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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (115690)	8/6/2001 10:19:23 AM
From: ild	Read Replies (1) \| Respond to of 436258

The Meehan Notes Time to Get Defensive By Bill Meehan Special to TheStreet.com 8/6/01 9:20 AM ET URL: thestreet.com Hope for a turn in tech stocks propelled the Nasdaq higher last week, but the broader market remains mired in a range that's been in place since spring. Friday's employment report was ambiguous enough to send traders to the beach with expectations of a 50 basis-point rate cut two weeks from Tuesday all but dashed. And the National Association of Purchasing Management's nonmanufacturing report slipped below 50 again to 48.9, making bets that the economy was about to turn look more than a bit iffy. However, for holders of Hughes Electronics (GMH:NYSE) and US Airways (U:NYSE), Monday morning brings renewed hope that the shopworn goods might finally be peddled. Roll those bones; it's dicey and the animal spirits are working overtime. The big-time trader playing the Qs (QQQ:Amex) late Thursday appeared to dump 'em on the opening bell Friday, which put pressure on the Nasdaq 100 after the jobs number fell less than economists had expected. And in the thinness that marks a summer Friday, the Nasdaq Composite languished throughout the day until a late lift trimmed the morning's deficit. The Philadelphia Stock Exchange Semiconductor Index, epicenter of a tech rebound that so far seems to be only in analysts' heads, broke its seven-day winning streak, as traders booked profits ahead of the weekend. "No sweat," said the expanding ranks of bulls. "The worst is over." Well, Tuesday we'll see how bad things are for Cisco (CSCO:Nasdaq), but the dismal past will take a back seat to management's outlook for the balance of the year. With little of importance on the economic calendar Monday, trading should remain tepid, but Tuesday's productivity data are likely to create some excitement. One thing's for certain: The notion of a "productivity miracle" is losing credence rapidly, with some talking a crash when Tuesday's data show that the Fed head's penchant for New Economy chatter was little more than wishful thinking. As for consensus earnings expectations, the fourth quarter is now expected to show no growth at all, according to Thomson Financial/First Call, and one wonders when 2002 expectations will stop sliding. If accurate, and I expect estimates will continue to decline, profits will have shown a four-quarter slump for the first time since 1991. And warnings season is once again just around the corner. While betting on the come in techland proved to be profitable over the past few weeks, the expected improvement in demand seems little more than blind optimism. Intel (INTC:Nasdaq), a company that's shown little bottom-line growth yet remains priced like a growth stock, is under pressure due to more realistic numbers from Salomon Smith Barney Monday morning. And as the SOX goes, so goes the tech-crazed market. While I'm not going out on a limb to predict a crash Tuesday, the way productivity is measured makes it very likely that the data will disappoint, with last quarter's number likely to be revised downward. More defensive sectors, such as drugs, are apt to outperform in the very near term, and that's where traders should focus. Investors should continue to sit chilly, as a significant rally is unlikely until third-quarter earnings season begins in October. Keep enough chips off the table to take advantage of better levels, and fade the folks who are wearing rose-colored glasses in the heat of summer.