MARKET TALK: A Bear Market Has Its Limits, You Know
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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3:00 (Dow Jones) There's no turn yet for stock futures as they hold at
pretty depressed levels on stagnant volume. "A three-day rally is the limit
for a bear market," explains one floor broker, referring to gains made
consistently since Thursday. Nasdaqs may bounce heading into close, but if
that happens, Tuesday will be weak, he predicts. (ZHS)
2:55 (Dow Jones) Sanmina's (SANM) acquisition of SCI Systems (SCI) could
spark a consolidation wave among mid-tier electronics manufacturing services
companies as they look to get bigger in order to compete with top-tier
players, such as Solectron (SLR), Flextronics (FLEX), Celestica (CLS) and
the new Sanmina, says Raymond James analyst Gary Baker. Baker said C-Mac
(EMS) trades at a discount to the rest of the EMS peer group and is not
receiving any premium for its takeout potential. The stock is up 3.2%
Monday. (SEW)
2:46 (Dow Jones) Mundane companies are the place to be. Secondary companies
are holding up better than the large caps, breadth is flat to up, and stock
selection is key. Thoughts from Prudential's Ralph Acampora. A sampling of
his favorite names: ADP, Stride Rite (SRR), Nike (NKE), JC Penney (JCP),
Goodyear (GT), Bed Bath & Beyond (BBBY), and Waste Management (WMI). (TG)
2:35 (Dow Jones) Businesses continue to move their buying onto the Internet,
but they're doing so at a slower pace, according to a new survey from NAPM
and Forrester Research. (MSD)
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)
(END) DOW JONES NEWS 07-16-01
03:01 PM
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