Sonny frombriefing.com :
Interestingly, the market was out in front of the Fed late last year/early this year when it was pressing for aggressive rate cuts... But just about the time the Fed "gets it," the market loses sight of the big picture and begins to soften on need for additional rate cuts... Don't be fooled by the consumer - the economy continues to decelerate, earnings continue to erode and economic conditions overseas continue to deteriorate... Acknowledging these facts, the Fed cut rates by another 50 basis points on Tuesday and left the door open for additional easings... Briefing.com holding to view that funds rate will come down another 50 to 100 basis points before easing cycle runs its course... The pace of rate cuts may slow, as Greenspan & Co. move from 50 to 25 basis point rate cuts, but lower rates are needed in order to stimulate business investment and economic growth.
Market failed to respond positively to the move. One reason for the lackluster response was fact that move was highly anticipated... But action also left traders speculating a) if cut was the last, b) if Fed, by being so aggressive and maintaining easing bias, sees something market doesn't and c) if rate cuts will make much difference (near-term), if corporate profits don't show signs of improving... Without a clear answer, traders simply stayed put and shifted their focus to this week's earnings numbers.
Though most of the tech earnings are in, a number of high profile firms were slated to report results this week - starting last night with Brocade (BRCD), BEA Systems (BEAS), Applied Materials (AMAT), Network Appliance (NTAP), Sycamore Networks (SCMR) and QLogic (QLGC)... Headline numbers were mixed with NTAP, BRCD and BEAS meeting estimates, while AMAT and SCMR missed by a penny... However, the big news is in the guidance, and early indications are decent as orders at AMAT were relatively strong and Brocade indicated that Q2 marks the low water mark for the business and that IT budgets may be thawing... For more details and reports from the conference calls, see Briefing.com's Short Stories page.
Credence Systems (CMOS), Hewlett-Packard (HWP), Ciena (CIEN), Analog Devices (ADI), Dell (DELL), SERENA (SRNA) and Portal Software (PRSF) among the firms due to report results over the remainder of the week.
As long as the street doesn't come away from these reports convinced that the earnings recovery is still several quarters away, techs are poised to resume their ascent... The Fed's aggressive actions will take hold later this year - about the same time corporate profits begin to improve - a very powerful combination... Investors should be buying in anticipation of that event.
BEST WISHES
BILL |
