WALL STREET Stock market needs a pullback, analysts say



An analyst said the market will level off in 2004.
NEW YORK (AP) -- The economy and corporate earnings have shown consistent signs of improvement, but the stock market's tendency to falter easily has some wondering if Wall Street -- or at least the technology sector -- might be in the early stages of a correction.
Noting how far stocks have come over the last year, some analysts say a pullback is needed for the market's long-term well-being, especially in the tech sector, where share prices have seemed expensive for some time.
The Nasdaq composite index roared back to life in 2003 with a 50 percent advance; it catapulted another 7.5 percent by Jan. 26, only to fall sharply after a new policy statement from the Federal Reserve led some to believe an interest rate hike could happen soon. Its 2004 advance currently stands at a more modest 1.7 percent.
"In the big picture, our view for 2004 as a whole is summed up in two words: leveling off," said Bryan Piskorowski, market analyst at Wachovia Securities.
Defining correction
Many theorists define a correction as a drop of 10 percent from a recent high, so Wall Street's recent slippage is still far short of that. But it's entirely possible "a rolling correction" has shaped the performance of individual sectors over the last 11 months, Piskorowski said.
With all the earnings news and upbeat economic data taken into account, and with the knowledge that interest rates will inevitably rise, "the market is looking for the next catalyst to propel itself higher or lower," said Stephen Sachs, director of trading at Rydex Investments. And investors haven't found much to look forward to.
"Guidance has not been that good on a company-specific level, and that really holds true for tech," Sachs said. "If we could get a 10 to 15 percent pullback, particularly in the broader tech sectors, frankly it might be good for the overall market. I'd be a buyer at that level."
Of all parts of the market, traders say this is the area where investors are most eager to grab profits when they can, with software and semiconductors taking the brunt of selling. Although some still see opportunities in communications and equipment companies, flows of new money into the tech sector appear to be declining.
Another possibility
But that doesn't necessarily mean a correction is afoot. Investors may simply be shifting assets away from riskier areas where they'd been overweight before, said Brian G. Belski, market strategist at Piper Jaffray. Rather than signaling a correction, this shift may be a sign that investors are seeking to diversify their holdings.