OT. More old news from Worldlyinvestor.com, but some interesting comments on Hikari. I hope this hasn't already been reported here. My apologies if so. They are managing to get posted to Softbank news on Yahoo.
Wednesday April 26, 8:30 am Eastern Time
worldlyinvestor.com Wake-Up Call
Still Seeking Proof the Trouble is Past
By David H. Smith, Columnist
Tuesday gave the bulls comfort and today looks good, too. But could this be a sucker's rally?
Yesterday US stock markets had the fear of stronger economic data to balance against the hope of stronger corporate results. Both the consumer confidence and the home resale data came in considerably above expectations, which suggests more trouble when personal consumption expenditure and savings data come out Friday. Bonds struggled with renewed inflation concerns.
But stocks followed recent history by defying expectations, trying something completely different than what had come before. Earnings hopes beat out inflation concerns, and shares ramped. Toward the close traders got a flat result from Compaq (NYSE:CPQ - news) but it was what the market wanted and Compaq gained in a strong technology sector.
After the close came results from LSI Logic (NYSE:LSI - news), JDS Uniphase (Nasdaq:JDSU - news), eBay (Nasdaq:EBAY - news), and Nortel Networks (NYSE:NT - news). They all beat expectations to a greater or lesser extent, but I listed them in increasing order of the degree to which they beat them, with Nortel having absolutely shot the lights out. Its revenues grew 50%, its earnings 80% -- and remember, this is not a little company for easily printing big numbers, but a company with well over $20 billion of annual sales as things look now.
Nortel and eBay seem likely to rise further, JDSU and LSI to pull back from gains they made ahead of their announcements.
Today's Lineup Less Impressive
We don't have a comparable pageant of technology beauties to excite traders today. But there are a few telecoms, including Global Crossing (Nasdaq:GBLX - news), McLeodUSA (Nasdaq:MCLD - news), Nextel (Nasdaq:NXTL - news), and some biotechs, including Celera Genomics (NYSE:CRA - news), PE Biosystems (NYSE:PEB - news).
Anheuser Busch (NYSE:BUD - news), CBS (NYSE:CBS - news), Chevron (NYSE:CHV - news), and Clear Channel Communications (NYSE:CCU - news) are the features among the traditional companies reporting earnings.
But the bulls have to take comfort from the strong market we had yesterday. It was a steady upward march rather than a dramatically swinging affair, it included all the popular indexes, it brought around some of the previously bearish strategists on Wall Street, forced some short covering, and gave over-worked margin clerks the day off.
Watch Your Back
The day ahead looks constructive as well. The only thing that bothers me, beside the fact that the Federal Reserve is still on inflation watch, is that bear markets never come and go as quickly as this one appears to have done. It makes me wonder if we are being drawn in for a sucker rally, and set up for another fall.
The index futures are down, but not much. European markets are following us higher rather than indicating the way ahead. There is good strength in Euro-techs such as Siemens (OTC:SMAWY - news), Alcatel (NYSE:ALA - news), SAP (NYSE:SAP - news), Nokia (NYSE:NOK - news), and Baltimore Technologies (Nasdaq:BALT - news), and the whole list of Euro-phones -- France Telecom (NYSE:FTE - news), Deutsche Telekom (NYSE:DT - news), KPN (NYSE:KPN - news), and the rest.
There are particular bits of corporate news giving strength to Psion (OTC:PSIOF - news) and Cable & Wireless (NYSE:CWP - news). Psion's Symbian software technology for handheld PDAs has been licensed by Sony (NYSE:SNE - news), which should be a quantum boost to the UK competitor to Palm (Nasdaq:PALM - news) in terms of money and credibility.
For Cable & Wireless, it is looking increasingly unlikely that it will complete its deal to sell Cable & Wireless-HKT (NYSE:HKT - news) to Pacific Century Cyberworks (OTC:PCCLF - news) - the loss of market value that Richard Li's company has sustained in the Internet stock bust is just too much, and he cannot, or will not, increase the bid. Singapore Telecom and News Corp (NYSE:NWS - news) are still in the background, ready to pick up the pieces of a broken deal.
The clue that this deal is coming apart came yesterday when HKT began to trade farther away from the price of Pacific Century. The gap really widened last night, when HKT rose 4.3% even and Pacific Century was falling 3.5% and the Hong Kong market was under pressure from unconfirmed reports of Chinese military buildup opposite Taiwan.
These reports also put considerable pressure on Taiwan stocks, which other things being equal should have risen following the strength of technology shares here.
Taiwan will remain a nervous place, at least until the inauguration of President-elect Chen next month. Needlessly nervous, I believe. China's bark is far worse than its bite, and no one is in any doubt as to what it really indicates about the relative strength of Taiwan's position and the weakness of China's.
No Luck With New Index
Finally, an observation about indexes and the statisticians who like to dicker with them. Isn't it strange how Intel (Nasdaq:INTC - news) and especially Microsoft (Nasdaq:MSFT - news) began to underperform after being admitted to the exclusive club of Dow Jones Industrial companies? Strangely, the same kind of thing is happening in Japan following the most comprehensive re-jigging of the Nikkei 225 index of the last decade.
Companies like Kyocera (NYSE:KYO - news) and Ito-Yokado (OTC:IYCOY - news) that rose in anticipation of joining the index are flat to down since then. Ito-Yokado's 4.5% fall and a similar drop in Toyota (NYSE:TM - news) drove the index lower in spite of solid gains for technology leaders NEC (Nasdaq:NIPNY - news), Fujitsu (OTC:FJTSY - news), Mitsubishi Electric (OTC:MIELY - news), and Softbank (OTC:SFTBF - news).
David H. Smith is managing director of Grayling Management. Grayling manages hedge funds and private accounts, and performs customized research for institutional clients. Smith specializes in Asian and emerging market equities. His column analyzes global economic and corporate events that happened overnight, and tells investors how those events affect their portfolios. Smith has clients with positions in Nortel, France Telecom, News Corp, Kyocera and NEC.
Go to www.worldlyinvestor.com to see all of our latest stories.
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