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According to

Lehman Brothers

analyst Jeffrey Applegate, the market hasn't found the bottom yet. And his cautious words support his thesis that "we're in a profits recession at best, a full-blown recession at worst."

One of the most bullish analysts on Wall Street, particularly on technology, Applegate reduced his 2001

Standard & Poor's 500 aggregate earnings per share growth forecast to $54, a decline of 4%, from $58.50, which would have been an increase of 4%. Applegate cut the aggregate 2002 earnings forecast for the S&P 500 components to $61 from $66. The revised figure would represent an increase of 13% from 2001. For this year, he projected a total return of 22% for the S&P 500.

Applegate also said his forecast assumes that after-tax margins for the industrial companies in the S&P will drop to 6.6% in 2001 from an estimated 7% at the end of 2000, but added that "as demand stabilizes and heads up again, margin expansion should resume." Applegate also cut his 2001 price target for the S&P 500 to 1600 from 1675, but that would still be an increase of almost 28% from the current level.

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The index lately climbed 5.33, or 0.4%, to 1251.19.

Applegate, whose new 2001 EPS forecast falls 6% below analysts' consensus expectations of $57.57, said he expects earnings to reach a trough in the third quarter, or seven to nine months after the

Fed first began to ease.

"We do not see capital spending, 60% of which is on technology, recovering until the third quarter," he said. Given that forecast and the declining equity markets, Lehman is now looking for the Fed to reduce the

fed funds rate by another 150 basis points to 4% by the June 27

Federal Open Market Committee meeting.

"Given current travails, this forecast may strike some as implausible. However, keep in mind that whether it's a hard or soft landing, the average forward one-year stock market rebound from the market trough is 38% from recessions and 31% from soft landings," Applegate wrote.