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Wall Street ready for wild ride

Analysts see more turmoil ahead

By EILEEN GLANTON - The Associated Press

NEW YORK -- Last week, stocks tumbled under a staggering weight of bad news. The dollar was declining. A handful of companies said their profits were in trouble. And Microsoft's president deflated enthusiasm for beloved technology stocks, even his own.

This coming week, none of that bad news is likely to improve.

While some investors are likely to view the battered market as a fine place for bargain-hunting, many market analysts expect another rough week on Wall Street.

Last week, the Dow Jones industrial average fell a total of 524.30 points, tumbling more than 200 points in two separate sessions. The plunge left the Dow 1,046.71 points, or 9.2 percent, below its record close of 11,326.04, set Aug. 25.

Broader market indicators also fared poorly. The Nasdaq composite index, which lists most of the world's leading technology companies, lost 129.21 points over the course of the week.

The tumble surprised few Wall Street analysts. In recent weeks, even as the Dow and the Nasdaq hit new records, many market watchers remained troubled about signs of ill health in the market. Above all, analysts worried that the strong performance of the Dow's blue-chip stocks and technology leaders like Intel and Microsoft wasn't shared by the broader market.

Last week, the market lost its last bastion of strength. Semiconductor stocks tumbled Wednesday, a day after an earthquake hit Taiwan, a major production center for the chips and components used in computers.

And on Thursday, Microsoft president Steve Ballmer sent the market spinning by telling reporters he believes technology stocks are too pricey.

There is such an overvaluation of tech stocks that it's absurd, he said at a conference of the Society of American Business Editors and Writers. I would put our company and I would put most companies in that category.

The economic factors that drove stocks lower last week haven't disappeared. The dollar lingers near its lowest levels against Japan's yen since 1996. Investors also remain worried that the Federal Reserve at its Oct. 5 meeting will raise interest rates for the third time this year to cool the economy.

Higher interest rates can hurt stocks by cutting into corporate profits as borrowing costs rise. That can make bonds, with their guaranteed rate of return, more appealing.

The calendar could be another menace. Some of the worst market declines in history have come in October, from the 1929 crash that launched the Great Depression to the 554.26-point drop on Oct. 27, 1997.

It's a scary time of year, said Brian G. Belski, chief investment strategist at George K. Baum & Co in Kansas City. By September or October, you know where a company's fundamentals are for the year, and a lot of investment managers make their buy and sell decisions based on that.

Still, analysts see at least two potential benefits from last week's sharp selloff. Some economists feel the market's decline could convince the Fed that an interest rate increase isn't necessary.

Also, investors could seize the chance to buy stocks at their new, lower prices.

This is an overdue opportunity to shake out some of the market's excesses, said Scott Bleier, chief investment strategist at Prime Charter Ltd. in New York.