In New Year, Market Bulls Pull For Reversal Of Fortunes - By Adam Shell USA TODAY January 1st, 2003

In New Year, Market Bulls Pull For Reversal Of Fortunes
By Adam Shell USA TODAY January 1st, 2003

NEW YORK - This is exactly the scenario Wall Street desperately hoped to avoid. After finishing in the red for a third-consecutive year in 2002, the pressure is on the stock market to avoid a fourth losing year in 2003.

It is a scary result not witnessed since the Great Depression - and, if it occurs, one likely to elevate the current bear from runner-up status to top dog.

While nine out of 11 top Wall Street strategists polled by USA TODAY say another losing year is unlikely, gurus from J.P. Morgan and Merrill Lynch say there's a good chance the Standard & Poor's 500, a proxy for the broad market, will finish 2003 down.

"I would not rule out a fourth down year," says Carlos Asilis, chief U.S. equity strategist at J.P. Morgan. His year-end target for the S&P 500 is 800, a sizable 9% below the 2002 close of 880.

Investors will be forced to confront the prospect that the same worries that dragged down stocks last year - terrorism, war talk, a soft economy and puny profits - may depress stocks further. If so, investors who have refused to abandon stocks because of an unflinching belief that stocks are the best investment for the long term may finally give up.

The three major U.S. stock indexes - the Dow Jones industrial average, S&P 500 and Nasdaq composite - all fell for a third year in a row in 2002. Other lowlights:

• The Dow fell 17%, its worst annual drop since it lost 17.3% in 1977, MarketHistory.com says. Only three of the 30 Dow stocks rose: Eastman Kodak, 20%; Procter & Gamble, 9%; and 3M, 4%. Biggest loser: Home Depot, off 53%.
• The Nasdaq declined 32%, its third-worst year since its 1972 inception. The tech-dominated index that rose to pop culture fame in the go-go '90s, is down 74% from its March 2000 high.
• The S&P 500 fell 23%, its weakest performance since a 30% plunge in 1974. Only one of the index's 23 industry sectors - household and personal products - finished higher.
• About $2.8 trillion in shareholder wealth was wiped out in 2002, Wilshire Associates says.

Despite few signs the downtrend is over, bullish talk is still abundant. Abby Joseph Cohen, the Goldman Sachs strategist who was Wall Street's most prominent bull in the '90s but who has seen her credibility wane for remaining bullish too long, is again the most optimistic. She says the fair value of the S&P in the next year is 1150, up 31% from 2002's close.

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