Last Big Earnings Reports Dead Ahead
* Patience is a good virtue janer ;-)
Feb 4, 2001 (JAGfn.com via COMTEX) -- February 2-9, 2001 The market had so well
anticipated another rate cut, the FOMC meeting on Wednesday all but put a hammer
on the month's rally. Yet, careful observers have detected a pattern. Mondays
crummy; Tuesday "am" follow-through to the downside, with a "pm" turnaround;
Wednesday rally; Thursday "am" rally follow-through followed by waning interest
by the close; Fridays down. Got that? Then you want to buy 'em Monday afternoon
or Turesday morning, sell 'em Wednesday afternoon, or Thursday morning at the
latest. Certainly that would have worked for last week's pick, AOL, which never
managed to climb to my target. And just so we clear the decks from the outset,
OPEC is making noise about cutting production further. With Saudi Arabia's oil
minister attending a seminar in Oslo, those comments could be further
delineated. So I'm watching and playing energy for one last push to the upside,
sticking with favorites Eneron (ENE), Apache (APA) and Tidewater (TDW) which
reprovisions all the rigs.
Since Cisco will be the earnings announcement (Tuesday) that makes or breaks
tech, this week, I'm, also, hanging out with old pharamceutical, Merck (MRK),
expecting the market to favor the rotation into drugs and out of
tech--especially since I'm expecting a Jonestown-like mass depression in tech as
earnings warnings outnumbered releases in the weeks to come. Yes, Wall Street
wants to look across the valley to the turn to more bullish corporate
com's (WCOM) report is a big deal. They've
preannounced.} And forget Sun Microsystem's (SUNW) multi-day analyst meeting.
After many quarters of growing 50-62%, the outlook for 30-35% makes Sun a "show
me" stock. Ditto the Microsoft NT Usenix event in Orlando. Miscrosoft 2000 just
wasn't the blockbuster hoped for and, in the meantime, Merrill Lynch is touting
Linux as the 2000 app killer.
With drugstore chain CVS (CVS), healthcare companies HCA (HCA), Pacificare
Health (PHSY), and Humana (HUM) also due to report, other traders will go there
instead of pharma. I won't because corporate lay-offs will impact these
companies' membership lists, as will any additional attempts at price hikes.
Ultimately, big companies find it cheaper to self-insure, or form their own
healthcare network. But while we're on the subject of healthcare, be aware that
the week promises many "Keystone" seminars that a hop over to www.symposia.com
will describe in full--including presenters at numerous events: Genzyme
Genetics; Genetic Manipulation of Insects; StemCells; Bacterial Chromosomes..
Also on tap, an Alzheimer's specialty meeting, in Atlanta, on Friday. (Wish that
we all could have forgotten what happened in tech, last year.) Then, again,
Blood Safety will put the spotlight on Abbot (ABT) and Baxter (BAX), if
companies like Genzyme Therapeutics (GENZ) are too pricey and speculative for
you.
Understand, I'm saying psychology, not the economy, will rule trading, even as I
believe the economy--ex-autos--might be in better shape than the earnings
outlook suggests. After all, with the exception of niches that, last year,
experienced reacted to component shortages by stockpiling more than necessary
(drams, optical fiber and flat screen displays, come to mind)
just-in-time-inventory controls should have limited the inventory glut before it
got out of hand. All the technology deployed in the last few years should have
provided managers with the kind of timely data that would have stalled orders
before warehouses were filled to the roof. If that didn't happen, then all the
backslapping about the "new" economy, productivity, and efficiency. will have
been a lie, the kind of lie Wednesday's Productivity numbers can't hide.
Laugh now. I'm mentioning World of Asphalt, which started on Sunday, because one
of the worst winters in years will cause road projects to boost this sector.
Okay, you and I both know the press and talking heads will be talking, instead,
about AON: All-Optical Networks, in Dallas, beginning Tuesday. But if you
watched JDSU, GLW and AMCC, last week, you might just have gotten the impression
that these stocks are correcting first, just as they corrected last in Fall
2000. And don't expect a better boost from World Optical Fair, in Tokyo. While
broadband is being deployed by telcos at more rapid speeds, capacity currectly
exceeds demand--even if that condition reverses sooner than the most negative
commentators predict. Internet Telephony, Wednesday, is the app no one needs now
that long-distance rates have cratered on their own.
In sum, I sticking with DOW-ish stocks, avoiding NASDAQ, expecting NASDAQ's
correction to continue, sending money rotating into the places it's gone in the
past. The only event that could change my mind is a great earnings report from
Cisco, followed by really bullish comments from CEO John Chambers, as well as
from Sun Micro, saying the slowdown in tech spending seems to have ended. I
don't expect that to happen, even if the slowdown did end. Tempered expectations
are the most prudent course, now. How else can companies manufacture upside
surprises come April's next reporting season? |
