Forbes Market Forecast: May 7, 2001...
Friday May 4, 5:23 pm Eastern Time
Forbes.com
By Mark Lewis
<<The bad news keeps coming, yet stock valuations keep climbing. The way things are going, Cisco Systems could ignite a monster rally this week just by missing its earnings number.
Cisco reports quarterly results on Tuesday, and investors aren't expecting to be impressed. But these days, who needs good news? Evil portents abounded last week, yet investors happily bid stocks higher on the theory that the Federal Reserve now is sure to deliver another one-half of a point interest rate cut.
"People don't want to miss the bottom," says equity strategist Peter Boockvar of Miller Tabak. "There's a lot of cash on the sidelines, and a sense that maybe the worst is over."
On Friday, the market dropped in the morning on the news that the unemployment rate in April had shot up to 4.5%, its highest level in almost three years. But within an hour, investors reversed course and began buying. The Dow Jones industrial average ended the day up 1.43% to 10,951.24 points--well within hailing distance of the 11,000 mark.
The Nasdaq Composite did even better, gaining 2.12% to 2,191.67 points. "It was an extremely impressive performance, considering how bleak things looked" Friday morning, Boockvar says.
Investors might see more of the same Monday, as the market continues to anticipate another rate cut. The next scheduled meeting of the Federal Open Market Committee is May 15, and investors now expect another cut of one-half of a percentage point.
The earnings reporting season for the first quarter is pretty much over, although there are still a few stragglers. Cisco will report its fiscal third-quarter results. The networking bellwether already has warned Wall Street that its quarter, which ended April 28, wasn't a good one. But investors will be eager to hear Cisco's guidance.
The economy seems to be teetering on the brink of recession, but the evidence is mixed. More clues will be available on May 11, when the retail sales figures for April will be released along with the Producer Price Index report. If the news is bad, will investors celebrate by bidding the market higher? Stay tuned.>> |
