST, DUDACK RESEARCH GROUP: The stock market can handle almost any bad news. What it can`t handle is unknowns and the number of unknowns with the sub-prime (INAUDIBLE) write offs, it`s diminishing, but it`s still big.

PRATT: Many experts believe 2008 will be an up year for stocks, with the major averages gaining about 10 percent. Some expect to see a rebound effect from financial shares, once all the bad news is out. Others points out that U.S. stocks almost always do well in presidential election years, although they worry that the leadership change will spell trouble for stocks next year.

DUDACK: I think the only real risk to 2008 will be politics, something no one`s talking about right now, but there are many policies that could actually change with the new administration which the market may like or not like.

PRATT: The bull market recently celebrated its fifth birthday. Most experts believe its run is not yet over, but they also point out it is an aging bull. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.