Second Guessing The Stock Market

010322 New York Stock Exchange building, lettering THE STOCK MARKET.
It is the question of the moment on Wall Street and Main Street: Did this week's stock rally, fueled by the Fed's surprise rate cut, signal a bottom in the stock market? CBS MarketWatch Correspondent Alexis Christoforous reports that, at a new Internet trading center in New York, the bears and bulls were duking it out.

But average stockholders were not the only ones who could not agree. Even the professionals were of two minds, but a majority seemed to think: If the bottom was not at hand, it is at least in sight.

"The fundamentals are in place for the economy to do better," explains Dick Rippe, managing director and chief economist for Prudential Securities. "One is the inventory correction will end; the monetary ease, which the Fed has engaged in, will help, and third, a tax cut is coming which will help consumer spending."

But Robert Shiller, author of the book "Irrational Exuberance," which warned that the boom in high-tech stocks was a house of cards, believes a lot of stocks are still overvalued.

"We're correcting," says Shiller, "and I think we're very likely on the way down to even lower levels as we come back to reality. And this is one thing people overlook: No matter what Alan Greenspan does, we're going to come back to reality."

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But in the past, a series of interest-rate cuts such as we've had this year almost always results in a market rebound, usually within three months.

For day traders, all this uncertainty can be a good thing. Says one, "If you're a trader, you love volatility. It creates opportunities, whether it goes up or down."

Most market watchers believe the Fed is not done cutting interest rates. As corporate America continues to hand out pink slips and sound profit warnings, economists are betting on at least two more rate cuts this year to boost consumer confidence and the stock market.

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