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To: patron_anejo_por_favor who wrote (112804)	7/16/2001 10:12:43 AM
From: ild	Respond to of 436258

The Meehan Notes Let the Spin Games Begin By Bill Meehan Special to TheStreet.com 7/16/01 9:23 AM ET URL: thestreet.com Friday's big news was that China will host next summer's Olympics, but those games are of far less importance to most Americans than the ones played among the capitalist pigs every three months. And this week kicks off in earnest the quarterly fun and games with numbers season, as companies and analysts go into full spin mode. Of course, the economic data reported on Friday were also big news, but neither the announcement from the Olympic Committee, the gubmint or the University of Michigan's consumer sentiment index amounted to much action on Wall Street heading into the weekend (although China-related shares got a quick pop). That the Producer Price Index fell on lower energy prices, sentiment ticked up again and retail sales ex-autos declined mattered little to traders looking forward to second-quarter earnings reports. However, more important will be whether the future looks any clearer or brighter than it did three scant months ago. With most of last week's gains chalked up on Thursday, the bulls begin this week optimistically, because the major market measures edged a bit higher on Friday. However, the weekly gains were accomplished on breadth that was only modestly positive, and the number of new lows on the New York Stock Exchange increased to the highest level since the week ending April 6. The "good news" reported by tech giant Microsoft (MSFT:Nasdaq) helped send tech stocks higher, but the number of 52-week lows exceeded the number of 52-week highs on the Nasdaq. Intel (INTC:Nasdaq) and IBM (IBM:NYSE) will be the focal points Tuesday and Wednesday, respectively. Given that mighty GE's (GE:NYSE) revenue fell 3% last quarter -- the first decline since 1987 -- it will be interesting and informative to see how traders respond to companies far less revered or predictable than GE. With the Fed either done slashing short-term rates, or approaching the end of its very aggressive easing cycle, the game will now almost exclusively be ruled by improving economic data and the outlook for earnings growth. With rates down by 275 basis points and the economy flooded with liquidity, the economy should begin to show signs of firming by the end of the year. However, with layoff announcements exceeding 777,000 in the first half and rising due to the need to aggressively cut costs, the question is whether consumers can continue to carry the load alone. Those job cuts were 26.6% greater than the number in all of 2000. Yes, consumer sentiment stopped plunging, good news for certain, but the reading reported Friday was just 2.2% higher than its recent low made in February. In any case, with overseas economies slowing -- or in the case of Latin America, looking increasingly dire -- can one reasonably make the case that the domestic economy is on the verge of a powerful upward thrust? It doesn't seem likely, and the strong dollar, combined with rising wage and benefit costs, make expectations of almost 20% earnings-per-share growth for the S&P 500 seem ludicrous. Yes, comparisons will be easy, and no longer having to write down goodwill will add about $3 in earnings to the S&P, but most tech companies are unlikely to see the type of bottom-line growth analysts expect until well after demand begins to pick up. There's simply too much capacity to see utilization rates improve enough to drive pricing much higher. And the same can be said for many other economically sensitive industries. We're certain to see restructurings, "nonrecurring" charges and pro forma results galore, so the spinmeisters will be working overtime. But this week also brings more than the usual economic data, which begin today with the release of May business inventories. Mr. G will make his semi-annual trek to Capitol Hill on Wednesday. Many pols are miffed about the Fed's slow response to the economic downturn, and his reception by the House Financial Services Committee is unlikely to be as cordial and congratulatory as in the past. With the major market measures in the midst of an assault on their downtrend lines, the action over the next few days could be very telling. Well-positioned investors should continue to sit on the sidelines and traders should play the game from the short side, with a focus on tech and relatively tight stops. Traders should probably play small until we get a sense of not only what companies and analysts say, but also how the market reacts. Let the games begin.