Correction Forecast

What does the summer hold for Wall Street?There is a widespread belief that the market is in for another 5-10% correction in the near future-similar to what happened in February.It has just been too hot recently.Bolstered by liquidity,mergers and acquisitions rather than fundamentals,it is on thin ice.The slightest jolt could send it into freefall.Investors must double-check for quality and diversity in their holdings,if they hope to weather the nearing storm.

Alcatel-Lucent Upgraded

Alcatel-Lucent(ALU),the Franco-American telecom colossus,has been upgraded to "outperform" by Credit Suisse.ALU's first quarter as a merged corporation was a difficult one.Although the company sustained a net loss of 8 million euros(10.8 million dollars),its cost-cutting plans impressed Credit Suisse.Alcatel-Lucent is one of the most actively traded stocks.Its CEO,Patricia Russo,sees revenue growth for the rest of the year,based on a good flow of orders.

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Alcoa Courts Alcan

In the world of mining and minerals,consolidation is king.That is why Alcoa(AA) is courting its Canadian rival Alcan.It would be the second-largest deal ever in the sector.Alcoa is offering 73.25 a share,plus stock.The total value of the deal is thirty-three billion in cash,stock and debt.According to Alcoa,the transaction would result in one billion in savings.Alcoa recently closed a plant in Frederick County,Maryland because of its inability to find cheap electricity.To satisfy Canadian regulators,the company would maintain headquarters in both New York and Montreal.

Recession Haunts Wall Street

As Wall Street looks forward to summer,it has warnings of recession in its face.David Rosenberg,Chief North American Economist of Merrill Lynch,points out some startling signs of a downturn.For the past four quarters,the U.S. economy has registered annualized growth of less than 3%.In the past sixty years,this has always foreshadowed recession.Similarly,the Conference Board's Leading Economic Indicators have declined on a year-to-year basis for three straight months.Every time it did that for the past fifty years-except in 1967-recession followed.Jim Hatzius,Chief U.S. Economist of Goldman Sachs,thinks there is a 25% chance of recession,citing the housing downturn as a burden on the economy.It would seem wise,then,to augment defensive holdings such as consumer staples and health care.