Foreigners' Ardor for U.S. Stocks Is Waning
THE U.S. STOCK MARKET is showing some signs of recovery, but there is a problem lurking in the background: foreigners.</br></br>Foreign investors, whose purchases in 2000 almost equaled those of U.S. equity mutual funds and who were steady buyers even last year, have pulled their horns in. They aren't quite net sellers yet, but their net buying has almost dried up.</br></br>That helps explain why the market has been soft -- especially the stocks of big, well-known companies favored by foreign investors -- and why the dollar has been under pressure.</br></br>The risk is that the disenchantment with U.S. stocks could continue and that foreign investors could even become net sellers, further hurting the U.S. market. "Foreign demand for U.S. assets is coming under strain," says Paul Meggyesi, a senior foreign-exchange analyst at Deutsche Bank. "With little sign of improvement in the U.S. asset market this is a problem which we believe will continue for some time to come.</br></br>Last week, stocks rose led by continued demand for technology shares in particular. The Nasdaq Composite Index jumped 8.8%, or 140.54 points, to 1741.39 following five straight days of gains. The Dow Jones Industrial Average, meanwhile, was up 4.2%, or 413.16 points, from a week earlier to 10353.08. The Standard & Poor's 500-stock index also gained 4.9% for the week.