NEW YORK, Jan. 14 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market were lower in moderate trading at midday Monday as investors continue to sell stocks amid concerns about the health of the nation's economy.
The blue-chip Dow Jones industrial average, which fell 80.33 points Friday, was down another 59.50 points, or 0.60 percent, to 9,928.00. The tech-heavy Nasdaq composite index, which lost 24.78 points in the previous session, was down 29.10 points, or 1.46 percent, to 1,993.36.
The broader New York Stock Exchange composite index was down 2.19 to 580.48 while the Standard & Poor's 500 index was down 4.80 to 1,140.80.
The American Stock Exchange composite index was down 0.63 points to 833.44 while the Russell 2000 Index was down 5.64 to 484.30.
Big Board volume rose to an estimated 512.60 million shares from 405.90 million shares changing hands during the same period Friday.
Analysts said stocks headed lower from the opening bell as investors heeded the cautious words about economic prospects sounded Friday by Alan Greenspan -- even as individual economists and strategists turned more constructive about underlying conditions.
Analysts said stocks were also pressured after Merrill Lynch chief U.S. strategist Richard Bernstein recommended investors allocate more of their portfolios in bonds and less in stocks in the United States.
Bernstein, also the broker's chief quantitative strategist, lifted his asset allocation in bonds to 30 percent from 20 percent and cut equities to 50 percent from 60 percent. He kept a cash allocation recommendation at 20 percent.
Wall Street strategists typically divide their portfolio recommendations between stocks, bonds and cash. The higher percentage in bonds and particularly in cash, the more bearish the strategist's outlook for stocks.
The consensus from Wall Street strategists currently stands at 68 percent stocks, 23 percent bonds and 8 percent cash with one percent in other investments, according to Thomson/First Call.
Bernstein told clients he lowered the equities allocation amid concerns for stock valuations, which he said "now seem extreme." Using a price-to-earnings multiple to growth rate measurement, Bernstein said that the S&P500 stocks are slightly above 2.4, which means stocks are more expensive than during 1987.
"We have commented that there is a thin line between a liquidity-driven market that anticipates improving fundamentals and a bubble," he told clients. "The equity market may have stepped over that line."
The recent rally in stocks offered the opportunity to alter the portfolio allocation recommendations, he said.
"There are basically three stimulants to the equity market: liquidity, valuation and sentiment. It is difficult to see how any of these will provide the stock market with the necessary fillip to keep the recent rally intact," he said.
Meanwhile, analysts said investors continued to watch the scandal surrounding Houston energy trader Enron.
In the latest development, a lawyer at Arthur Andersen & Co., Enron's accounting firm, directed the destruction of Enron documents, according to a memo cited by news reports. Enron faces controversy amid its finances and spectacular collapse in late 2001.
And, as stock jockeys fine-tuned their forecasts for 2002, increasingly the experts are anticipating the recession that took effect last March to run its course by the end of this quarter, and for growth, though shallow, to resume by mid year.
If that flies in the face of Federal Reserve Chairman Greenspan's more-cautious view from Friday's address at an economics conference, so be it.
Analysts said trading activity was dominated by the push-me, pull-me action of portfolio managers, who don't want to pay up for stocks now that valuations have steepened, but are anxious to participate in any rally, so they buy every dip.
And, the earnings forecasts come a little closer to focus as the week wears on.
Though the calendar is not very brisk Monday, Tuesday brings Intel's results, Wednesday delivers Compaq Computer's, and Thursday is International Business Machines day.
The earnings consensus is that earnings for the Standard & Poor's 500 will rise by about 16 percent in 2002 vs. 2001. That's a pretty good forecast when you consider it compared to a 28 percent earnings decline the previous year.
The outlook is starting to reflect the fact that companies across most industries have been cutting costs to the bone. Even a slight pickup in demand should sweeten earnings as the year progresses.
Over the next week or so, however, corporate managers will have mostly disappointing news for investors. Not only will fourth-quarter earnings continue on a shrinking trend, they'll probably be worse than analysts expect, as managers use the rotten business environment as an excuse to clean house of all the things they should have written off ages ago, experts added.
Meanwhile, U.S. Treasury prices pushed higher. The 10-year bond rose 11/32 to 101 12/32. Its yield, which moves in the opposite direction of its price, slipped to 4.82 percent from 4.86 percent late Friday.
In Europe, stock prices ended lower in moderate trading in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index lost 91.6 points, or 1.76 percent, to 5,107.0. The German DAX index dropped 121.93 points, or 2.34 percent, to 5,088.04 and the French CAC-40 index fell 100.72 points, or 2.21 percent, to 4,453.97.
Analysts said European stocks were led lower by weakness in banks and telecom issues as worries about the health of the U.S. economy put pressure on Wall Street.
Analysts said comments Friday from Greenspan indicating economic recovery may take longer than expected and news that Merrill Lynch had trimmed its recommended holding of U.S. equities set a bearish tone.
The telecom and banking sectors weighed down amid concerns over exposure to Argentina's financial crisis.
Earlier in Asia, prices on the Hong Kong Stock Exchange ended marginally higher, snapping a four day losing streak on a rebound in telecommunications stocks. Hong Kong's blue-chip Hang Seng Index, which fell 89.61 points Friday, gained 42.97 points, or 0.40 percent, to 11,209.43.
Experts said bargain hunters stepped into the market following losses in the past four sessions. They said trading was thin as many investors stayed on the sidelines to await direction from Wall Street.
Despite the rise investors remained cautious over the U.S. economy after Greenspan Friday warned that the U.S. economy continues to face short-term risks.
Elsewhere in Asia, prices also ended higher on the South Korean Stock Exchange as chip stocks rose sharply on continued hopes the worst for the semiconductor industry is over. The Korea Composite Stock Price Index, or Kospi, gained 16.67 points, or 2.29 percent, to 744.03.
The market had opened lower and traded in negative territory in the morning, following the decline in U.S. stocks Friday after U.S. Federal Reserve Chairman Alan Greenspan played down expectations of an economic recovery.
But the Kospi recovered in the afternoon as Samsung Electronics shares rose on positive expectations for the company's fourth quarter financial report due Wednesday, experts said.
Stocks ended lower on the Taiwan Stock Exchange on renewed caution about economic recovery following Greenspan's remarks last week. The weighted price index of the Taiwan Stock Exchange lost 75.73 points, or 1.30 percent, to 5,611.86.
Analysts said fears of Beijing being irritated by Taipei's decision to add Taiwan to the cover of Taiwanese passports also prompted a selloff.
Elsewhere in the Pacific region, stocks ended slightly lower on the Australian Stock Exchange, pressured by weakness in blue-chips after Federal Reserve chairman Alan Greenspan made somber comments about the U.S. economy. The blue-chip All Ordinaries Index lost 9.70 points, or 0.30 percent, to 3,350.40.
Meanwhile, markets in Tokyo were closed for a national holiday. Trading will resume on Tuesday.
