reading the tea leaves the lewis way
Print Version September 26, 2002
Tech Starts To Stumble
Asia got a boost off of our rally last night, with Japan bouncing back two percent. Europe rose a big 4 percent, and the US futures were also a little higher. We gapped up and immediately dove to fill the gap and then slingshot back to the upside and slowly worked our higher into the new home sales data. August new home sales came in a touch better than expected, but the market couldn’t do a whole lot with it and actually slid lower after the news. We managed to push up to a marginal new high once again in the afternoon, but tech actually went in the opposite direction. That pulled on everything else, and we slipped back to the morning’s lows in the S&Ps as the NASDAQ actually fell to a new low for the day. With a couple hours to go, we finally managed to stabilize and bounce back to the morning’s highs for the close, although the NASDAQ barely even made it back to the morning’s lows. Volume was fairly chunky once again (1.6 bil on the NYSE and 1.7 bil on the NASDAQ). Breadth was almost 3 to 1 positive on the NYSE but only marginally positive on the NASDAQ.
NT warned last night that revenue was going to come in below forecasted levels (again), down 15 percent sequentially instead of the expected 10 percent. NT slipped 11 percent to 57 cents. The company also announced a reverse split, which it needed to do in order to hopefully keep its listing on the NYSE (something that we’ll no doubt be seeing a lot more of going forward). NT’s warning had the rest of the networking sector under pressure, including mighty CSCO, which fell 5 percent to a new low for the move. The steady liquidation in telecom continues. For many companies in this space, it’s no longer become a question of when they turn around but rather how long they last before they “go away.”
The semis were weaker for the most part, led by mighty MU, which fell 6 percent and back to its low for the year. The equips were also under pressure once again. Equipment maker CCMP’s CFO apparently sees the handwriting on the wall because he’s decided to jump ship. The company announced last night that he is leaving to become the CFO of Snap-On Tools of all things. CCMP fell 4 percent. The SOX erased yesterday’s gain with a 3 percent loss.
Elsewhere, the entire PC complex was a little heavier for the most part. HPQ fell 6 percent to a new low for the move. TECD fell 5 percent to a new low for the year, and MSFT and CDWC were both off a touch. DELL managed to close up a few pennies ahead of its analyst milk and cookies party next Tuesday. Will the Michael and company go ahead and break the bad news that they’re going to miss the quarter then? Or will we have to wait until mid-October? We shall see.
Financials were hopping. The BKX rose 3 percent, and the XBD rose 2 percent. The derivative king bounced 2 percent. GE broke from the herd and fell 2 percent after the company broke the news that a one-time gain from an asset sale will be what allows it to make the current quarter’s estimates (that it reaffirmed just yesterday if you recall). No doubt, asset sales such as this one were how the company always managed to beat estimates by “a penny” every single quarter for I don’t know how many years. The company also declined to give any guidance for 2003, although that shouldn’t have surprised anyone after the dismal things they had to say about the future yesterday. Mortgage insurers finally managed to bounce, led by MTG, which rose 6 percent. Subprimes popped 4 percent or so. FRE and FNM rose a couple percent.
Retailers and restaurants were generally higher after the new home sales data came in positively. Additionally, Bed Bath and Beyond (BBBY) reported its quarter ending August 31 and managed to beat estimates, and I think that encouraged people that maybe the housing boom (which BBBY is tied to) is still continuing. Of course, what the market cares about is the future, not August. Homebuilders were generally up 3 percent or so after the new home sales data, but it wasn’t much of a bounce when you consider the spills they have taken recently. Judging by the action in homebuilders, the market appears pretty skeptical that the August strength will carry forward through the end of the year.
Oil fell 8 cents. The XOI rose 4 percent, and the OSX rose 5 percent (both simply bouncing after returning to their lows for the year earlier this week). The CRB was up a hair. Gold slipped a buck in London, setting up a lower open in NY. The metal gapped down and continued to grind lower until about an hour before the close when it went into a bit of a freefall. The yellow metal was down as much as $4 at it lows, but a small recovery into the close cut its loss to $1.90, sending it out at $321.60. Today was also an OTC option expiration in gold and could be partially responsible for the steep slide that we saw today. The gold shares were similarly shelled and probably weren’t helped by the fact that ABX warned that it was going to miss the quarter due to lower gold production and higher mining costs than expected. The gold shares managed to climb off the lows for the close though as the HUI cut its losses in half, ending down 3 percent for the day.
The US dollar index slipped a hair. The yen and euro both rose an eyelash. Treasuries were off a touch with the yield on the 10yr rising to 3.76%.
The rally in tech sort of fell apart today. As we’ve noted before tech usually leads the way, and the Dow gets dragged along like a caboose. So, our short covering bounce may be already beginning to fail. Let’s see if we turn down in earnest tomorrow or not…
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Disclaimer: Lance Lewis' Daily Market Summary is not intended to constitute investment advice or a recommendation to buy, sell, or hold any security.
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