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.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: James Strauss who wrote (39771)	5/30/2001 12:41:37 PM
From: Luce Wildebeest	Read Replies (1) \| Respond to of 50167

This from the Internet Stock Report; Sun Provides Reality Check By Paul Shread (mailto:pshread@internet.com) May 30, 2001 - Any hope that the second quarter could provide some sign that fortunes are improving for technology companies was pretty much dashed by Sun Microsystems last night. Sun not only guided estimates lower, from 2-4 cents per share, down from estimates of 6 cents a share, but the company also refused to provide any forward guidance, meaning that there is still no sign of when the earnings outlook might improve, or at least stabilize. Sun blamed the shortfall not on product transition, but on "overall slowdown in demand." There is some evidence that the U.S. is stabilizing, Sun said, but not before the problems have begun to spread abroad: European and Asian markets are getting weaker, Europe much more than expected. "The surprise is Europe," was the word out of last night's conference call. And cause for concern, too, because the European economy had been one of the few bright spots this year. If there was any hope that the June earnings warning season would be an improvement over March, Sun just delivered a bold statement that it likely will not be. So does this mean the Nasdaq goes back and retests its April lows? Maybe not just yet, but it's beginning to appear likely at some point in the seasonally weak period of May-October. For now, investors are betting that the Fed will prevail in its crusade to keep the economy from slipping into recession. And that's not a bad bet to make - the Fed has pulled out all the stops on this one. In addition to the most aggressive course of rate-cutting in its 88-year history, the Fed has removed the safeties on the other weapons in its arsenal. Just yesterday, the Fed added about $10 billion in reserves to the banking system, the most since it added $11 billion on May 16, the day after its last rate cut. Think the May 16 rally was a delayed reaction to the Fed's rate cut the day before? The word among traders is that it was the unexpectedly large addition of reserves via repurchase agreements on May 16. The Fed was letting the market know it will pull out all the stops to win this one. But it's a risky bet, and time is running out. Fed rate cuts take 6-9 months to begin to hit the economy. The Fed began cutting rates on January 3; that means they could begin to hit the economy as soon as July. Which means that companies had better have something - anything - to say about visibility on their July conference calls, and certainly by Cisco's August conference call. Otherwise, this market may not continue to support valuations that are double the Nasdaq's 15-year historical average.