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Wall St. sees tough week
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December 17, 2000: 7:00 a.m. ET
As another week begins, hard-hit stock investors don't have much to buoy them
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - With the Nasdaq composite index down nearly 50 percent since March, the last full trading week of 2000 brings a sobering fact: The U.S. stock market could post its worst year since 1977.
Sure, the Federal Reserve meets Tuesday to set interest rates. But analysts put the likelihood of the central bank lowering borrowing costs at close to zero.
And the blitz of corporate earnings warnings that have battered the markets since Labor Day is not likely to ebb as companies close their books on the year.
The economy is slowing, the stock market knows it, and analysts don't expect this to change any time soon.
The Nasdaq fell 9 percent last week while the Dow Jones industrial average tumbled 2.6 percent over the last five sessions. The S&P 500 slid 4.2 percent
The S&P 500, which comprises about 75 percent of the market's value, is off 10.7 percent in 2000. The losses, if they hold, would give the index its worst annual performance since 1977, when it fell 11.5 percent.
Only a shift in bias expected
But Fed watchers agree the central bank will not lower the cost of borrowing on Tuesday.
"We do not expect any rate adjustment," said William Sullivan, money market economist at Morgan Stanley Dean Witter.
 Like others, Sullivan expects the Fed on Tuesday to shift its bias, or inclination, toward cutting rates at a future meeting. The evidence of slowing consumer and business spending will force such a move.
But he said the still-tight labor market and rising wages will keep the Fed from cutting rates this year
Mike Moran, chief U.S. economist at Diawa Securities agreed.
"I think they will get rid of the bias in their statement," Moran said of the Fed. "But they are not ready to lower interest rates."
The next concrete chance for such a move comes in January at the central bank's next meeting.
"I would not close the door on a January policy change," Moran said.
Adding another voice to the fray, the Washington Post Friday also said the Fed won't touch rates Tuesday. Still, the piece by John Berry, who is said to have close connections to Fed officials, predicts the central bank will change its inclination toward reducing borrowing costs ahead.
The Fed has left rates unchanged at all of its meeting since May following six rate hikes starting in the Summer of 1999. Still, Fed Chairman Alan Greenspan suggested earlier this month he was willing to cut rates if necessary.
Some hints on the health of the economy
More clues could come in the days ahead. The Commerce Department Wednesday reports on November housing starts, which are expected to stay strong. Analysts surveyed by Briefing.com expect builders broke ground on new homes at an annual rate of 1.55 million last month, slightly higher than the 1.53 million rate in October.
In another key report, November orders for durables come Friday. Orders for big ticket items are seen gaining 1.3 percent following a 5.5 percent drop in the previous month.
On the same day, personal income in November is expected to have gained 0.4 percent after dropping 0.2 percent in the previous month.
The final reading of the economy's growth during the third quarter comes Thursday. No changes are expected from the last reading, when gross domestic product rose 2.4 percent, a much slower rate than at this time last year.
Slowdown hinders earnings growth
This slowdown has not gone unnoticed at the nation's biggest financial intuitions.
Quarterly profits at Goldman Sachs (GS: Research, Estimates), expected next week, are forecast to fall to $1.38 per share, according to First Call, which tracks analysts forecasts. That's below the $1.54 per share Goldman earned in the year-ago period.
Morgan Stanley Dean Witter (MWD: Research, Estimates) is seen earning $1.29 a share during the three-month period ended in November, lower than the $1.42 per share a year-ago.
These cooling earnings come amid a slowdown in the corporate mergers that Goldman and Morgan Stanley make money advising on. Stock and bond underwriting, another big business, has also dropped off.
Just last week, Chase Manhattan Corp. (CMB: Research, Estimates) and J.P. Morgan Inc. (JPM: Research, Estimates) said profits in the last three months of the year would fall below Wall Street forecasts due lower trading revenue and increased expenses from their planned merger.
Chase and Morgan are hardly alone. Technology companies including Microsoft (MSFT: Research, Estimates), Intel Corp (INTC: Research, Estimates), Apple Computer (AAPL: Research, Estimates) and Gateway (GTW: Research, Estimates) have in the last few weeks readied investors for earnings and revenue disappointments. Their stocks along with the entire technology sector have shed billions of dollars in market value.
But the prospects for Palm Inc. (PALM: Research, Estimates) look good. The maker of handheld computing devices is expected next week to double earnings, with profits of 4 cents a share.
Still, Palm stock traded in the $43 range Friday, down about 50 percent from where the stock closed on March 2, its first day of trading. For investors, March 2nd, when the Nasdaq was up 17 percent on the year, seems like a long, long time ago. 
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