Today's prudentbear! -->
Market Summary July 16, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
AMAT Crashes Hope Party
Asia was lower last night with Taiwan being the weakest as it fell
3 percent to a new multi-year low. Europe was down a percent
this morning, and the US futures were a little weaker. We
opened flat, danced around for a couple hours as everyone still
had their MSFT hope party hats on from last week, and then
AMAT mentioned at a big semi equipment cookout that business
stinks and is going to likely continue to stink until mid-2002
(that’s right, we’re now past the 2nd half and reduced to hoping
for mid-2002.) That caused a bit of selling in the semi and semi
equipment stocks, which dragged down the NASDAQ and
dragged down the S&Ps. We drove lower the remainder of the
afternoon before finding some footing in the last hour. Volume
was just OK (1 bil on the NYSE and 1.5 bil on the NASDAQ.)
Breadth was slightly negative on both exchanges. The big
sector winner was the airlines (on oil weakness I suppose) as
the XAL rose a percent. The big loser was the oil services as the
OSX fell 7 percent.
Last night in Taiwan, the world’s second largest foundry, United
Microelectronics, laid off 3 percent of its workforce. Obviously,
they smell an imminent turnaround there. So, things were
looking dicey for the semiconductors even before the open, but
that wasn’t going to stop hopers from trying to party as many
semis actually traded up early this morning. Out in California,
semi equipment companies were at a big analyst cookout called
Semicon West making various presentations. AMAT chose this
moment to crash the hope party on Wall Street. About two hours
into the session, AMAT spilled the beans that the second half of
2001 was not looking so hot and neither was the first half of
2002, which both fall under the heading of “duh” if you’d been
awake to hear what AEIS and CYMI said just last week (not
mention everything we discuss here almost daily.) Naturally,
people didn’t seem to like that, and they promptly dumped the
SOX for 6 percent, completely wiping out last week’s
MSFT-inspired rally in both equipment companies and chips
alike. I think it’s important to note that equipment companies
CYMI and AEIS both took out their lows from last week that
resulted from warnings, so we’re seeing a bit of downside
acceleration in these chip equipment guys. We’ll see how
people react to NVLS tonight, which will also likely have a poor
outlook. Psychology continues to be the key. There’s no
question about the data. Things aren’t showing any sign of a
rebound, but people are still trying to close their eyes, buy these
tech stocks, and hope. That sort of strategy, when coupled with
tremendous overvaluation and high optimism, is almost always
a recipe for big losses. Today’s reaction to AMAT could mean
that people are finally starting to question the bets that they’ve
made. The rest of tech was broadly lower as well with the usual
chaos theory being the main driver there. Financials were lower
today even after “better than expected” earnings from C and
BAC. The BKX fell a percent, and the XBD fell 2 percent. Bank
of New York (BK) also reported this morning and came in a bit
light. In addition, BK warned that earnings could deteriorate
further going ahead if the world economy slum continued. That
warning sent BK lower by 13 percent. GE fell 3 percent.
Oil fell 53 cents to 26 bucks. The XOI fell 2 percent, and the OSX
fell another 7 percent to a new low for the move. For those that
like to buy dips because they think the chart will bounce or
some other silly reason, take a lesson from the OSX. Sometimes
stocks just keep going down and fail to bounce even where you
think the chart looks like it should. And when “real” companies
like these oil service stocks collapse as they have, it should
make tech stock owners think twice about what can happen to
their shares. Don’t forget that you’re not just buying and selling
the “blue line” out there. Stock shares represent a fractional
ownership of a business. It’s not a video game. So, don’t treat it
like one. Gold fell 20 cents, and lease rates were quiet. The HUI
fell a percent. The US dollar index was a touch weaker. The
euro rose a hair. Treasuries were a little higher.
Tonight we hear from NVLS. The NASDAQ has now wiped out
about half of last week’s 2-day MSFT day. A gap down tomorrow
would erase all of it as well as give us a nice island reversal
ahead of the two big boys that report tomorrow night and Wed
night, INTC and IBM. It’s expiration week, so anything can and
will happen, but anybody who bought the bull line about MSFT
signaling the beginning of the fabled summer rally that would
then lead us to the fabled second half recovery has to be
understandably a little disappointed right now. And
disappointment typically leads to more selling. |
