Beware the market bear-trap
Dawn Patrol
April 19, 2000
by Thomas Coyle
Share prices in technology stocks could fall back on Wednesday in the wake of back-to-back single-day point records, particularly if that two-session spike was, as some believe, a "bear-trap" -- a rally before a sustained downward trend.
"I'm afraid we're in for a major bear market," Michael Lehman, a professor of economics at the University of San Francisco, told UpsideToday. "The valuations are just too high. We saw the first real pain last week."
Although other market watchers think that investors are in the process of sorting out valuations in a sustained flight to quality, Lehmann sees more volatility in store, with "the downdrafts stronger than the updrafts."
Trade numbers: On Wednesday, the Department of Commerce will report on February's trade balance. The market estimate is for an import-to-export shortfall of $28.5 billion, compared to a shortfall of $28.0 billion in February 1999. The trade report is widely watched for trends in the overall trade balance. The volatility in the monthly trade balance can play a role in forecasts of gross domestic product.
Wednesday's earnings: On Wednesday, Apple Computer (AAPL) will report its second quarter. The consensus estimate is for earnings of 81 cents a share, up from 60 cents a year ago.
Also on Wednesday, wireless communications company Alltel (AT) is seen posting earnings of 67 cents a share for its first quarter, compared to 59 cents in the year-earlier period.
ITT Industries (IIN), a network systems supplier, is expected to earn 55 cents a share in its first quarter, a dime over earnings in the same period in 1999.
Lucent Technologies (LU), a communications and software company, is expected to report second quarter earnings of 22 cents a share, up from 17 cents for Q2 1999.
United Technologies (UTX), which makes a range of things from elevators to aircraft flight systems, will post first-quarter results. The Street sees earnings of 72 cents a share, against 63 cents a year ago.
Tuesday's earnings: Tuesday was a busy day for earnings reports.
Internet giant America Online (AOL) beat the Street by 2 cents with third-quarter earnings of 11 cents a share, up from 4 cents a year ago. The consensus estimate called for a profit of 9 cents a share, while "whisper" numbers were as high as 11 cents.
Semiconductor company Intel (INTC) posted first-quarter earnings of 71 cents a share, 3 cents over the consensus estimate of 69 cents, but lower than the "whisper" call of 72 cents to 73 cents. Before those numbers came out, Morgan Stanley raised its rating of the chip maker to "strong buy" from "outperform," citing stronger demand for PCs in the coming months.
Systems and computer company IBM (IBM) beat the Street's call by a nickel, posting first-quarter earnings of 83 cents a share, up from 78 cents in Q1 1999.
Data storage company EMC (EMC) posted first-quarter earnings of 30 cents a share, beating the Street's call by a penny.
Sprint's (FON) core long-distance, local and data unit reported first-quarter earnings of 48 cents a share, excluding a gain, edging out the consensus call for 47 cents. ABN AMRO raised its rating on Sprint PCS (PCS), Sprint's mobile communications unit, to "outperform" from "hold."
Wireless communications company Qualcomm (QCOM), reported second-quarter earnings of 25 cents a share, a penny over the consensus estimate.
Tyco International (TYC) said second-quarter earnings for the electronic component maker were 50 cents a share, in line with the analysts' estimate, and up from 34 cents in Q2 1999.
Tellabs (TLAB), a maker of network access systems, reported first-quarter earnings of 26 cents a share, in line with the consensus call and 2 cents above earnings in Q1 1999.
Advanced Fibre Communications (AFCI) said first-quarter earnings came in at 9 cents a share, 2 cents better than the market call and up from 4 cents a share for the same period in 1999.
Saga Software (AGS), an e-business integration and enterprise software publisher, also beat the Street by 2 cents, coming in 12 cents a share in its first quarter.
Broadcom (BRCM), a maker of semiconductors for broadband digital data transmission, reported first-quarter earnings of 17 cents a share vs. the consensus estimate of 16 cents a share and up from 7 cents a year ago.
Reporting later Tuesday, analysts expect Copper Mountain (CMTN), a builder of copper-wire DSL networking capabilities for the Internet, to post earnings of 12 cents a share for its first quarter.
IPO watch: Market debuts set for Wednesday include those of Birch Telecom (BRCH), a provider of telecommunications services to small businesses in the Midwest; and Camtek (CAMT), which provides automated optical inspection for the manufacture of printed circuit boards.
Thomas Coyle is the markets reporter at UpsideToday.
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