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The Taskmaster
Investors Need a 12-Step Program for Their Optimism Addiction
By Aaron L. Task
Senior Writer
7/17/01 5:36 PM ET
URL: thestreet.com
SAN FRANCISCO -- It may take a village to raise a child, but it takes only a hint of good news to raise the stock market these days. Or so it seemed today when KLA-Tencor (KLAC:Nasdaq) sparked a discernible midday turn by reiterating its earnings guidance at the Semicon West conference here.
Today's action adds fodder to the "not yet" side of the ongoing capitulation debate: Hard to argue that investors have capitulated in any material way when they're so anxious to glom on to any hint of positive news.
"When a company reports a better-than-expected quarter and folks don't get excited but rather they say, 'Yeah but next quarter isn't looking so hot' we'll have had capitulation," RealMoney.com contributor Helene Meisler said in an email exchange today. "But instead, now we get a company who reports an awful quarter and everyone says 'next quarter we'll see the bottom.' That is keeping the hope alive, not giving up hope."
Meisler was referring to theoretical developments, but her comments are applicable to KLA-Tencor, which didn't say it would exceed estimates, merely that it would meet them. But that was enough to encourage investors to start "looking beyond the economy and hoping earnings come in OK," said one West Coast trader. The news also prompted short-sellers, wary of another spike as occurred last week, to cover their positions.
Once as low as 10,438.66 during the day, the Dow Jones Industrial Average closed up 1.3% at 10,606.39. Similarly, the S&P 500 closed up 1% to 1214.44 after trading as low as 1196.14 while the Nasdaq Composite climbed 1.9% to 2067.34 vs. an intraday low of 2006.80. Gainers led losers by 3 to 2 in NYSE trading and by better than 4 to 3 in over-the-counter activity.
Among tech proxies, the Philadelphia Stock Exchange Semiconductor Index rose 4.3% and the Nasdaq 100 climbed 2.6%.
Of course, it's entirely possible that KLA-Tencor had nothing (or little) to do with the market's turnaround. Bob Basel, director of listed trading at Salomon Smith Barney, acknowledged the news from KLA-Tencor and the market doing better were closely timed, but added that the market is also "a little oversold" and so didn't need much excuse to rally.
Still, major averages all rallied shortly around 12:30 p.m. EDT, around the time KLA-Tencor's analyst meeting was scheduled to end.
Additionally, with the semiconductor cycle believed to hold the key to much of the tech sector's fortunes, it's logical that an equipment maker such as KLA-Tencor could have a wide influence. Just yesterday, you'll recall, negative comments from Applied Materials (AMAT:Nasdaq) were cited as a main catalyst for the market's downturn.
If the seemingly mixed message from the chip equipment makers -- and the market itself -- has you perplexed, you're not alone.
"You have a lot of punch-drunk, beaten-down traders that aren't having any fun," said Sam Ginzburg, senior managing director of equity trading at Gruntal. "Every day it's a battle. Things looked like they were going up, and then they get smacked back down, and vice versa."
The frustration is being intensified by movements in stocks such as Charles Schwab (SCH:NYSE), Ginzburg said. The brokerage firm produced "horrific numbers" -- second-quarter profits fell 51% from year-ago levels -- but rose 7.2% today.
Still, it is encouraging that stocks are doing well on good news and not getting creamed (or rising) on bad news, the trader said. KLA-Tencor, which rose 5.7%, being an example in the former category today while Johnson & Johnson (JNJ:NYSE) and Black & Decker (BDK:NYSE) joined Schwab in the latter.
More of that kind of action, and more positive news about the outlook going forward, like we've seen from Whirlpool (WHR:NYSE), "could turn [the market] around," Ginzburg said. "We're hanging our hats on it right now [but] we have earnings tonight that can turn [sentiment] around on a dime."
The trader referred, of course, to earnings from Intel (INTC:Nasdaq). After the close, Intel reported earnings of 12 cents a share, or 2 cents above the consensus estimate from Thomson Financial/First Call. Earnings were down 76% from year-ago levels as revenues fell 24% to $6.3 billion.
Time constraints prohibit further analysis of Intel's results and conference call here, but after an intial pop, Intel shares had recently turned lower in after-hours trading.
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Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task . |
