Stop worrying, Abby Joseph Cohen says.
Or at least, that's what she said before Intel Corp. joined the list of companies warning about weaker-than-expected third-quarter results.
Cohen, the Goldman, Sachs & Co. market strategist who has been one of Wall Street's most steadfast bulls since the mid-1990s, said in a note to clients Thursday that investors' fears about earnings, energy costs and the euro currency are "overdone" and will be "short-lived."
"Investors have been recently unnerved by an assortment of developments and concerns," Cohen said. "We conclude that the reaction to these has been somewhat overdone and that the intermediate- and long-term view remains quite bright."
Cohen said the backdrop for the U.S. economy "remains quite favorable" and reiterated her year-end price target of 1,575 for the Standard & Poor's 500 index, and 1,650 by mid-2001.
The S&P 500 closed at 1,449.05 Thursday, off 0.2%. If Cohen is right about the year-end figure, the index will rise about 9% between now and then.
While corporate profit growth is slowing, Cohen said her initial estimate of $56 a share for the total operating profit of all S&P 500 companies this year is "likely to be too low." She suggested it is also "the durability of profit growth, not its pace, that supports equity prices."
A slowdown in the economy should bolster that durability by helping to prolong the economic expansion, she said.
And while some U.S. companies have indicated a weakening euro is partly to blame for earnings shortfalls "most companies have not done so," she said.
Cohen added that Goldman research indicates the euro is undervalued against the dollar and is likely to regain some of its value in coming months. "If correct, the currency argument for weak earnings is likely to fade," she said.
As for energy prices, Cohen said they may rise further this fall and winter, but she argued that the largest percentage increases have already occurred.
Institutional clients who joined Cohen in a conference call on Thursday said she reiterated that energy, financial and drug stocks remain her favorite sector picks.
Ticker Talk: As expected, Optimark Inc. said it will suspend the operation of its once-ballyhooed electronic trading system, which now operates on the Pacific Exchange and Nasdaq. The complicated system never caught on with major investors.