Wall Street's rise tempts investors
NEW YORK -- The surging stock market may look tempting, but not everyone is ready to jump back in just yet.
Marcus Roland of Lexington, Ky., for one, got burned during the market's long slide. He saw his IRA drop from $60,000 to $11,000 over the past three years as the Dow slumped from an all-time high of 11,722 to a five-year low of 7,286. Roland still can't bear to look at his 401(k) statements.
But the 36-year-old lawyer is getting prepared for a return to stocks, researching companies he may add to his battered portfolio. He is focusing this time on blue chips like General Electric Co. rather than risker technology stocks.
"I have been talking to people who are in the market and to some brokers I know about what the climate is and what people are considering to be hot moves," he said. "I am far more hopeful than I was a year ago."
Stocks have been on an upward climb for about three months now, leading many market-watchers to wonder if the bull market has returned.
Much of corporate America reported better-than-expected first-quarter earnings, the war in Iraq was swift, and economic data has been turning a little more positive. Federal Reserve Chairman Alan Greenspan has made several upbeat assessments of the economy lately.
Wall Street has responded, sending stocks soaring. The Dow Jones industrials on Wednesday closed above 9,000 for the first time in nearly 10 months. The Nasdaq composite index is at levels last witnessed just over a year ago, while the Standard & Poor's 500 index is at year-ago levels.
Since March 11, when the rallies began, the Dow has risen more than 20 percent, the Nasdaq has gained about 30 percent and the S&P has increased by nearly 24 percent. The Dow is up 8.4 percent for the year, the Nasdaq 23.3 percent and the S&P 12.5 percent.
Many investors fear the rally could lose steam quickly, and they don't want to get fooled again.
"We've had such a tough decline and we (still) have so much money on the sidelines," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif. "You have people who say they are bullish. But saying they are bullish and committing cash to the market are two different things."
Market observers attribute much of the recent buying to institutional investors, such as mutual fund managers, not smaller, individual stock buyers.
That is because professional investors cannot afford to wait to see if a bull market is the real thing, said Michael Murphy, head trader at Wachovia Securities in Baltimore. Those who do not jump in at the beginning of a bullish run risk turning in subpar annual returns for their shareholders.
There are some individuals buying stocks -- but with caution.
Rick Davitt, for instance, increased the stock portion of his savings portfolio from 20 percent to 25 percent. Davitt, 44, of Huntington Beach, Calif., bought mostly safer, dividend-paying stocks such as ChevronTexaco, Duke Energy. and PepsiCo.
"I think we may have the footings of a good recovery, and so I am getting more into stocks. I plan over the next six months to move that up to maybe 40 percent if things remain stable," he said.
Davitt is a former executive at a networking company and has also taken part in the tech rally, buying stock in Cisco Systems.
"I'm not a bull yet," he said. "But I am someone who is extremely optimistic that what we are seeing is the start of a very good opportunity."