Despite Expected Greenspan Wariness, Stocks Gear Up to Head Higher

It doesn't appear that the market will be tempered by expectations for overvaluation concerns from the Fed chief.
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Liquidity trumps all.

This, at least, has been the lesson driven home to investors lately. Despite Asian and Russian and Brazilian shocks, despite the mistakes that the fine people at

Long Term Capital Management

made, despite earnings growth at U.S. companies slowing to a crawl, the market continues to rise -- levitate, some would say -- buoyed by a steady flow of cash.

Now, given this lesson, let us say that the president of the United States in his State of the Union address made the suggestion that some Social Security funds -- say $3.6 to $6.7 billion a month -- get channeled into the stock market over the next 15 years. What would that do to the stock market?

Yes, stocks look like they are headed higher this morning -- even in the face of worries that

Alan Greenspan

, in his testimony this morning before the

House Ways and Means Committee

, will try to talk them down. It is almost a given on Wall Street that the chairman feels stocks are overvalued and that he is worried. Two moderate

Federal Open Market Committee

members --

Alice Rivlin

and

Jack Guynn

-- voiced concerns earlier this month, and it is doubtful that their thinking is very far from Greenspan's. But though he might want to take a little air out of the stock market, Big Al may deem world markets still a little fragile to pull out the pin.

And though Greenspan might want to take a little air out of the stock market,

Bill Clinton

has suggested that some Social Security funds get put into it. If the president is ready to put money into the market, who's to say that stocks are overvalued?

"I think they should wait until the P/E gets to 40," said Bill Meehan, market analyst at

Cantor Fitzgerald

, of the president's investment plan. "Which index do you use? I would say the

DOT

TheStreet.com Internet Sector

index. The

Nasdaq 100

would be for widows and orphans. Everyone else, the DOT would be the way to go."

Meehan, for one, hopes that in Greenspan's 10 a.m. testimony the

Fed

chief decries Clinton's investment plan. "Unless Mr. Greenspan throws some cold water on the bulls, we could get to 1290 on the

S&P

in short order, and a move to 1350 is possible," he said. "It's a dangerous game. If he doesn't intervene a little, at least verbally, we could see a blowoff top."

Further bolstering stocks this morning: the pleasant glow from

Microsoft's

(MSFT) - Get Report

blowout quarter and its suggestion that the future looks even brighter than analysts think (a change from the company's usual chatter about how growth going forward may be more difficult). At 9 a.m. EST, the

S&P 500

futures were up 10.8, about 8 above fair value and indicating a positive open.

With stocks looking stronger, Treasuries were weak. The 30-year was down 26/32 to 100 28/32, lifting the yield to 5.19%.

In Japan, surging real-estate shares -- beneficiaries of an article in the

Financial Times

suggesting the ruling

Liberal Democratic Party

is considering putting money into the sector -- helped send the

Nikkei

up 257.61 to 14,028.05.

Hong Kong stocks were basically unchanged in very light trading. The

Hang Seng

added 24.8 to 10,314.91.

With expectations of a good open in the U.S., European markets were all solidly higher. In Frankfurt, the

Dax

was up 92.72, or 1.8%, to 5165.87. In Paris, the

CAC

was up 60.13, or 1.5%, to 4176.12. And in London, the

FTSE

was up 67.3, or 1.2%, to 6094.9.

Wednesday's Wake-Up Watchlist

By Brian Louis
Staff Reporter

    (Earnings estimates from

    First Call

    )

    General Electric (GE) - Get Report posted fourth-quarter earnings of 80 cents, in line with the 13-analyst estimate and up from the year earlier 70 cents.

    General Motors

    (GM) - Get Report

    posted fourth-quarter earnings of $3.25 a share, excluding special items, up from the year-earlier $1.93. The 10-analyst outlook called for earnings of $2.65. Including charges, GM earned $2.61, compared with $2.33 in the year-ago period.

    Microsoft after the close yesterday posted second-quarter earnings of 73 cents a share, crushing the 23-analyst outlook, which called for 59 cents. In the year-earlier period, Microsoft earned 42 cents.

    AlliedSignal

    (ALD)

    posted fourth-quarter earnings of 62 cents a share, in line with the 14-analyst view and up from the year-ago 54 cents.

    AMR

    (AMR)

    , parent of

    American Airlines

    , posted fourth-quarter earnings of $1.09 a share, falling short of the 11-analyst view of earnings of $1.16 a share and down from the year-ago $1.16.

    Boise Cascade

    (BCC) - Get Report

    posted fourth-quarter operating earnings of 8 cents a share, beating the 14-analyst outlook of a loss of a penny.

    Bristol-Myers Squibb

    (BMY) - Get Report

    reported fourth-quarter earnings of 90 cents, excluding a charge, in line with the 28-analyst outlook and up from the year earlier 78 cents.

    Burlington Resources

    (BR) - Get Report

    posted break-even results for the fourth quarter, beating the 26-analyst outlook of a 4-cent loss, but down from the year-ago 20 cents.

    Caterpillar

    (CAT) - Get Report

    posted fourth-quarter earnings of 83 cents, in line with the 18-analyst view.

    Chancellor Media

    (AMFM)

    has hired

    BT Alex. Brown

    to explore "strategic alternatives." Those alternatives may include, but aren't limited to, the sale, merger or consolidation of one or more of the company's operating divisions, Chancellor said.

    Comcast

    (CMCSA) - Get Report

    said it is selling its cellular-phone business,

    Comcast Cellular

    , to

    SBC Communications

    (SBC)

    for approximately $1.7 billion, including the assumption of approximately $1.3 billion of debt.

    Data General

    (DGN)

    posted first-quarter earnings of 7 cents a share, excluding gains, beating the nine-analyst view, unchanged the year-earlier period.

    Exxon

    (XON) - Get Report

    and

    Mobil

    (MOB)

    may be forced to sell or sever contracts with more than 1,000 gas stations and to sell one or more refineries as a condition for U.S. approval of their $75 billion merger,

    The Wall Street Journal

    reported, citing people close to the antitrust review.

    Lucent

    (LU)

    ,

    Compaq

    (CPQ)

    and

    Agora Interactive

    have joined forces to produce a delivery system for high-speed Internet network services.

    Texas Instruments

    (TXN) - Get Report

    posted fourth-quarter earnings of 59 cents a share, excluding charges, beating the 22-analyst First Call consensus estimate of 54 cents and up from the year-earlier 55 cents.