Today's prudentbear! -->
Market Summary July 19, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Diagnosis: Schizophrenia
Asia was mixed last night. Europe was up 2 percent this morning, and the US futures were also sharply higher. We gapped up big and immediately began to rally. That flamed out around noon, and the rest of the day was spent sliding back to the open. As we got to the last hour, we actually slid below the open but the usual rally into the close showed up to take us out just above that level. Volume picked up again (1.3 bil on the NYSE and 1.9 bil on the NASDAQ.) Breadth was slightly positive on both exchanges. The big sector winner of the day was the semis as the SOX rose 5 percent. The big sector loser was insurance as the IUX lost 2 percent.
IBM was the big news last night. Their revenue number was a little light as it was basically flat year over year and sequentially. On the call, IBM said the second half would be a little more troublesome for them and blamed it on foreign currency and their microelectronics business. So, basically they guided lower. Communications chip maker AMCC reported a loss, cut their workforce by 5%, and declined to give any further guidance. Internet software company SEBL reported last night, and its CEO by the same name said, “It looks tough for the rest of the year… It's tough and it's going to get tougher.” Also last night, several big Japanese chipmakers cut cap ex by 40 percent. You would have thought that after all that ugly data maybe some sellers might show up today. Well, you would have been wrong, at least in the early going. Overnight, NOK reported and said they see a Q4 rebound (one of their many optimistic pronouncements over the last 9 months.) I have no doubt they really do think that since based on what RFMD said yesterday (NOK is their largest customer) they’re still churning out handsets like there’s no tomorrow. Demand for these handsets still has not picked up, and when Q4 doesn’t turn out like they’re betting, NOK is going to be an absolute disaster. Then DELL basically guided lower by saying the current quarter was going to come in at the bottom of the range of their previous guidance. That then somehow got spun as meaning DELL was going to meet their estimates? Those two news items somehow swung everything around to where by the time we opened up we saw panic buying. Did NOK and DELL turn the tape because what they said was so Earth shattering? I don’t think so. The market wanted to rally for whatever reason so it did. It’s as simple as that. Whether purely expiration related or just the usual chaos, this market continues to get more and more schizophrenic. I guess its just part of the process of the market slowly casting aside the idea of a rebound and coming to the realization that we’re a long way away from any sort of bottom or a return to growth as stock prices bounce around frenetically in this range they have been in for a month now. But in the meantime, it’s completely chaotic from one day to another and completely useless to try and gain any insight into what the market is “thinking” by looking at a trend that lasts for all of one or two days of trading. It’s been that way for a while as there was no differentiation between groups or stocks within groups. Everything was bought or everything was sold based on the latest news item regardless of what it was. But the last few days have been even more nutty than usual as the whole market has gone from rabidly bearish and selling everything to quickly whirling around the next day and buying like its 1999. But I digress, back to the day’s chaos… after the gap up and initial frenzy to buy the bad news, SEBL and some other Internet related shares like AOL (which has broken down badly on the charts) never could get going and slowly sunk deeper into the red as the day wore on. IBM also could never get moving as it also was down a percent or so. Those were really the only signs of weakness early on as we were powering higher. The slide at the end of the day seemed to me more short-term exhaustion than anything else. As I said though, its so chaotic that there’s really no point in trying to attach any sort of significance to these sharp gyrations we’ve had over the last few days because just when you think the market has appeared to have made up its mind on whether things are as rosy as the hopers believe or not, the market will change its mind 180 degrees in the opposite direction soon thereafter. Meanwhile, prices just gyrate around in the same tight trading range separating short-term traders from their money. Financials also opened higher but almost immediately began sinking. The BKX was down a percent, and the XBD was up a percent after both traded higher early on. GE was up a percent. The credit cards were quite a bit lower after PVN reported its credit loss rate rose to 10.29 percent from 9.34 percent in Q1. Everybody had obviously been thinking that when the second half recovery fable came true, that loss rate would begin to decline. Now that it’s showing no sign of coming in and the second half is looking more precarious by the day from an economic standpoint, people appear to be coming to the conclusion that PVN could have some problems. Thus, they smoked the stock for 14 percent today.
Oil fell 19 cents after trading considerably higher earlier in the session off statements from OPEC that production cuts would likely take place ahead of their scheduled Sept meeting. The XOI rose a percent, and the OSX rose 2 percent. Gold fell $1.10, and lease rates were spanked yet again (the one-month rate is now well below one percent.) There’s certainly no lack of liquidity in the physical gold market at the moment. The HUI fell a percent. The US dollar index tried to bounce in the early going, but slipped as the day wore on to end down a touch. The euro was flat after the ECB left rates unchanged. Treasuries were a little lower.
Tonight we’ll hear from MSFT, GTW, SUNW, NT, and VTSS. It’s also expiration, so I’m sure we’ll probably see more frenetic gyrations tomorrow. What will matter is how we come out of expiration next week. |
