Low Dividend Yields, High Stock Prices Feed the Bears

WARINESS has arrived on Wall Street. Political instability in Russia, concerns over the ultimate cost of health-care reform in the United States, and prospects of lower corporate earnings stemming from a sluggish economy, are taking some of the excitement out of the stock market.

Wall Street is asking whether the bull market is about to be replaced by a correction. The market continues to post earnings gains. But divergence is in the air: While the broad market, as measured by the NASDAQ composite index and the Standard & Poor's 500 continues to show strength, the Dow Jones industrial average is showing signs of strain.

The divergence in market indexes comes at the time of year when the most severe market corrections have tended to occur. Most major downturns have taken place in October and November. Russia just an excuse

``We're somewhat cautious about the market right now,'' says Gregory Nie, who monitors market indicators for Kemper Securities Inc. ``We think the market could have a correction, as early as the fourth quarter of this year,'' which starts later this week.

Increased turmoil in Russia, Mr. Nie says, could be the catalyst that propels the market into a decline. But such a Russian-related downturn ``would be an excuse, a rationale'' for investors to bail out. What is ``really'' disturbing the market, he says, ``are doubts about the US economy and therefore corporate earnings in 1994,'' not what happens in Moscow.

Many market watchers concede that they are getting slightly more anxious.

``When the news came through on the [turmoil] in Russia,'' last week, ``we all suddenly thought, well, there's that [bad] news, and the issue of future corporate profits, and the slow growth in the economy, and we're heading into fall,'' laughs David Prickril, vice president and portfolio manager with the Glemede Trust Company, in Philadelphia. Such factors, he says, tend to make one very careful about the market.

For investment managers such as Glenmede, market gyrations are not to be taken lightly. Glenmede Trust Company has assets of $7 billion under management. Mr. Prickril oversees a $284 million portfolio. He says that the current bull market will continue, based on low interest rates and low inflation.

Moreover, Prickril contends that the turmoil in Russia has not reached such a point of severity as to endanger US or global equities markets. Prickril sees solid earnings potential in overseas stocks. Still, Prickril concedes being wary, given so many uncertainties. A scary week on Wall Street

After closing down 37 points last Monday, the Dow fell another 39 points on Tuesday after the initial reports of unrest in Russia. For the week, the Dow closed down 70 points at 3,543.11.

It was the broader market, including smaller companies, that showed strength last week. The NASDAQ over-the-counter market hit an all-time high on Friday, reaching 754.65 points. The previous high was 749.71, set on Sept. 3. The broader market was driven by heavy buying of technology-related stocks plus some health-care issues.

``The bull market is definitely not over,'' insists Larry Wachtel, a vice president with Prudential Securities Inc. ``The same fundamentals are intact now as they were last week, before the turmoil in Russia and the president's speech to Congress on health care: a sluggish economy, low interest rates, and low inflation. This is a stock market dominated by money managers'' and large institutional investors.

``Until those money managers see a significant change in underlying fundamentals, they are not going to pull out of equities,'' Mr. Wachtel says. ``And so far, there is no major change in fundamentals.''

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