Transcripts

Investment Strategists Offer Their Outlook For Oil & Stocks

PAUL KANGAS: Developments around the globe sent oil prices sharply lower in New York trading today. Light sweet crude for July delivery fell $4.75 or 3.5 percent to $131.93 a barrel. The drop came as China said it will raise diesel and gasoline prices by 18 percent tomorrow. Traders think that price hike could curb demand in China, the world`s second largest oil consumer. Adding to the sell off was a statement posted on the web site of the Saudi Arabian embassy in London, saying it would boost production by 200,000 barrels per day. The statement was later removed from that site.

SUZANNE PRATT: Those lower oil prices helped stocks move higher on Wall Street today as investors defended the psychologically important 12,000 mark for the Dow. After dipping below that level for a second day, the Dow closed at 12,063, up 34 points. Rising oil prices and fears of recession have been pressuring investors for weeks. Erika Miller looks at what may be in store on Wall Street.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Dow managed to close above 12,000 today. But many analysts are betting the index will continue to retest that level over the next few weeks. They say investors have plenty of concerns on their plate, including record energy prices, rising inflation and the possibility of recession. But most strategists, including UBS`s Mike Ryan, do not think stocks are headed significantly lower near term.

MIKE RYAN, CHIEF INVESTMENT STRATEGIST, UBS WEALTH MANAGEMENT: What I think we`re going to continue to do is we`re going to range trade. We`re going to continue to chew through the economic data and we`re also importantly going to look at the guidance we see on the earnings side to see whether we`re going to start to see some downward revisions in earnings for the second half of this year.

MILLER: For now Wall Street is expecting a big second half recovery in earnings. Analysts surveyed by Thomson Reuters are predicting the S&P 500 will post 13 percent profit growth in the third quarter and a 58 percent increase in the fourth, thanks to easy comparisons and strong U.S. exports. Another big unknown for financial markets is the outlook for interest rates. The Federal Reserve`s open market committee meets next week and some traders fear it will hint at the possibility of a rate hike later this year.

RYAN: I think that the near-term catalyst here clearly is going to be the outcome from the FOMC meeting. We don`t expect to see a change in the policy. However, I think the wording of the statement and a potential bias are two of the things we`re going to be focused on very closely.

MILLER: Ryan expects most major stock market indices will end the year near current levels. But S&P`s chief investment strategist Sam Stovall thinks the Dow and the S&P 500 could both eke out a single digit gain for the year. He thinks the third quarter will be lackluster followed by a rally late in the year.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, STANDARD & POOR`S: In this presidential election year, I think now that we`re going to be focusing on the conventions, a lot of negative rhetoric that`s going to occur between now and the election. I think only after November, will we start to see investors breathing a sigh of relief because at least now there`s more clarity for the next four years.

MILLER: The market`s obsession with Dow 12,000 stems partly from the fact that the index last closed below that level on March 17. That was the day Bear Stearns collapsed, a psychological turning point for the stock market. Erika Miller, NIGHTLY BUSINESS REPORT, New York.