NEWS AND COMMENTARY February 26, 2001 Waiting For A Fall If you're happy the market rallied on Friday, send a big fat "thank you" to Bear Stearns economists Wayne Angell and John Ryding. This dynamic duo propped up the market on Friday by starting a rumor that the Fed will deliver a "surprise" rate cut. And it worked! Before the rumor hit, the Nasdaq was down more than 88 points -- to its lowest levels since December of 1998 -- but ended the day up 17.55 points at 2,262.51. The Dow still lost nearly 85 points, but rallied back from a 235-point plunge earlier in the trading day, while the S&P; 500 dipped into "official" bear market territory. So, sure, the market rallied -- but it only postponed the inevitable. Is the economy going to magically turn around just because the Fed cuts rates? The fact is, any interest rate cut takes months to filter through the economy. Plus, the stock market is worse off today than it was before the rate cuts in January -- the last time we had a rate cut that really was a surprise. We're not saying that a rate cut before the March 20 FOMC meeting won't spark a rally, but it will fail miserably, just like the bounce in January. The market fell like a stone after the January rate cut rally because loads of companies came out with lousy fourth quarter earnings reports. It will be the same story in March and April -- the Fed may cut interest rates, but it won't be enough to stem the tide of red ink flowing from earnings reports, and it won't be enough to convince investors to go rushing back into the market. And next time, it will take a lot more than some optimistic words from a dynamic duo to stop stocks from falling through the floor. Holy bear market -- I see a crash, dead ahead! Printer Friendly Version

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