New York Market: Dow Jones - Investors upbeat for 1999

As the year closes, US investors are looking to 1999 to be a year of solid returns, even as stocks retreat from records and a Who's Who of the biggest companies warns of disappointing profits.

These bulls argue that market-friendly trends of late will not abate. Interest rates may continue falling, investors will continue pouring money into mutual funds, and the "Year 2000 problem" will buoy technology spending - all occurring as Asian economies recover.

"By the end of next year, the Asian crisis will be two-and-a-half years old," said Tom Galvin, chief investment officer at Donaldson, Lufkin & Jenrette. "People will begin to see global economic growth rebounding, which will be good for corporate profits and good for stocks."

True enough, the pessimists had a strong case in the past week. The Dow Jones Index fell 2.2 per cent last week as blue-chip companies such as Merck, Procter & Gamble and Coca-Cola warned that profits would fall short of expectations.

These declines fanned concern that an ever-shrinking clique of huge companies is powering the market. While the S&P 500 is up 20 per cent this year, the average stock in the index is 21 per cent off its high.

"Many of the strong stocks that have camouflaged this bull market have started to weaken," said Robert Freedman, chief investment officer at John Hancock Funds. "That's troubling. The market needs to have a continuing broad advance, but the market is narrowing."

Some managers argue that technology bellwethers will benefit as companies invest to address the problem of the millennium bug. The internet is helping large companies to save billions of dollars and increasing competition among suppliers by ordering parts and materials over the computer network.

In the bond market, older Treasury bonds are paying big premiums compared with the benchmark, handing traders an opportunity and the Federal Reserve a reason to consider cutting interest rates.

The bond sold a year ago, which matures in November 2027, yields 5.25 per cent, while the benchmark bond, which matures in November 2028, yields 5.02 per cent, leaving a difference in yield of 23 basis points. That gap is "awfully big," compared with the historical norm of about 7 basis points, according to Martin Jones at First American Asset Management.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...