From your report of yesterday, I just wanted to pull out the commentary by Patrick J. O'Hare and highlight a couple of areas.
< From Briefing.com: A new week of trading began on Monday, but apparently, a number of people didn't show up for work, or if they did, they found other things to do instead of buying and selling stock. The volume figures pretty much said it all as a paltry 1.13 bln shares changed hands at the NYSE while 1.46 bln shares traded at the Nasdaq.
The lackluster action was attributed to an unwillingness to commit to positions ahead of Tuesday's FOMC meeting. Briefing.com, for its part, isn't expecting any change in the fed funds rate nor any meaningful change in the accompanying policy statement from the one that was offered August 12 in which attention was paid to the brightening economic outlook and the continuation of disinflationary trends.
Beyond the FOMC pre-occupation, investors were put off by various reports from both analysts and the media that highlighted valuation concerns for the technology stocks. A survey by Goldman Sachs on information technology spending didn't exactly light a fire under the tech stocks either as the survey suggested technology capital spending in 2003 will be no better than flat or slightly below 0.00%; meanwhile, only a modest 3.9% increase in spending is projected for 2004.
That survey overshadowed a UBS upgrade of IBM (IBM 88.49 -0.21) to Buy from Neutral, and a Merrill Lynch upgrade of Applied Materials (AMAT 20.58 -0.39) and Kulicke & Soffa (KLIC 12.23 +0.34) to Buy from Neutral. Additionally, it drowned out the suggestion from Goldman Sachs itself that it would be aggressive buyers of U.S. chip equipment stocks on a dip that it feels is possible heading into earnings season due to what may be unrealistic Street expectations. That view was predicated on the belief that the stocks won't peak for the cycle until the industry hits normalized cash flow levels in early 2004.
All things considered, there was little conviction on either side of the trade on Monday as participants were consumed with reconciling near-term valuation concerns with long-term prospects. The former, we suspect, will take precedence for the time being as we work through the tenuous earnings warning season. Accordingly, we anticipate a period of consolidation for the technology sector and would look to lighten positions in highflying technology names.-- Patrick J. O'Hare, Briefing.com>
As is the case many times, I don't claim to understand everything I just read. The reference to "technology capital spending" in 2003 will be approximately 0.0 percent and a modest increase to 3.9 percent in 2004 sounds pretty poor, yet in the same breath, GS said they would be an "aggressive buyer" of U.S. chip equipment stocks on a dip.
Observations like that tend to set my head "a spinning". Whatever GS was trying to say, it apparently did not affect the "market". Maybe the "market" had as much difficulty as I did in trying to decide what they meant and just threw in the towel like I did?:)
Don |
