Sunday, October 27, 2002 BUSINESS Stocks, pages D-2-5. Family, page D-6. D All business Is the bear market really gone? By RACHEL BECK •AP Business Writer NEWYORK— Investors are starting to sound like children who keep asking their parents on a long trip, "Are we mere yet?" Or more to the point: Is Wall Street back yet? We've been fooled before — in fact, just last summer, when things started to look up but quickly turned sour. Maybe this time it's different. There have been some changes in the market since last summer that may indicate tilings are looking up. "Everyone is wondering if the rally is real or if it's a bear-market bounce and we will retest the lows again. The problem is it is too soon to tell," said Brian G. Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray in Minneapolis. It's been a troubling few months for investors, capping two years of losses. Stocks started to inch higher last spring amid signs that an economic recovery had finally begun. But those gains were surrendered in a broad decline from mid-May into July, driven by new economic concerns, a rash of business scandals and weak corporate earnings. A record $52.6 billion was sold out of equity mutual funds in July alone. That compared with a record $28.1 billion put into bond funds, which offered better returns and a safer haven for investors. The market then bounced back in midsummer. Market-watchers wondered if the-decline had bottomed out and a turnaround had begun. But again the excitement vanished when a fierce selloff began in late August and last. ed through early October. That knocked the Dow Jones industrial average to a five-year low and forced other market indexes sharply lower, too. So it's no wonder that people are a bit anxious about the current rally. No one wants to think the good times are back and then be disheartened by another steep slide, so no one is declaring the bear market over. And we might not know for a long'time if we've really climbed out of it. There's no formula to measure the end. The key will be whether the market can hold up its strength and not retest the lows it hit earlier this month. If it proves to have ended, the turning point will have been Oct. 10. That's when bargain hunters flocked into the market, unable to resist some of the unbelievable deals. And they didn't stop buying for much of the next two weeks. Since then, the Dow has risen about 16 percent, the Nasdaq composite index about 18 percent and the Standard & Poor's 500 index about 15 percent. Sure, there have been some weak days, but nothing like what we've seen in recent months. Now under debate around family dinner tables and in corporate boardrooms: Will it last? Even the professional analysts aren't sure. "Market pundits are afraid to call bottoms, having been wrong too many times in the past 18 months, and skepticism is at all-time highs," Tobias Levkovich, chief market strategist at Salomon Smith Barney, wrote in a recent report. But there is some hope for this rally. There are a number of fundamental changes in the market right now that bode well for stocks. For starters, third-quarter earnings appear to be stronger than before. According to Levkovich, there have been six positive earnings surprises for every one negative surprise, an improvement from the past. And there's been some surprisingly good earnings news from a number of industry leaders, like General Motors, which has helped bolster the recent rally. In addition, earnings expectations for the fourth quarter and the year ahead have been adjusted to be more realistic given the current state of the economy, so there's less of a chance of as many big disappointments to rock the market. There's also been a pullback in gold and bond prices, making stocks more attractive by comparison. Important, too, is that overall volume in the market has picked up in recent weeks, which prevents dramatic swings in either direction. Investors also have history on their side, with October being the month when nine previous bear markets ended. "We are seeing less selling, less panic and the volume overall has really picked up," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. "We are in a period of a slow recovery." Still, many market watchers remain cautious. They warn that anything could set off another big decline: a prolonged war with Iraq, continued economic weakness or a big corporate scandal. Remember, this is the stock market, where there aren't any guarantees. Telecom tug of war Phone companies profit on both sides of telemarketing battle By JIM KRANE AP Technology Writer NEW YORK — Victor Symonette, a 49- year-old orchestra conductor, likes to sleep late on Sundays. So he pays his phone company, Verizon, $10 per month to block telemarketing calls that used to wake his family. "The last thing I want to hear is a telemarketer at eight in the morning," said Symonette, his soothing baritone rising in anger. Americans like Symonette pay $2 billion a year to block pushy calls from peddlers of goods such as credit cards, satellite TV and real estate, said Robert Bulmash of the privacy group Private Citizen. For regional phone companies such as Verizon, Qwest, SBC and BellSouth, privacy sen/ices like Caller ID and Security Screen are a growing revenue source. But the phone companies aren't just trying to thwart sales calls. They're also helping telemarketers make them. Telecoms sell telemarketers high-capacity lines and sophisticated "predictive dialing" machines that have helped unleash a stampede of automated sales calls. Some, including Qwest and Verizon, even sell home numbers of the same customers who buy their privacy services — unless they pay a fee to have their numbers unlisted. "The phone companies are like arms merchants in a technological war between telemarketers and phone subscribers," said privacy advocate Jason Catlett. "They profit from both sides." Customers of carriers