Stock market seer Elaine Garzarelli stepped back into Wall Street's bright lights this past week to offer a dire prediction about the direction of stock prices. In a word, down.
Known best for predicting the October 1987 market crash, Garzarelli played big on her earlier success. She recommended Tuesday that investors go to "maximum cash," the same as nine years ago. But she'd been bullish in a New York Times article just two days earlier.The market took her change of heart to heart, pushing the Dow Jones industrials down as much as 60 points that day before recovering a dozen or so by the close. The Nasdaq market's main index tumbled 3 percent.
All that, and Garzarelli's comments were neither earth-shattering nor groundbreaking.
Since the Dow's 161-point plunge on July 15, bullish voices have turned bearish and even the most avowed bulls have tamed their enthusiasm. Garzarelli called for a 15 percent to 20 percent decline in the Standard & Poor's 500 index from its spring highs. It's already down about 7 percent.
But the market's visceral reaction to her forecast illuminates one key point: Investors are hungry for guidance, any guidance.
"That's pretty typical, really," says Peter J. Canelo, chief investment strategist at Dean Witter Reynolds. "When the market's going up, `Don't bother me, I know what to do.' When you're not sure about the direction of the market, people tend to get panicky and tend to latch onto anybody who they think knows what's going on."
And the market's direction indeed appears unsure, especially given the host of differing opinions making the rounds.
What's known with certainty is this: Springtime brought the major stock market indexes to new highs, led by gee-whiz technology stocks among others. Things seemed marvelous and the biggest worry was the Federal Reserve would mess up all the fun by raising interest rates.
That hasn't happened. Instead, the market started coming off its highs and a bit of bad news on corporate profits - from the aforementioned high-tech darlings - sent stocks sprawling. They're not quite right yet, either. Up one day, down sharply the next.
"It's obvious that investors both large and small, institutional and individual, are very skittish at this point," says James Solloway, director of research at Argus Research Corp.
Into that fracas jumped Garzarelli, adding her voice to those of an army of market strategists.
For those who remember Garzarelli's past TV appearances mulling the market or even, at one point, doing pantyhose commercials, the former Lehman Brothers guru represents something of a beacon.
In the world of stock-market analysis, certain players stand above the rest. For one reason or another - not always their accuracy - these gurus speak on television, get quoted in newspapers and in the somewhat cloistered world of Wall Street become major celebrities.
Garzarelli, who declined to be interviewed for this story, fell into that category. Before Lehman fired her in 1994 as part of what it said was a cost-cutting effort, she was reportedly paid more than $1 million a year.
Since the firing, she's become a newsletter writer, spreading her wisdom directly to the masses. For a price. Her newest prognostication came during a conference call with clients, and word got out.