TALKING POINT/WALL STREET STOCKS
Investors who have been riding the
bull market in U.S. stocks got a stinging reminder today of how
unexpected news can trigger sharp reversals.
    "The market was ripe for some type of pullback," said Frank
Korth, analyst at Shearson Lehman Brothers. He said over the
weekend, investors pondered President Reagan's decision to
impose tariffs on Japanese electronic goods and some concluded
the step could signal the beginning of a trade war.
    The Dow Jones Industrial Average plunged 79 points in 30
minutes before stabilizing and making a partial recovery.
    Korth believes there has been an over-reaction and
near-term traders might want to step in and buy one-half or
one-quarter of new investments they have been considering.
    "We're still in a bull market," said William Raftery of
Smith Barney, Harris Upham and Co. He thinks history has shown
such sharp pullbacks are a natural part of bull markets. "The
bear usually strikes slowly," he said.
    Raftery noted that blue chips have been forefront of the
rally that took the market to record highs last week. In
today's decline, he said, the big name stocks were coming more
into a more normal alignment with the general market.
    Charles Comer of Moseley Securities Corp said ultimately
the pullback could prove to be a pre-shock to the long awaited
correction. But for now he believes the bull market remains
intact. However, it could take several weeks for the market to
complete a "distribution process" and along the way there will
be rallies.
    Comer thinks it is premature to conclude that today's
action signaled formation of a market top. He thinks the market
can hold in the low to mid 2200 area on the Dow index.
    "This probably is the correction that has been expected,"
said Crandall Hays of Robert W. Baird Co.
    Hays noted that market breadth began to deteriorate last
week. He said this morning investors saw the dollar down
further, interest rates up and gold up. "The trade problem got
people spooked and and all the bad things were happening at
once," he said.
    "This correction could take us down 150 points and we're
half-way there now," he said early today.
    He thinks the downward move in stock prices could be over
in a couple of weeks. Business conditions seem to be getting
better according to what he hears from a broad cross-section of
companies, from retailers to machinery manufacturers.
    "The market was high and people were looking for a
correction, so this was an excuse for the market to go down,"
said Alan Ackerman of Gruntal and Co.
    He believes investors will be in a mood of extreme caution
or slightly negative for the near term.
    Ackerman thinks the U.S. is attempting to "fire a shot
across Japan's bow and let them know we're serious about having
closer trade ties." But nevertheless investors have been
rattled by "a perception that a full scale trade war is
possible." Ultimately, unless there is an accord, the effects
could be higher interest rates and unemployment, he said.
    "I anticipate a further correction later this week," said
Harry Laubscher of Tucker Anthony, R.L. Day. He thinks the
pullback was "the start of an overdue correction of between six
and 10 pct from the market highs."
    Although investors now have new reason to worry about
higher interests rate and a return of inflation, Laubscher
says, "it is not the end of the bull market."
    "The market was looking for a reason to knock itself down a
little bit, and with the trade sanctions coming largely as a
surprise, this was the think the market attached itself to,"
said Gary Ciminero of Fleet Financial Group.
