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By Arnie Kaufman Accounting and reporting issues are the dominant market influence just now. The corporate blemishes revealed in the glare of the Enron debacle are serious. The doubts they raise about earnings come at a time of high vulnerability, with confidence fragile in the aftermath of the bear market and the recession and with the debate over justification of today's elevated p-e ratios continuing.

Still, while aggressive accounting may be fairly widespread, not all companies are guilty of major irregularities. And tighter external and internal standards are bound to evolve.

We believe that investor attention will gradually turn to underlying improvement in the U.S. economy. The indicators are all looking better than expected at this stage, according to S&P chief economist David Wyss. While not ruling out a temporary GDP relapse once inventory restocking has been completed, Wyss feels the odds favor strong growth in late 2002 and early 2003.

For some time, bonds have benefited from stocks' woes, rising in price because of "safe haven" demand. Recently, however, they've slipped along with equities, an indication that the economic recovery concept is being accepted in credit market circles. Money coming out of bonds apparently is going into cash equivalents, adding to an already huge pool of reserves available for investment later on.

The technical picture is unclear, with important support levels being tested. But one sign that the stock market decline may be close to an end, says S&P chief technical analyst Mark Arbeter, is the recent spike in the put/call ratio to the highest level since last September. When the buying of put options (bets on a decline in price) rises in relation to the buying of calls, the implied deterioration of investor sentiment is viewed as a positive, suggesting that many of those who are inclined to sell have already done so. Kaufman is editor of Standard & Poor's weekly investing newsletter, The Outlook

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