Today's prudentbear! -->
Market Summary June 27, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
No More Hard Liquor
We had some technical difficulties yesterday that prevented the
summary from being posted, but we’re back in full force today.
So, let’s get to the action… Asia was mostly lower last night with
Japan losing a percent and a half. Europe was up a touch, and
the US futures were a little higher. We opened flat, took a small
dip, and then walked up to the high of the day. The remainder of
the afternoon was spent drifting sideways while we waited for
our rate cut from the Great Oz. The Fed announced that we were
only getting a 25 bp cut (beer) instead of the customary 50 bp
(hard liquor), and that caused an immediate selloff to new lows
for the day. The drunk patient obviously didn’t like that because
the next step after beer is probably sobriety, which means reality
will have to be dealt with. What came after that slide that was a
lot of dancing around but no clear direction. As we got closer to
the last hour, we began a rally that carried us back to the
morning’s highs, but as the hour wore on we started sliding
again to send us out at the close in the lower end of the day’s
trading range. Volume was OK (1.1 bil on the NYSE and 1.7 bil
on the NASDAQ.) Breadth was slightly positive on both
exchanges. The top sector winner was the airlines as the XAL
rose 2 percent. The top sector loser was the oil services as the
OSX slipped 5 percent.
PLD maker XLNX warned last night that revenue was going to
come in worse than expected because of a slowdown in the first
3 weeks of June. Recall that XLNX put out their 3 line
“mid-quarter update” on their website back on June 4th that said
everything was grand, which sparked a huge rally in the stock.
Today XLNX closed down 9 percent and back below the $40 line
that the stock was at just before that June 4th guidance was
given that they have now been forced to change. We also got a
warning out of VTSS, which was yawned at, as well as PLAB,
which was also treated as a nonevent. Networking equipment
maker COMS also warned last night of a greater than expected
loss, with their CEO saying “My scenario, while ultimately
positive, is not one that calls for an industry turnaround anytime
soon.” COMS was hit for 5 percent. PALM stepped over its
twice-lowered bar and reported a loss that was less than
expectations. Of course if you toss in their inventory
write-down, they actually lost even more than their guidance.
But, management handed out some hopeful comments on their
call, and that was enough of an excuse to pop it to the upside by
16 percent. ORCL’s Ellison was out last night making some
hopeful comments saying that the current quarter looks “a lot
stronger.” That was largely ignored as the stock opened down
and stayed down. ORCL has made similar hopeful comments
over the last year that it has been forced to retract later, and the
market may be finally catching on. Of course, the rate cut was
the big news item of the day and what caused the most motion.
By the close, there were no real themes in tech that were
detectable to me other than the fact that the semi equipment
shares didn’t rally for once. Selling on bad news continues to
be very company specific for the most part. Financials were
mixed. The BKX fell a hair, and the XBD rose a hair. The credit
card shares were a little lower. The big boy (GE) slipped a
percent. Retailers were weak again as the RLX fell 2 percent to a
new low for the move.
Oil was spanked for $1.37 after API data showed a big increase
in inventories last night. Recall we discussed that oil prices
could take quite a spill once the market began to discount a US
recession and the resulting demand shock. It looks like that’s
what we’re seeing already. The XOI fell 3 percent, and the OSX 5
percent. Gold was spanked for $4.20 on the news of the 25 bp
cut as I guess some people had bet on something bigger from
Uncle Al. Lease rates were quiet, and the HUI lost 4 percent.
The US dollar index bounced a touch. The euro slipped back
just below the 86-cent level. Treasuries slipped a little on the
news of the rate cut, continuing yesterday’s slide.
Uncle Al showed some unusual restraint today and broke the
pattern by only handing out a 25 bp cut. That takes the fed
funds rate to 3.75% from the 6.5% we stood at before the Fed
began cutting rates on Jan 3rd. All the major indexes now sit
below those Jan 3rd levels when the Fed began cutting rates, so
the stock market is saying that this unprecedented easing cycle
hasn’t done much good. With the Fed’s break from the 50 bp
pattern today, while continuing to cite the fact that economic
weakness continues with no signs of recovery, they may finally
be coming to the same realization. The question is: when does
the herd figure this out and their hope and faith in the Fed turn to
fear and selling? Of course, the more immediate question is:
what sort of end of the quarter monkey business will we see
between now and Friday? We’ll soon find out.
Be sure and check out the Mid-Week Analysis for a discussion
of the easing cycle and the lack of results. |
