MARKET TALK: Acceptance Is The First Step To Recovery
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
2:29 (Dow Jones) If you're a tech investor hoping stocks will rebound enough
to let you bail out at the price you paid for them, you better change your
strategy, says Barry Hyman of Ehrenkrantz King Nussbaum. "Bubbles happen
once in a lifetime and will not be repeated," he says. Rather, "this is a
deep bear market and the old paradigm of earnings, cash flow, etc., must be
given priority in finding new ideas," he says. (RJH)
2:19 (Dow Jones) Telecom carrier spending may not have yet reached bottom,
says Deutsche Banc's George Notter. Notter says recent conversations with
industry contacts suggest capital spending in North America is likely to
decline 20% - more than most now project. Also, Notter says current
consensus of capital spending growth of 11% in 2002 may be too high, given
that North American carriers project a decline of 19%. "In general, we
remain inclined to stay underweight in the telecom equipment sector," he
says. (JDB)
2:08 (Dow Jones) Applied Materials (AMAT) is off 9% after the semiconductor
equipment company made negative comments at an analyst meeting at Semicon
West, a large trade show being held this week in San Francisco. Wit
SoundView's Michael O'Brien says AMAT's chief financial officer, Joseph
Bronson, told analysts the company didn't expect a recovery to happen until
mid-2002. O'Brien said the company also didn't reaffirm its forecasts for
the just ended quarter, which is a departure from past meetings. Previously,
AMAT expected orders to pickup in October, said the analyst, adding that
typically AMAT will reaffirm forecasts. (DLF)
1:52 (Dow Jones) Robertson Stephens analyst Lowell Singer is urging caution
on AOL Time Warner (AOL), saying he doesn't think the current stock price
"fully reflects the ongoing business risks." While the company is expected
to report 2Q in line with estimates, "we remain concerned management is
banking too heavily on a strong performance in the back half of the year to
reach its revenue and EBITDA growth targets of 12-15% and 30%,
respectively," he says. (RJH)
1:36 (Dow Jones) While corporate credit quality overall is showing some
signs of firming, junk-rated companies are still on a prolonged slide, says
Moody's. $935 billion in bonds were downgraded in the 12 months ended June,
34% of all outstanding bonds. That's well below the record of 45.8% in 1990,
and Moody's says that with the value of downgrades having peaked in 4Q 2000,
the possibility that the credit cycle has bottomed "is not beyond the realm
of possibility." Not so for junk bonds, though, which in the last 12 months
have seen a record 48% of outstanding bonds downgraded. (RTB)
1:22 (Dow Jones) There are two upcoming events Prudential's Greg Smith is
watching. The first will be the impact of the Bush tax-cut checks, which
could have an effect on the economy in August or September. The second is
energy pricing. "I think it is very important that energy prices do not eat
up those tax cuts," Smith says. (RJH)
1:09 (Dow Jones) Sep Nasdaqs have taken a big hit, dipping below support of
1719, though traders cite low volume. Key economic data and earnings reports
expected this week are exerting weakness. Next support near 1704. (ZHS)
12:57 (Dow Jones) Ahold (AHO) is launching a buyout of online grocer Peapod
(PPOD), but a post-mortem of Webvan (WBVN) on the Wall Street Journal's
editorial page questions the viability of the whole sector. One of online
grocing's biggest flaws is that it adopts a model - home delivery of foods -
that went out of style in the 1950s and 1960s when consumers' lifestyle
changes made it more difficult and costly to deliver the goods, says Roger
Blackwell, an Ohio State professor. "Home delivery was an old business
strategy, and migrating it to the Web did not make it futuristic," he says.
(RJH)
12:45 (Dow Jones) The latest one-question Ried, Thunberg and Co. survey
reports that 62% of forex managers don't think Latin America's financial
troubles will spread to affect global markets. Poll surveyed 74 U.S. forex
institutions. (JEN)
12:30 (Dow Jones) A retest of lows on Nasdaq Composite and Nasdaq 100 is a
decent possibility, but a retest, let alone new lows, in indexes
representing small- and mid-cap stocks is not probable. So says Quantech
Research's Mark Minervini, who sees current action in small and mid-cap
names as corrective episode within new bull market. (TG)
12:14 (Dow Jones) Merrill's Rich Bernstein says higher-quality stocks are
cheaper than lower-quality names in nine of 10 economic sectors - the
industrial sector is the lone holdout. Higher-quality issues tend to
outperform lower ones when the profits cycle decelerates, while lower
quality tends to outperform when the profits cycle accelerates. "The
consensus view is that one should 'position a portfolio for the recovery
before there is evidence of that recovery,"' Bernstein says. "Unfortunately,
that appears to be well baked into stock prices." (TG)
12:03 (Dow Jones) "The quick fix of reflationary interest rate cuts is not
the panacea for a Brave New World in need of fundamental reform," says
economist Stephen Roach of Morgan Stanley. "It is high time to face up to
the heavy lifting that is needed to make globalization work. Until that
occurs, I suspect the global economy will remain more recession prone than
ever." (JCC)
11:51 (Dow Jones) The 2Q earnings season is off to a robust start, says
Brown Brothers Harriman. Of 12 S&P 500 technology companies that reported
through Friday, seven posted upside earnings surprises while just two missed
expectations. Upsiders included Advanced Micro Devices (AMD), Motorola (MOT)
and Palm (PALM). (KJT)
11:34 (Dow Jones) Comdisco (CDO) bonds traded down slightly but are back to
unchanged on the day at around 78 cents after the company said it was filing
for bankruptcy protection. Dealers say there was an interest to snap up the
bonds as recovery at the unsecured level is expected to be good. (CSE)
11:25 (Dow Jones) Steve Kim, who helped initiate and manage Merrill Lynch's
(MER) equity derivatives coverage, has been hired by Credit Suisse First
Boston as a managing director and head of North American equity derivatives
and quantitative strategy. CSFB also named Philipp Kauer, a director, to the
position of head of European equity derivatives strategy, where he will
develop a similar coordinated approach for European clients. (KT)
11:16 (Dow Jones) A little primer on what is a big week for economic data
and monetary policy, from UBS' Maury Harris: Another drop in factory output,
a stall in housing starts and an extremely weak Federal budget report will
reinforce image of a stressed economy, he says. The volatile,
hard-to-predict Philly Fed index could be the riskiest release of the week.
Greenspan's testimony should include scale-back of growth outlook, but
bigger question is how he will package his comments. Also, he'll be hard
pressed to defend forecast for sustained high US productivity growth in
light of slowing pace of past year. (TG)
(END) DOW JONES NEWS 07-16-01
02:29 PM
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