Market Summary - April 11, 2001
Posted Daily Between 5 and 6:30 PM EST

by Lance Lewis

http://www.prudentbear.com/bearthoughts.htm

Semi-Brain-Dead Call Ignites Pandemonium

Asia was higher last night as Japan and Hong Kong both rose 4 percent. Europe was up a touch as we rolled around to the US open where the futures were (you guessed it!) limit-up on the Naz, again. We gapped as usual and had a virtual panic to the upside in the first 90 minutes where we traded almost a billion shares on the Naz (we normally do a little over 2 bil for the day on the Naz.) From that panic open we slid back to yesterday’s lows and basically flopped around on those lows for the remainder of the day. Volume was good again (1.2 bil on the NYSE and 2.3 bil on the Naz.) Breadth was just shy of 2 to 1 negative on the NYSE and slightly positive on the Naz. Big winners were in the semis as the SOX rose 8 percent. Big losers were in the oil service shares as the OSX fell 3 percent.

The big news this morning was not the horrific results out of MOT last night, but a semi-drain-dead call (no pun intended) out of a semi analyst turned fortuneteller. The semi analyst (whose initials are J.J.) concluded that semis have bottomed for several reasons that all revolve around: "it can’t get any worse, can it?" One of the examples he cited is the fact that CY said yesterday that they had no new orders. He concludes based on this data that things can’t get any worse than that. Hmmm… how about no new orders next quarter either as a start? In fact, if everyone hadn’t been so busy drinking J.J.’s Kool-Aid this morning they might have bothered to listen to the MOT call where CEO Chris Galvin said that the technology sector is in a recession and "reflects the boom and bust of the high-tech cycles of 84-85 or perhaps even the 74-75 time frame," which means multiple quarters of contraction await us. It can get worse, and it will. But nobody cared about that today as J.J.’s call ignited complete pandemonium in the semis this morning. The SOX gapped up huge, managed to trade a little higher, and then proceeded to close back at the open, trapping most everybody who bought semi shares today at higher prices. Getting back to MOT was the fact that MOT’s chip division cut cap ex from 2.4 bil to less than .7 bil. Nobody seemed to want to think about that as semi equipment shares were panicked into this morning though. By the afternoon, many appeared to have buyers’ remorse as the equipment shares, like the semis, traded back below or near their opening prices. EMC preannounced this morning and never could get going, ending down 6 percent. The rest of tech was gunned at the open much like the semis and then as the day wore on we saw more and more weakness pop up as mutual funds appeared to run out of excess cash to put back to work (I suspect many mutual funds raised money early this year ahead of tax time to avoid the debacle we saw last year.) The weakness had no rhyme or reason to it as usual. I still think that when the majority of companies begin reporting next week and awful guidance is given these tech shares will begin to reverse the recent gains in rapid fashion. Financials were up although they weakened late in the day. The BKX finished up a percent and back at the open after trading higher intraday. The XBD performed similarly and rose 3 percent. GE slipped a percent ahead of its earnings tomorrow morning. Retailers were weaker ahead of tomorrow’s retail sales data as the RLX fell a couple percent.

Oil fell 30 cents. The XOI and OSX both fell 2 percent. Gold rose $1.40, and lease rates were quiet. The HUI fell a percent. The US dollar index was flat. The euro traded lower initially after the ECB failed to cut rates this morning but then turned to move back near unchanged. Treasuries were lower once again.

Tonight, we’ll hear from YHOO as well as semi equipment company LRCX. Tomorrow, we’ll get the PPI as well as earnings out of GE. I expect we’ll continue to bob around up here till next week unless we get some sort of surprise from GE, which is coming at some point but doubtful for this quarter based on the noises Jack Welch has been making over the last few days. The next big challenge for the bulls won't come till next week when they will have to ignore more bad news in the form of negative guidance as the bulk of companies begin reporting. I doubt they have enough dough left to do it, and that means we'll get selling, and probably lots of it...

(you can email me below, and I enjoy hearing from both bulls and bears)

bear--mail@wtez.net

Fair use for educational/research purposes only!

-- Anonymous, April 11, 2001

Answers

maher, i am of the opinion that hardware improvements have outstripped the growth rate of software improvements, thus no need to further upgrade at this point.

-- Anonymous, April 12, 2001