including BellSouth and Sprint — which say they don't sell numbers — still surrender their privacy to firms that scan and sell White Pages data. Verizon spokeswoman Catherine Lewis says the company isn't playing telemarketers and consumers against each other. "I don't think it's a case of we should pick one side over the other," she said. "We do serve both sides." It ought to be illegal, says Buimash, whose group publishes the book "So You Want to Sue a Telemarketer." Bulmash says he's helped members collect $1.4 million from telemarketers who break privacy rules. "If Terminix were to throw termites on my LAUDINSKY foundation, then bang on my door saying 'Hey, you've got termites, we can get rid of them,' the attorney general would be all over diem," Bulmash said. "The phone companies are doing the same thing." Telemarketing has grown so widespread — and become such a nuisance, many argue -— that the two regulating federal agencies, die Federal Communications Commission and Federal Trade Commission, are exploring the creation of a nationwide "do not call" list similar to lists many states have created. An FCC memo says lelemarketers attempt 104 million calls a day to U.S. businesses and consumers. Sales revenue has risen from about $435 billion in 1990 to around $660 billion last year. A computerized calling machine called the predictive dialer is responsible for the boom. The machines dial numbers stored in a database using a mathematical algorithm to predict when a telemarkeler will be ready to finish one sales call and start another. When the machine reaches a person, the call is supposed to be transferred to a lelemarkeier who is just finishing a previous call. "Predictive dialing has been a huge asset in efficiency," said Matt Mattingley, spokesman for the American Tcleservices Association, an industry group. "You keep your operators busy talking lo people. In this industry, time is money." The sales industry might value its own time, Catlett says, but not yours. "The growth in these infernal human-pestering machines is based on the unjust economics that telemarkciers don'l pay for wasting your time," he said. The dialers, which first emerged in the late 1980s, have tripled productivity, says Chrisi- ian Laudinsky, sales manager of manufacturer MarkeTel Systems of Rogina, Saskatchewan. Others, like Jim Conway, spokesman for the Direct Marketing Association, say call- ing efficiency has grown tenfold since the clays when marketers dialed their own phones. A firm with just four callers and eight phone lines can use MarkeTeTs $13,500 predictive dialer and pitch products to 72,000 people a month, Laudinsky says. For larger operations, Verizon and SBC sell more complex dialing capabilities from Concerto Software, which can leave messages on answering machines if a person doesn't answer. All this growing sophistication in telemarketing has spurred an "arms race" with call- blocking devices for consumers. The race began with consumer Caller ID boxes and anonymous number blocking. When lelcmarkcters "spoofed" them with fake numbers, consumer devices got smarter. Symonette, for instance, bought a SI50 Siemens phone that "speaks" the caller's name and number, so he won't actually have to get out of bed to learn who's calling. Others have purchased a $50 device called the TcleZapper, which thwarts predictive dialers by playing the shrill tones of a disconnected phone number. Other devices offer "kill switches" that hang up and tell callers that the house doesn't take sales pitches, or require callers to use a passcode lo get through. Phone companies offer their own blocking and screening solutions, like SBC's Privacy Manager, Sprint's Privacy ID and Qwcst's No Solicitation, which intercept calls without ID and ask solicitors to hang up. For those who don't like the idea of paying for privacy, the FTC and FCC may soon offer some relief. Advocates believe both agencies will create a nationwide list of residents whom Iclemarketers may not call. "The stars are in alignment here," said Chris Iloofnagle, legislative counsel with the Electronic Privacy Information Center. "This is one of those areas where it's safe for I he government to tackle a big industry because the public is so fed up." Charities and political campaigns will get loopholes, Iloofnagle predicts. "Politicians, they'll always be able to do it," he said. "I guarantee you." Briefs S&T announces quarterly earnings S&T Bancorp recently announced earnings for the third quarter increased 5 percent to 46 cents, up from 44 cents reported during the same period last year. Net income also increased 5 percent to $12.4 million, up from $11.9 million reported during the same period in 2001. For the nine months ended Sept. 30, net income totaled S35.7 million, com-' pared to $35.4 million during the same period last year. Phoenix named one of 500 fastest-growing Indiana-based Phoenix Rehabilitation and Health Services Inc. has been named one of America's 500 entrepreneurial growth leaders in Inc. magazine's October edition. Phoenix achieved 2,350-percent growth in the past five years, ranking the physical-therapy company 68th on the list. To be eligible for the list, companies have to be independently and privately held through fiscal year 2001, had more than $200,000 in sales in 1997 and their 2001 sales had to have exceeded 2000 sales. 1st Summit announces quarterly earnings 1st Summit Bancorp of Johnstown recently reported earnings of $777,453 during the third quarter, up from 5592,107 reported during the same period last year. Earnings per share were $1.42, compared to $1.07 during the third quarter of 2001. 