WSJ column on “Bears on Street”

Last week, I noted there’s an old expression on Wall Street: 

"They don’t ring a bell at the top."   Actually, they do; Its just hard to see at the time.

The credit or the blame for today’s sell-off goes to a front page article in the WSJ last week "Behind Surging Stock Market: Old-Fashioned Economic Boom" – was pretty much a gong ringing.

So perhaps this column in today’s WSJ — by the same writer as the Old-Fashioned Economic Boom piece, no less — might be implying the contra-position:

Bears on Street Ask ‘How Far?’ Amid Pullback

Several things make investors worry: At the top of the list is inflation, which some analysts fear will force the Federal Reserve to keep raising interest rates into summer or even autumn. Past Fed rate increases sometimes have gone too far, provoking shocks such as a bear market, a real-estate collapse or a recession.

In each of the past two months, "core" inflation, which excludes food and fuel, has increased more than 2% from a year earlier. That is above the level Fed officials have indicated they consider acceptable, suggesting the Fed could keep raising rates to cool the economy and thereby tamp down inflationary pressures. Fed officials have indicated that they are determined not to create an economic shock this time, but the inflation numbers may put them in a bind.

What made the stock market boom this year was the prospect that the Fed would stop raising rates at a time when the economy and corporate profits continued to surge. Analysts currently expect profits at big companies to rise 14% or more in the second half of this year. If the Fed is forced to cool the economy further, profits could suffer, and the Wall Street euphoria could fade further.

Since early 2003, when anxiety over the Iraq war knocked stocks down, the Dow industrials haven’t fallen 10% from a high. Many consider such a decline overdue. They note that the April and May stock gains were led by a limited group of stocks that were thought to benefit most from low interest rates and a strong economy. Such narrow gains often are a sign that trouble could be lurking.

It would be quite ironic if this article were to help put in a short term low . . .

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UPDATE May 23, 2006 9:14am

The NYT joins the parade:

Bulls Retreat Worldwide as May Rally Turns to Rout
NYT, May 23, 2006   

Rally turns to a rout?  Gee , thanks for the heads up!

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Source:
Bears on Street Ask ‘How Far?’ Amid Pullback
By E.S. BROWNING
May 22, 2006; Page C1
http://online.wsj.com/article/SB114825456472159078.html

Bulls Retreat Worldwide as May Rally Turns to Rout
VIKAS BAJAJ
NYT, May 23, 2006
http://www.nytimes.com/2006/05/23/business/23stox.html

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