The short-term focus on Wall Street centers on doubts about the pace of recovery in corporate profits and economic growth this year.
But impediments in the long-term view are keeping a lid on stock prices as well.
Despite troubling numbers in terms of job growth, economists believe a normal economic rebound is under way.
Analysts at Thomson Financial/First Call predict that corporate profits in the current quarter will be up 3 percent from the second quarter of 2001, the first year-over-year gain in quarterly profits after five straight quarters of declines.
Nonetheless, a basketful of worries about 2003 is nagging at market prognosticators who look beyond the next earnings release or economic report.
Forecasting market news is hard enough; gazing into the 2003 crystal ball is much more daunting.
But that doesn’t mean professional money managers aren’t trying.
“As you get into 2003 and beyond, you see a more constrained outlook for sales growth,” said market strategist Jerrold Senser of Chicago-based Institutional Capital, which manages portfolios of large-capitalization value stocks.
Moreover, Wall Street analysts already hold fairly optimistic assumptions about profit margins overall, leaving little room for expansion next year, he told an investment conference in Chicago on Thursday.
A popular view among long-term analysts is that consumer spending, having held up well in last year’s economic downturn, won’t boost growth in the months ahead.
Separately, few analysts are optimistic about a significant pickup in business spending on technology and telecommunications anytime soon.
“For certain sectors, like telecom and technology, it’s going to be a long time,” Senser said.
Unremarkable growth in consumer spending and continued reluctance among business managers to invest would spell uninspiring results in the stock market next year.
He’s predicting average returns of 6 percent in the stock market, adjusted for inflation, down from about 7 percent historically.
On the other hand, Senser said, “we’re not looking for an outright downturn. What you would need for that to happen is a pickup in inflation and interest rates.”
Six months from now, Senser’s outlook might seem overly cautious or woefully optimistic. But it represents a view that is currently widespread enough to temper any stock market rally this spring or summer.
Thursday’s action: Major stock indexes retreated in thin trading Thursday, shaving a third of Wednesday’s 305-point advance by the Dow Jones industrial average.
A downbeat April sales report by retailing giant Wal-Mart Stores and an anthrax scare involving mail addressed to the Federal Reserve in Washington helped nip the exuberance of Wednesday’s rally.
The Dow Jones average fell 104.41 points, or 1 percent, to 10,037.42. Technology stocks in the Dow, which were big winners Wednesday, led Thursday’s retreat. Microsoft dropped $2.85, to $52.12. Wal-Mart lost $1.40, to $54.99.
Defensive stocks Philip Morris, Procter & Gamble and Johnson & Johnson posted gains.
The broader Standard & Poor’s 500 index fell 15.84, to 1073.01. The Nasdaq composite index gave back 45.80 points of Wednesday’s 122-point advance, ending at 1650.49. The Russell 2000 index of small-company stocks fell 8.36, to 501.39.
New York Stock Exchange floor volume totaled 1.15 billion shares, well below Wednesday’s 1.53 billion shares. Losing stocks outnumbered winners by nearly 2-1, the mirror image of Wednesday’s 2-1 advance.
Nasdaq trading volume reached 1.78 billion shares, less than the 2.4 billion shares that changed hands Wednesday. Nasdaq losers outnumbered winners by nearly 2-1.
Treasury securities, which were pummeled in Wednesday’s stock market spurt, recovered some of their losses.
Local news: After the close of regular trading, Chicago-based bond fund manager John Nuveen declared a 2-for-1 stock split, to be distributed June 24 to shareholders of record June 3. Nuveen shares hit an all-time high, $59.83.
