Eddie,
Good article. Here is one on the market that is not very positive. Notice it doesn't mention Compaq. Some how I think the big guys are short and looking to cover.
NW
High tech's new lows
The big name, big cap tech leaders are crashing to earth. Here's
what to expect from here.
Andrew Marks
moneydaily.com
Say it any way you want: bruised, beaten down, sold off. But the
ugly truth is that the big technology stocks -- the last redoubt
of the high-flying, big name, big cap issues responsible for the
market's summer highs -- have been dragged down in the last two
weeks.
"Shot down is more like it," says Jamie Atwell, senior vice
president and head of Nasdaq trading at Nicholas Applegate,
surveying the damage suffered by such Nasdaq leaders as Microsoft
(down 19.3% since Sept. 28), Dell (down 29% in that time), Cisco
Systems (down 30%) and Intel (down 12%).
And because Dell (DELL), Microsoft (MSFT), Intel (INTC) and Cisco
(CSCO) account for nearly 40% of the Nasdaq's market
capitalization, the composite index has now reached staggering
losses as well. The Nasdaq is now down 16% since Sept. 28, nearly
30% since its July 20 high and 10% for the year.
That the stocks have suffered is hardly a shocker in this
environment. But the speed and depth of the selloff among this
group and among Internet leaders like America Online (NYSE: AOL),
Yahoo (Nasdaq: YHOO) and Amazon.com (Nasdaq: AMZN) has been
remarkable -- especially after positive earnings surprises from
Yahoo, Motorola (NYSE: MOT) and Advanced Micro Devices (NYSE:
AMD), and a report that computer chip sales showed their first
monthly sales growth since November.
AOL's now down 27.5% from Sept. 28, Yahoo's off 20.5% and Amazon's
down 25.5%.
Again on Thursday, it was the big-name tech stocks that led the
way down, as the Nasdaq Composite lost 43.49 points, or nearly 3%.
The Dow industrials fared better, recovering from a 273-point
plunge to lose just 9.78 points on the day.
Money Daily managed to pull several busy analysts away from their
tickers long enough to explain why the companies that were spared
from the summer selloff are now heading south, and what to expect
from them going forward.
They attributed much of Thursday's selling to bearish
pronouncements from leading market strategists, including super
bull Abbey Joseph Cohen of Goldman Sachs, who lowered her 1999
projections for S&P 500 earnings, and Prudential Securities' Ralph
Acampora, who reduced his target price range for the Dow
industrials to 6500-7000 from 7400-8250.
But they also said that much of the recent carnage was inevitable,
and perhaps even necessary in order to start a market turnaround.
"These were the few remaining all-star stocks still out there,"
says Atwell. "And it was only a matter of time before investors
decided that all the bad news and fear of more bad news on the way
that has pulled most stocks down in the last couple of months
applied to the Nasdaq's big guns, too."
Fears of a slowdown in the domestic economy have caught up with
the technology stocks. Many economists are now forecasting that
the economy will do well to expand by 1% next year, and most of
that, they say, will come from consumer spending.
"Corporate capital spending is going to come way down next year --
you can already see signs of it happening," says Joel Naroff,
chief economist at First Union. "And technology companies,
especially when you're talking about computer-related equipment
and software, are heavily dependent businesses' upgrading their
existing systems."
Lehman Brothers, for instance, is forecasting that capital
spending, which is expected to grow more than 12% this year, will
be flat in 1999. "These big tech stocks trade at such high
multiples because they're expected to generate big growth," says
Charles Pradilla, S.G. Cowen's chief investment strategist. "Well,
where's the growth going to come from next year? I certainly don't
see it."
Jim Broadfoot, chief investment officer at the Ivy Funds and
manager of Ivy's Global Science & Technology fund, believes that
when it comes to Internet leaders like Yahoo, AOL and Amazon,
investors are finally starting to worry about the lack of solid
numbers to back up the high-flying growth prospects and high
prices.
"It's like biotech was 10 years ago," he says. "The Internet
companies have no earnings and there's no solid way to value them.
And as overall earnings worries extend out into 1999, investors
are less comfortable holding these stocks at such high prices."
The analysts say that most of recent selling in the big tech
stocks has come from portfolio managers looking to raise liquidity
in anticipation of redemptions. "But today, you saw retail
investors joining in the selling in a big way," Atwell says,
noting that 102 million shares of Dell were traded on Thursday.
He thinks that's a positive sign for the market, because up to now
many small investors persisted in buying the big cap tech stocks
on the dips.
"I don't think the realization that we're truly in a bear market
hit home with most investors until this last week, with the
dramatic selling of the Nasdaq's big four," he says. "That buying
on the dips mentality has to be broken completely if we're going
to get to the bottom, and we've got to get to the bottom before we
can start rising again." |
