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|  | APRIL 23, 2004
 STOCK SCREENS By Numer de Guia Taking Stock of a Rate Hike Equities tend to fall when tightening occurs, but there are refuges -- and health care and info tech are two of them Speculation is mounting that the Federal Reserve will pull the trigger on an interest rate hike within the coming months. Indeed, Standard & Poor's Chief Economist David Wyss expects Alan Greenspan & Co. to increase the benchmark Fed funds target rate by 25 basis points, to 1.25%, at the Fed's June policy meeting. What can equity investors expect after the Fed begins to raise interest rates? S&P chief investment strategist Sam Stovall recently conducted a study assessing the effect on the stock market -- and individual sectors -- during past Fed rate-hike cycles (see BW Online, 4/21/04, "Where Rising Rates Will Hit Hardest"). His study covered all six monetary tightening periods that have occurred since 1970. IT TAKES TWO. Stovall found that the S&P 500-stock index falls 6%, on average, a year after the Fed starts a series of rate hikes. He also noticed that of the 10 major economic sectors under S&P's Global Industrial Classification System, only health care and information technology posted positive 12-month returns on average, after the initial Fed rate increase. And it's that finding that forms the basis for this week's screen. We sifted for those issues within the health-care and info-tech groups carrying S&P's highest investment ranking, 5 STARS (buy). Stocks with that designation are expected by Standard & Poor's Equity Research analysts to outperform the overall market by a wide margin over the next 6 to 12 months: These are the names that emerged, by sector:
 De Guia is an analyst for Standard & Poor's Portfolio Services All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
BW MALL
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