To: JDN who wrote (39482 ) 8/13/2000 7:47:33 PM From: Eski Read Replies (1) | Respond to Weekly Recap : Rotation, rotation, rotation... Despite solid earnings from a trio of tech heavyweights - Cisco (CSCO 64 5/16 +15/16), Applied Materials (AMAT 69 13/16 -1/16) and Dell (DELL 37 11/16 -4 1/16) -- investors continued to move money out of techs... Where did the money go? If you guessed someplace safe, well guess again... One of the biggest winners this week - tobacco stocks... Group caught fire - especially Friday when Goldman Sachs issued a very bullish report... Firm noted that tobacco litigation was slowing and that Philip Morris (MO 31 1/4 +2 3/4) could rise by 50% to 60% by next year... That's not a misprint... Claimed that the sum of its parts are greater than the whole... Blah, blah, blah... Litigation may have hit a temporary lull, and I'm sure the street is excited by the prospect of a Bush presidency (he leads in the polls), but the long-term picture for this group remains dubious at best... Briefing.com sees no reason to suspect a significant change in the courtroom (where tobacco recently suffered a major loss), the court of public opinion,or in the tone on Capitol Hill (where the court of public opinion is king)... But we digress... The point is that investors continue to rotate out of techs into groups offering better values... Money landing in Beverage, Gaming, Brokerage and Banking... Even the deep cyclicals got into the game amid late week talk that the Fed's next move will be an easing... Chemical, Machinery and Paper stocks were some of the winners... But the big story for the market remains the lackluster performance of the tech sector... Two problems continue to plague the high-profile sector... First, it's large-cap leaders such as Cisco (CSCO 64 5/16 +15/16), Oracle (ORCL 81 1/8 +1 1/16), JDS/Uniphase (JDSU 117 3/4 unch), Dell (DELL 37 11/16 -4 1/16), Sun Microsystems (SUNW 112 3/16 +1 3/4), EMC (EMC 89 9/16 +1/2), Intel (INTC 63 13/16 +1 13/16), Microsoft (MSFT 72 7/16 -3/16), etc. continue to trade at historically high valuations... CONSEQUENTLY, AS WE SAW THIS WEEK, STOCKS HAVING A HARD TIME GAINING UPSIDE TRACTION EVEN WHEN REPORTING GOOD EARNINGS... SECOND, THE STREET IS WORRIED THAT A SLOWING ECONOMY IN THE SECOND HALF WILL RESULT IN SLOWING EARNINGS GROWTH FOR TECHS... POTENTIAL SLOWDOWN WILL BE MAGNIFIED BY DIFFICULT COMPARISON PERIODS STARTING IN Q4... UNTIL ANXIETY OVER THESE ISSUES ABATE, SECTOR LIKELY TO REMAIN TIGHTLY CONFINED... The good news is that money isn't leaving stocks altogether... Rather it is moving to underperforming/undervalued sectors... Ultimately, increased participation is a good thing but don't expect groups like Tobacco and Food to lead the indices to the kind of returns that have been the norm over the past few years... In the week ahead, traders likely to focus on the CPI data and the retail sector... Home Depot (HD 55 15/16 +13/16), Lowes (LOW 44 1/4 +3/4), Target (TGT 29 5/8 -1/8), Kohl's (KSS 59 +1 1/2) and Toys-R-Us (TOY 17 3/8) among the retailers due to post results... Linux stocks could also get a boost from the LinuxWorld Conference. -- Robert Walberg, Briefing.com
