Elaine Garzarelli's commentary, 2/9/01...
garzarelli.com
-------------------------------------------------------------------------------------------------------------
Rearranged for emphasis & ease of reading.
>>>Stock market analysis for February 9
Cisco led the markets down as their earnings missed expectations.
Also causing uncertainty in the markets are mixed economic signals.
While lower consumer confidence suggests a slowdown in the economy,
... consumer spending rebounded in January (likely due to the refinancing surge).
Nonetheless, we think:
... the economy is on track for softness or even recession, but
... because of the aggressive easing by the Fed, the softness should be short lived.
This was the first time the Fed has cut a full point in one month since 1984.
The Fed should ease another 50 basis points in March.
We DO NOT believe the technology stocks will stay weak as some analysts do.
... We think the group has some excellent values now based on 2002 recovery earnings (including Cisco), and
...we advise our clients to take advantage of these low prices.
We do not (and never have) recommended the dot.com's -- but rather selected technology including:
... software,
... hardware, and
...semiconductors.
The worries of a tech slowdown are understandable, however, and
... we believe the worst will be seen in the 1st and 2nd quarter reports.
... We expect down earnings of course, and
....... that has generally been a good time to buy the stocks.
For instance, Cisco says it gets 20% of its enterprise revenue from manufacturing companies who are slashing their corporate information-technology spending budget.
We believe:
... as the Fed's easing policy gets absorbed into the economy (generally takes 6 to 12 months),
...companies will return to their technological expansions and earnings will rebound.
..........................................................
Interest rate/bond market analysis for February 9
Our readers know we had been very bullish on the bond market for a number of years.
Recently our outlook on bonds changed
-- we would rather take advantage of the values in the stock market.
We believe the Fed will continue to ease but most of that has been factored into bond prices.
Yields, however, should remain steady for the next 6 to 12 months, we believe. <<< |