1st Summit owns two subsidiaries, 1st Summit Bank, with 11 offices, and Cambria Thrift Consumer Discount Co., a finance company with four locations. Bico names two to board of directors PITTSBURGH (AP) — Jerome M. Buyny and Robert Lawler have been named to the board of directors for biomedical device maker Bico Inc. Buyny, the president of SWAT Security Systems, and Lawler, a retired Florida physician, will also serve on the board of Bico subsidiary ViaCirq. Bico lias been testing and developing a non-invasive blood-sugar monitor since 1986. Since it began work on the device in 1986, Bico has lost at least $221.5 million, including $111.5 million in the past three years. Most of the company's income has come from stock sales. Consol Energy reports loss of $7 million PITTSBURGH (AP) — Coal company Consol Energy Inc. reported losing $7 million, or 9 cents a share, in the third quarter, struggling with sluggish demand and higher mining costs. The results announced Thursday were better than those during the third quarter of last year, when Consol lost $] 1.5 million, or 15 cents a share, and also heal Wall Street's expectations of an 18-ccnt loss. Revenue increased to $546.4 million, up from $534.4 million a year earlier, mainly from higher gas saies and prices which increased 26.1 percent and 11.8 percent respectively. Facing grim future, airlines shrink operations again By BRAD FOSS AP Business Writer T he airlines are carrying lots of baggage these days, it's just the wrong icind. Business travelers continue to spend less. Pension and security costs are on the rise. Debt is growing. And the perceived aggravation of flying is propelling many travelers to drive or take the train for shorter trips. So, with a dismal third quarter behind them, and the immediate future looking grim, major carriers are'shrinking operations again. They are unloading employees, real estate and aircraft as part of an ongoing effort to stanch the billion-do liar losses that have dragged their stock prices to historic lows. In the past week, Delta Air Lines said it would lay off up to 8,000 employees, American Airlines said it would delay delivery of 34 jets through 2005, and Northwest Airlines said it would close a maintenance center and several ticket reservation offices. American announced in August that it would cut its payroll by 7,000. Industry consultants expect that before the year is up there will be even more layoffs and that major carriers will be forced to further pare the number of short-distance flights, especially in smaller markets. The latesl wave of cost-cutting came as the nation's largest airlines racked up roughly $2.2 billion in third quarter losses, putting the industry on a pace to lose some $8 bil- Grim forecast for major airlines With the immediate future looking gloomy, most o( the major carriers have continued to rack up losses that have sent their stock prices lo historic lows. AMR Continental Corp. Airlines Net income/loss, in millions y Q32001 9- -$414 Q3 2002 9- -$924 Operating income/loss Q32001 -^--$3.40 Q32002 4P--S3.05 "Si S3.0 4P--S37 per share ' H!" $0.05 * 9 -$0.58 Analysts' ^,. S3 _ 04 . jp.-so.74 projection ^^ ^^ 'Excludes one-time items Delta Air Lines 9 -£259 9 -S326 9- -$2.43' -^--$1.75* 4P--S1.84' Northwest Airlines -, 5 -J- $19 9- -$46 sSr $0.20 9 -S0.55 jp, -S0.82 Southwest Airlines f|| $151 •|ft- S75 1® $0.10* l&Sr so.oe* '•8% S0.05* UAL Corp. -^--$1,160 9 -$889 9- -$10.05' 4P--S8.82' 9 -S7.42' SOURCES: The companies iion for the second year in a row. US Airways was forced .into bankruptcy two months ago and other carriers arc desperately trying to avoid the same fate. "It's certainly more than a bit discouraging as an equity analyst when the most frequently asked question is 'What airline is going bankrupt next?' And when the follow up is, 'No, I meant after United?'" Samuel Buttrick, a UBS Warburg analyst, quipped in a recent report. For all the clouds hanging over the indus 1 try, analysis found some bright spots within the latest round of earnings reports: • Southwest, which earned $75 million, said it would increase capacity hy 5 percent in the fourth quarter. • Northwest, which lost $46 million in the July-September -period, was praised for maintaining strong liquidity. It had $2.4 billion in cash on hand at the beginning of September, according to Salomon Smith Barney. • Continental, which lost $37 million, was credited with efficient operations, reducing its cost per seat by 4.7 percent compared with last year. But the industry tea leaves mostly foretell gloominess. In 2003, Delta will have to spend up to $250 million in cash and take charges of up lo $300 million to deal with the problem. Other carriers face similar, if less severe, situations. Because of tighter security in the wake of the terrorist attacks, airlines added a $2.50 fee to ticket prices to reimburse the government, which now controls baggage and passenger screening. An additional downside of the stricter security is what airline executives refer to as ihe "hassle factor," the added time spent at airports thai makes cars and trains an attractive alternative for shorter trips. The number of available flights in September shorter than 250 miles declined by 18 percent over the past two years, according to the'fransportation Department. By comparison, flights 250-499 miles long declined by 10 percent and flights longer than 1,000 miles fell by 3 percent. Even with these capacity reductions, average fares in September were 18 percent below 2000 levels, according to the Air Transport Association, an industry group. A major contributing factor to the cheaper fares has been the increased competition from low-cost carriers, whose market share has increased by 19 percent over the same period of time, according to Transportation Department. The airlines say the low prices are necessary lo attract today's frugal fliers, but they know it's only sustainable if they can bring their costs down. That is why carriers have been tightening restrictions and adding fees on lower fares and charging customers for certain services that used lo be free.
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