I think people are just not going to respond to what the Fed does if it's only 25 basis points (a quarter point). In order to have any kind of impact he has to change people's actions, he has to change what people do.
Alan Kral
The defense sector has had quite a run over the past 18 months. As people start to anticipate a war scenario, we're seeing a little froth in these stocks.
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People have been looking for reasons to buy. There's so much money around and that places the bias in the market on the upside.
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We'll continue to see volatility for two reasons. First, there's no straight line of good numbers continuously coming out of the economy.
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All this talk about a war with Iraq is adding a tremendous amount of volatility in all the markets. We see it in bonds, gold, oil. The uncertainty of what's going to happen is weighing on the markets.
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The Fed made it reasonably clear they will raise rates again. The Fed is impacting the Dow stocks and not impacting the Nasdaq stocks.
made
Two that need to be looked at are J.P. Morgan and Merrill Lynch. J.P. Morgan because they have been heavily involved internationally over the last couple of years, and Merrill Lynch is the leading retail financial brokerage stock in the country. How they did coming out of the fourth quarter is very important.
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I think the Fed is hanging its hopes on a couple of things. The bond price has dropped and yields have gone up and it is doing the job for them... The economy as a whole is slightly slower in the second quarter than it was in the first. There's hope that it will tail off to a more sustainable rate.
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We pick those two for their exposure to the domestic market. We think the recovery in Asia is lifting demand and has re-established a floor under oil prices, and we don't expect prices to drop any time in the near term.
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Now that the baseline of demand has returned and (oil) prices returned to around 0 to 1 a barrel, the environment is such that there will be a return to exploration, and Schlumberger will be a big beneficiary.
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