Transcripts

What The Experts Are Saying About The Future of the Credit Crisis

SUSIE GHARIB: In recent weeks, stocks have been on the upswing on the growing belief that the worst of the credit crisis could be over. But as Erika Miller explains, most Wall Street pros don't see a strong recovery for stocks anytime soon.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a long wait, hope appears to be creeping back into the stock market. The S&P 500 has risen 11 percent from a 19-month low hit March 16. S&P market strategist Alec Young credits optimism about earnings and the economy.

ALEC YOUNG, MARKET STRATEGIST, STANDARD & POOR'S: There's a sense that while things are still kind of murky in terms of the housing market and high gas prices, that overall, you know, the worst of the economic news is over in terms of its impact on earnings and that pressure will be less as we move forward than it has been over the last few months.

MILLER: In addition, he says investors believe credit conditions are improving, thanks to the Fed's massive injection of liquidity into the banking system. But some analysts are more bearish about the near-term outlook for stocks, warning this could be a suckers' rally. Citigroup's Tobias Levkovich worries corporate earnings will disappoint in coming quarters due to a lagging impact of tight credit conditions.

TOBIAS LEVKOVICH, CHIEF US STRATEGIST, CITI: I would expect that it is going to take a few months for companies to come out and tell investors that the business conditions aren't quite as good as they thought going back a month or two even. And that tends to take a little bit more time than we would like. Usually summer is a tough time in stocks.

MILLER: Historically, May has been the start the weakest six-month period for stock prices. That is reflected in the well-known Wall Street adage sell in May and walk away. However, some analysts think this year will buck the trend.

YOUNG: It's not as simple as looking at the calendar. And we think, given how much bad news has been factored in on January to April in 2008, it is likely that the summer will produce better performance in the U.S. market.

MILLER: Bulls and bears agree there's little likelihood of a huge, runaway rally in stocks. They say that won't happen until there's stronger evidence the economic and earnings outlooks are improving. Erika Miller, NIGHTLY BUSINESS REPORT, New York.