ECONOMY Experts ponder stocks' upswing

Analysts wonder if the increase in stock prices is a bull market or just bull.
SAN FRANCISCO CHRONICLE
Are the bulls back, or is it a dead-cat bounce?
Investors are pondering whether a recent run-up in the stock market signals a genuine turnaround, or whether it's a temporary upturn.
Since hitting low points for the calendar year March 12, the three major Wall Street indexes have been on a steady rise.
Ask analysts how they see the stock market, and different viewpoints arise.
"I look at it as the glass half-empty," said Gary Schlossberg, senior economist with Wells Capital Management in San Francisco. "The fundamentals for a sustained rally aren't there yet."
Although first-quarter earnings reports over the past few weeks have been slightly better than expected, Schlossberg said profits that were achieved largely through belt-tightening don't bode well for the overall picture.
"Businesses are maintaining their margins and earnings growth through aggressive cost-cutting. That spills into the economy because they're not hiring and not spending on equipment," he said.
Contrasting opinions
Tim Leach, chief investment officer for private client services at Wells Fargo, took a glass-half-full outlook.
"I am optimistic that this is a sustainable rally," he said. "I think there's enough stimulus in the system because the Fed has been so accommodative [and because] we have a comprehensive stimulus package in place."
Schlossberg is not impressed by earnings growth rates.
"Double-digit earnings growth is a heck of a lot better than earnings slumps -- but it's still fairly weak," Schlossberg said. "Coming out of a recession, you can get 35 [percent] to 40 percent earnings growth; we've had 10 [percent] to 12 percent."
Richard Welty, principal of Welty Capital Management in Lafayette, Calif., is a fan of lean-and-mean balance sheets.
"The majority of companies have cut a lot of excess expenses; therefore, when demand and revenue pick up, their profit margins will improve, guaranteed," he said. That, in turn, should help propel the market. "The biggest driver of stock prices is improving corporate profits," he said.
Healthy diagnosis
Liz Ann Sonders, chief investment strategist at Charles Schwab & amp; Co. in New York, took an upbeat view.
"I think it is a bull market," she said. "There's health to this rally. The market fundamentals, economic fundamentals, political fundamentals [are there]. I think it's for real, at least for the time being."
David Blitzer, managing director of Standard & amp; Poor's in New York, was also solidly on the side of the bulls.
"I think we have seen the lows, and the direction is now much more up than down. We will end the year in positive territory for the full year, which we haven't done since 1999. We're a little ahead now, which is nice, and we will get further ahead."
Blitzer predicted the S & amp;P 500 will end the year above 1,000. It's been trading at about 950 recently.
He sees the dollar's misfortunes in the world markets as a strength that will buoy corporate earnings.
"A weak dollar is actually a plus for corporate earnings," Blitzer said. "In the short term, foreign earnings of U.S. companies with operations overseas -- pounds, euros, yen -- are worth more when they bring it back home. There's a transaction gain right away.
Still, he and others cautioned that there will be more gyrations.
"Not straight up, but a lot of bouncing around," Blitzer said.
"The market will probably be three steps forward and one back on a regular basis," Welty said.