Friday's prudentbear --> (A MUST READ)
Market Summary July 13, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
How Far Can Imagination Take Us?
Asia was a little lower last night after rallying hard with us over the last couple days. Europe was up a percent this morning, and the US futures were a little lower. We opened flat and immediately began to slowly grind higher. We had a bit of a selloff in the last hour that was mostly in tech, but the S&Ps still managed to recover to end right on the high of the day. Volume slipped a little from yesterday (1.1 bil on the NYSE and 1.5 bil on the NASDAQ.) Breadth was slightly positive on both exchanges. The big sector winner of the day was the networkers as the NWX rose 4 percent. The big loser was the semis as the SOX fell 2 percent.
Last night JNPR stepped over its lowered bar and said that Q3 would likely be flat but that they were hopeful for an uptick in Q4. JNPR tried to rally initially but ended down 4 percent by the close. AMD also reported last night, warned for Q3, cut cap ex another 10 percent, and said that they now believe that PC unit shipments will likely be flat this year instead of up slightly as they had originally expected. AMD ended down 7 percent but held its recent low that resulted from its warning a week ago. AMD’s news had the chips a little weaker, but it was pretty mixed until late in the afternoon when semi equipment maker CYMI spit up a warning about 30 minutes till the close saying, “At this time, we anticipate that operating results for the third quarter will fall substantially below second quarter results. We now expect a further decline in unit shipments as well as ongoing reductions in the sales of consumables from second quarter levels. We expect that total third quarter revenue could decline by 25 percent to 30 percent from the second quarter 2001 level, and we currently anticipate posting a loss for the third quarter of this year. We believe that the ongoing deterioration in the semiconductor industry, as evidenced by fab utilization rates that continue to fall and the announcements of production line shutdowns and fab closures, add significant levels of volatility and unpredictability to an already difficult business environment.” That ringing endorsement for the chip and chip equipment companies’ prospects dragged the SOX down 2 percent and CYMI down 9 percent. Otherwise, it was kind of hit and miss. IBM bounced a bit but drifted down from the highs. MSFT slipped a touch. CSCO bounced 5 percent on the rumor that they had placed an order for a couple chips. Blah blah… you get the picture. It was the usual indecision day that you typically get after a romp like yesterday. Financials were higher but muted. The BKX rose a percent, and the XBD rose a hair. GE rose a percent. Retailers were higher as the RLX rose a percent even though retail sales out this morning showed sales ex-autos falling a bit in June.
Oil fell 21 cents. The XOI and OSX both bounced a percent. Gold rose 50 cents. The HUI fell a percent, and lease rates continue to drift along the bottom. The US dollar index bounced a hair again today. The euro ended up an eyelash. Treasuries were a touch lower even after this morning’s extremely benign PPI number. Argentina managed to rally back 6 percent today on hopes that the government can push through a “zero deficit” plan. I’ll believe it when I see it.
For the week, we went out right near the highs on all major indexes, which regained about half of last week’s losses. Next week, we’ll hear from several big techs (NVLS, INTC, IBM, and MSFT to name a few) as well as several large financial institutions. The guidance will be what is important and not so much the Q2 earnings. To make things even more fun, next week is an expiration week. The big question is how honest will these companies be in their guidance and how strong is the willpower (or gullibility, whichever the case may be) of stockholders to continue to buy stocks in the face of rapidly deteriorating business conditions on the hope of a magical second half recovery. In other words, how far can people’s imaginations take us? If the hopers have deep enough pockets to hope their way through next week, then maybe stocks can hold together till the Fall. But if they don't, look out below. Next week's trading will be interesting to say the least. |
