A view from Briefing.com's porch.. <VBG>...
[Briefing.com] Tech Stock Analysis General Commentary
Updated: 12-Mar-01
<<And the hits just keep on coming... Prior to Friday's trading, Intel (INTC 29 7/16 -3 13/16) guided
quarterly estimates sharply lower, citing weakness in PC demand and generally lousy
macroeconomic conditions... That news was a major factor behind the Nasdaq's slide to new a
52-wk low.
Then, just before the close of trading Friday, Cisco (CSCO) announced sizable job cuts
(5500-8000 full & temporary workers), which would result in a one-time charge of about
$300-$400 mln... Company also noted that it expects a wider range of estimates for the
remainder of the year... A not so subtle way of suggesting that there's limited visibility for the
foreseeable future, and that the likelihood of an earnings disappointment just increased...
CSCO closed at 20 5/8, a new-52 wk low and its lowest price since December of 1999.
Other tech heavyweights that established new lows on Friday included: Brocade (BRCD 27 3/8
- 5 15/16), EMC (EMC 34.35 -2.80), Sun Microsystems (SUNW 17 1/2 -2 13/16), i2 Tech
(ITWO 19 1/2 -1 15/16), Siebel Systems (SEBL 27 5/16 -1 1/4) and Broadcom (BRCM 38 9/16
-2 3/8).
Considering how many tech companies have already issued earnings warnings for Q1, you
would think that at some point the din of negative news would diminish. It looked like that point
had been reached early last week when the sector shrugged off some negative
preannouncements and pressed higher... But the Yahoo! (YHOO), Intel (INTC) and Cisco
(CSCO) stories killed the recovery but quick.
Traders were also disappointed by Friday's jobs data, as they assumed that the stronger than
expected jump in non-farm payrolls would keep the Fed from acting aggressively on rates. Not
true. The employment report is a lagging indicator. The Intel and Cisco news prove that. As
companies begin to follow through on announced layoffs the unemployment figure will rise.
To make a long story short, the Fed will cut rates by 50 basis points on the 20th. Short-covering
ahead of that event is the sector's best chance for a bounce this week... But conviction will
remain low until earnings visibility improves, and right now that doesn't look likely until some
time in quarter three or four.
There are short-term technical opportunities in tech, but the market risk is very high...
Consequently, traders considering buying oversold issues in anticipation of a bounce need to
be prepared to weather potentially extreme short-term volatility.>>
Robert Walberg
Used with permission of Briefing.com |
