No Honeymoon in June for Wall Street

June is still a favorite month for brides, but for stock investors, it's definitely not honeymoon season.

In the past 51 years, June was up 28 times and down 23 on the S&P 500 index, and up 26 times, down 25 on the Dow Jones industrial average, according to the Stock Trader's Almanac. The average gain for the Dow was a mere 0.1 percent, the Almanac says.

But this June, stock investors are likely to feel the game they're playing is more akin to "Survivor" -- that bellwether of reality TV -- rather than "The Newlywed Game."

The reason?

Wall Street is on high alert over more warnings of terror attacks on the United States and a growing list of companies suspected of "funny money" accounting. The result: A stock market that's softer than the mattress in the honeymoon suite at the Four Seasons hotel.

So what should stock investors do in June?

"Pray."

That's the word from Larry Wachtel, senior vice president and market strategist at Prudential Securities in New York.

"June looks like a tough month," Wachtel said. "The volume is the lowest of the year. The players are just not playing.

"The foreign situation is a psychological overhang," he added, referring to the violence in the Middle East and rising tensions between nuclear powers India and Pakistan.

Economic reports in late May were "decent," he noted, but not strong enough to stimulate activity. Without earnings scorecards to motivate stock buyers or sellers, June could be a long, dull month, Wachtel believes.

Anthony Chan, senior managing director and chief economist of Banc One Investment Advisors, agrees.

"Sideways or slightly down" is how Chan sees the stock market in the month ahead.

"It's the old 'sell in May, go away' philosophy," added Chan, whose firm has $145 billion in equities and fixed-income assets under management.

Jeffrey Hirsch, publisher and managing editor of the Stock Trader's Almanac, said, "We gave a seasonal 'sell' signal to our clients on April 2," based on the philosophy that May through October are the worst for stocks.

For anyone with amnesia, Hirsch recalled: "Last June was horrible. The Dow lost 400 points."

NERVOUS TYPES NEED NOT APPLY

Banc One's Chan cited the "extreme pessimism" that colors the market's mood going into June.

"We have event risk, with the terrorist warnings delivered by Cheney and other administration officials," he said, in a telephone interview from his office in Columbus, Ohio.

Adding to investors' anxiety, he noted, is "the turbulence with Halliburton," which disclosed earlier this week that the Securities and Exchange Commission is investigating the company's accounting policies to boost revenues.

Vice President Dick Cheney was chief executive of Halliburton Co. , a Dallas-based oilfield services and construction company, from 1995 to 2000. The accounting policies under investigation were adopted in 1998.

"I'd like to say the other shoe has dropped," Chan said, referring to the accounting problems that have dominated headlines since Houston-based energy trader Enron's collapse last December. "Maybe the shoes are getting smaller."

Anyone who's not already in the stock market or who has a low tolerance for risk should "stay away" in June, Chan said.

"This is not a market for the squeamish," he noted.

But even June must have a bright spot. The risk of an interest-rate increase from the Federal Reserve, when its policy makers meet June 25-26, is almost nil, Chan said.

"The labor statistics are showing this is a jobless recovery," Chan said. "Consumer spending is moderating. So the risk of erring on the side of being too easy is not too large right now." He thinks the Fed is likely to keep U.S. short-term interest rates at 40-year lows a bit longer.

SNACK CAREFULLY

"If you're a long-term investor, then nibble" on stocks chosen with care, Chan said.

Think consumer staples -- food, soft drinks, diapers, detergent, toilet paper -- the traditional sector that performs well regardless of the economy's strength, said Chan, declining to name companies.

Translation: Big names in the consumer staples game include McDonald's Corp. , Coca-Cola Co., Procter & Gamble Co. and Philip Morris Cos. Inc.

"If we're shifting our goals to fighting terrorism, then the shares of security companies look exciting," Chan said.

Chan declined to recommend individual stocks, but an example in the security sector is Kroll Inc. , a company that specializes in corporate investigations, security and forensic accounting. Its stock hit a fresh 52-week high at $24.20 on Friday -- up 60 percent for the year to date.

In contrast, the Standard & Poor's 500 index is down 7 percent for the year to date, while the tech-driven Nasdaq composite index is down 17 percent. The Dow Jones industrial average is off almost 1 percent in 2002.

A TIME FOR PATIENCE

Erick Maronak, research director and a portfolio manager at NewBridge Partners LLC, of New York, which has $3 billion under management, said investors should first take "a good, hard look at which companies are performing in their portfolios and which aren't."

Turn an analytical eye on the recent recession, he said.

"In the downturn, who got stronger? Who gained market share? And who lost market share? What we're going through is cyclical. This downturn in technology is not permanent. A lot of companies will disappear. You want the survivors."

Two years ago, Maronak noted, "Juniper was taking market share away from Cisco in its core business for Internet routers. In the last two quarters, Cisco has taken back 10 percentage points in market share."

Maronak believes "the economic recovery is well under way." He pointed to improvements in orders booked by the companies that make semiconductors and semiconductor equipment, adding: "Those are the basic building blocks for everything in technology. That would augur well for the rest of technology."

Wachtel of Prudential Securities said "Home Depot falling from $54 to $41 -- that might be an opportunity.

"You hear it said, 'They bought at the lows,' like there was some cabal of 'they's' out there. These are simply patient people. That's the key to success right now."

For the week, the Dow average slipped 179.01 points, or 1.8 percent, to finish Friday at 9,925.25, based on the latest available figures. The tech-driven Nasdaq composite index lost 45.76 points, or 2.7 percent, to end the week at 1,615.73, and the broad Standard & Poor's 500 index declined 16.68 points, or 1.5 percent, to close the week at 1,067.14 Friday.