In worst showing since 1970, stocks fall 6 quarters in a row
NEW YORK -- The battered stock market in March posted its best monthly gain since October 2002, but it wasn't enough to help stocks avoid a sixth-consecutive quarter of losses, matching a record set more than 30 years ago.
Still, the ability of stocks to rally sharply off the March 9 bear market low raised hopes that investors are correctly forecasting that economic conditions have hit bottom and will stabilize in coming months. Wall Street is hoping that aggressive steps by the federal government to boost confidence, get banks lending again and jump-start the economy will start to take hold, paving the way for a profit recovery for U.S. companies.
The Standard & Poor's 500 index rose 8.5% last month but fell 11.7% in the first quarter. The only other time the index lost money six quarters in a row was a dismal stretch from the fourth quarter of 1968 through the second quarter of 1970, S&P says.
Ironically, the beating stocks have taken is cited as a reason for hope. "There is a sense that things won't get much worse," says Alec Young, equity strategist at S&P. "It's harder to make a bear case. You would need something pretty apocalyptic, but that doesn't mean it can't happen."
For stocks to keep rising:
•The economy must stabilize. While few on Wall Street expect the economic data to get better any time soon, the mere fact that things are not getting worse could give investors the confidence to start betting on a recovery, Young says.
•The rescue plans must work. "You want to see government programs implemented and show positive results," says Quincy Krosby, chief investment strategist at The Hartford. Investors will be closely monitoring the success of the Treasury Department's plan to rid banks of toxic assets to free up lending.
•The profit picture must brighten. First-quarter earnings are expected to be dreadful, with analysts predicting a 35.6% drop, Thomson Reuters says. Investors will be looking for signs of a trough. "Earnings season will tell a huge tale," money manager Gary Kaltbaum says. How the market reacts to profit news is key, he says.
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