Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (68987)	2/12/2001 9:42:05 AM
From: Les H	Respond to of 99985

Nasdaq-100 P/E 811 nytimes.com Man does his part as consumer news.excite.com

To: Les H who wrote (68987)	2/12/2001 10:15:58 AM
From: Les H	Read Replies (1) \| Respond to of 99985

Place your bets on the U.S. avoiding recession bangkokpost.com Turn of the interest rate cycle markets.ft.com Is the Fed pushing on a string in cutting rates? quote.bloomberg.com

To: Les H who wrote (68987)	2/12/2001 3:18:29 PM
From: Les H	Read Replies (2) \| Respond to of 99985

MARKET EARNINGS We hate to sound like a broken record, but the concern continues to be 3Q01 estimates for overall earnings, with a focus on the technology sector. We are in a profits recession! The question now is how long will it last. Something more than just the economy is driving down tech earnings. The economy alone does not cause a drop from earnings growth of 42% in 3Q00 to about 3% (reports this week from Applied Materials, Dell Computer, and Hewlett-Packard's could alter that 3% slightly) in 4Q00. Just as alarming is the way analysts continue to slash estimates for the first three quarters of this year. Since 1 January, tech earnings estimates have dropped for 1Q01 from a 4% gain to a 14% decline, for 2Q01 from a 2% gain to a 13% decline, and, most ominously, for 3Q01 from an 11% gain to a 2% decline. As a former technology analyst from 1968 to 1990, the similarities between the downturn in tech earnings in 1970, 1974, and 1980 and this downturn are rising. All of those were accompanied by a recession and by the transition to a new product cycle at IBM. In those days it was much easier to identify a product transition. What the cause could be now is hard to fathom at this point. It The January bounce in technology stocks in January was fueled by expectations that the worst news was out on tech, and that the sharp decline would be followed by a similar sharp recovery in 3Q01. That now looks like a dead cat bounce. Forget that notion of a V shaped decline and recovery! The question now is will it be a U or an L. The first checkpoint is whether the tech earnings decline will be less than in 3Q01 than it will be in 2Q01. The danger in the deterioration in tech sector growth is that it may pull the rest of Corporate America into a more severe profits recession than the current estimates would indicate. Already, there is more than the normal trimming of 3Q01 estimates for consumer cyclicals, basic materials, and capital goods. Given that capital goods is a lagging sector in the business cycle, the 16% expected for 3Q01 is probably pie-in-the sky. Add the risk of the energy problems being greater than expected over the next few quarters, and the expected 3Q01 earnings recovery may not materialize. The primary determinant of market performance over the next few months likely will be the degree of change in the outlook for growth in the 3Q01 economy and in 3Q01 earnings, particularly in the technology sector. Over 80% of the S&P500 companies have reported 4Q00 earnings. With the exception of retailing, all of the industries have now been heard from in a meaningful way. Earnings growth for the 82% that have reported are up 4.8%. As the retailers and others report over the next few weeks, the magnitude of the gain will back off some. The blended number of actual results for the 82% and estimates for the remaining 18% is 3.5%. The final result for 4Q00 will likely be a 3% to 4% gain, the same as the 3% to 4% we had expected at the beginning of the reporting season (but only because the switch from AOL alone to AOL Time Warner after the merger pulled the results down just over one percentage point). Estimates for 1Q01 and 2Q01 continue in free fall, particularly in the technology, consumer cyclicals, and basic materials sectors. It now seems assured that 1Q01 will show a slight decline from 1Q00 earnings, and that 2Q01 will show an even deeper decline. Meanwhile, the pace of negative pre-announcements continues unabated. It is already a record for negative pre-announcements, and the total will likely top 800 for 4Q00. The previous high was 554 in 4Q98. But the problem now is the pre-announcements for 1Q01. thomsoninvest.net