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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (5971)	10/5/2000 4:21:41 PM
From: Dealer	Read Replies (1) \| Respond to of 65232

Tech Rally On The Way, Analysts Say By: Tom Walker 10/5/00 9:10:00 AM Source: Cox News Service Technology stocks have been in a near-bear market slump since Labor Day - their second worst performance of the year - but some Wall Street strategists believe the sector is poised for a rebound. Ralph Acampora, senior technical analyst for Prudential Securities, told clients on Wednesday that the steep slide in tech stocks ``sets up (the) potential for a final `washout' in the Nasdaq composite.'' He sees the rebound being led by renewed investor interest in semiconductor, hardware, software, networking and other ``big-cap tech'' stocks. And while one day doesn't make a trend, the tech-heavy Nasdaq composite index reversed a three-day, 8.8 percent slide on Wednesday on strength among some of the very stocks that had hurt the market recently, including Intel. Significantly, it was one of the busier sessions in recent weeks, with turnover of 2.06 billion Nasdaq shares, up from 1.89 billion on Tuesday, and 1.16 billion shares on the New York Stock Exchange, up from 1.08 billion Tuesday. At Goldman, Sachs, senior strategist Abby Joseph Cohen declared in a message to clients earlier this week that ``the backdrop for investments in technology is favorable.'' Those were her first bullish words on the sector since late March, when she recommended that investors trim their stock portfolios by 5 percent in favor of cash. Cohen and other analysts who base their outlooks on economic fundamentals got some additional support on Tuesday from the Federal Reserve, which held its third straight policy meeting since May without raising interest rates. But while the Fed's statement explaining its inaction said in effect that the economy has slowed enough to make another rate increase unnecessary, Wall Street was disappointed that it did not give at least a hint of future interest rate cuts. Instead the Fed, which raised rates six times in 1999 and 2000 to thwart inflation, reiterated its concern that inflation is still a risk due to high oil prices and a tight labor market. Analysts who look for a fourth-quarter stock rally base much of their optimism on the end of an unusually busy and negative ``pre-earnings'' report season that, more than anything else, appears to have depressed investor sentiment. ``To date, 12 percent of the S&P-500 companies have issued negative outlooks for the third quarter,'' said Joseph Cooper, research analyst for First Call/Thomson Financial, which tracks earnings projections. He said that is twice the usual number of such announcements. But Wachovia Securities analyst Ricky T. Harrington said the latest sell-off has also pushed major market averages and key stocks ``close to oversold conditions.'' That, in turn, could set the stage for what Harrington called ``a year-end recovery in the latter half of October, November and December. ``One of the first signs of this occurring probably would be for key stocks to begin to respond favorably to good earnings, or for stocks to resist selling off in the face of disappointing earnings,'' he said. This, clearly, has not yet begun to happen, since the third-quarter earnings season has just started. The big test comes over the next three weeks, when thousands of earnings reports are released, including those of high-profile market movers. That's one reason some analysts remain guarded in their optimism. Paul Cherney, a market analyst for Standard & Poor's, was skeptical of Wednesday's broad-based rally. ``Right now I can't call it anything other than a short-covering rally,'' he said, referring to the replacement of borrowed shares by short sellers who had sold them earlier on the expectation that prices would decline. Also, the market is still dogged by problems of high oil prices and a weak European euro, and the usual uncertainty associated with the outcome of a presidential election. According to Cherney, the market is still waiting for ``a headline of undeniably bullish impact'' to push stocks through their ``wall of resistance.'' (The Cox web site is at coxnews.com)