Oops, more bad news!
MOST STOCKS CONTINUED yesterday's slide as investors showed no love for Alan Greenspan on Valentine's Day. However, techs held up well, as some traders again started betting that a bottom in the Nasdaq is near.
The Federal Reserve chairman's Tuesday testimony before a Senate committee is eroding hopes he will push for more substantial cuts in interest rates. Greenspan said the current economic slowdown is abating and a recession is unlikely. While most analysts expect another cut at the Fed's March 20 policy meeting, it now seems highly unlikely anything will happen before than, as some had wanted. As a result, good news on the economy remains bad news for stocks.
At 11:45 a.m. ET, the Dow Jones Industrial Average was off 63, on top of yesterday's 43-point Greenspan-related loss. The S&P 500 was down six, but the Nasdaq Composite Index turned 16 points higher. Outside of tech, selling was broad based, with health care, food, brokers and transportation the weakest.
Those looking for a glimmer of hope were casting their eyes on the semiconductor sector. While chip-equipment maker Applied Materials (AMAT) issued a profit warning, its stock and those of its peers rose.
Applied gained about 9% even though it warned that delays and cancellations of orders will cause it to miss the next quarter's profit predictions. While most analysts lowered profit estimates on the sector, J.P. Morgan analyst Eric Chen upgraded Applied and four competitors, KLA Tencor (KLAC), Novellus Systems (NVLS), ASM Lithography (ASML) and Varian Semiconductor Equipment (VSEA). Chen said declines in business are moderating and the worst for the beaten sector may be over. He put a Long-Term Buy on the shares and they all rose sharply.
Sycamore Networks (SCMR), a big player in the data-networking gear space also warned, but rose 9%. The company expects fiscal third-quarter earnings to come in on the low end of its estimated range of 32 cents to 39 cents.
Despite the Nasdaq's resilience, Dick Dickson, a technical analyst for Scott & Stringfellow, said he won’t be satisfied that techs are primed for a rally until the index shows such fight for an extended streak. "You’re going to have to see bad news becoming good news consistently before you see good news become good news again. We’re not quite at that point yet," Dickson said.
Steven Goldman, market strategist for Weeden & Co., said Nasdaq stocks became overvalued during January 12% run-up and will remain shaky while earnings warnings continue to come by the barrel. "[Price-to-earnings] ratios are generally high for the Nasdaq," said Goldman. "Until we see the whites of the eyes of a recovery, it'll be hard for those stocks to sustain an advance."
MOST STOCKS CONTINUED yesterday's slide as investors showed no love for Alan Greenspan on Valentine's Day. However, techs held up well, as some traders again started betting that a bottom in the Nasdaq is near.
The Federal Reserve chairman's Tuesday testimony before a Senate committee is eroding hopes he will push for more substantial cuts in interest rates. Greenspan said the current economic slowdown is abating and a recession is unlikely. While most analysts expect another cut at the Fed's March 20 policy meeting, it now seems highly unlikely anything will happen before than, as some had wanted. As a result, good news on the economy remains bad news for stocks.
At 11:45 a.m. ET, the Dow Jones Industrial Average was off 63, on top of yesterday's 43-point Greenspan-related loss. The S&P 500 was down six, but the Nasdaq Composite Index turned 16 points higher. Outside of tech, selling was broad based, with health care, food, brokers and transportation the weakest.
Those looking for a glimmer of hope were casting their eyes on the semiconductor sector. While chip-equipment maker Applied Materials (AMAT) issued a profit warning, its stock and those of its peers rose.
Applied gained about 9% even though it warned that delays and cancellations of orders will cause it to miss the next quarter's profit predictions. While most analysts lowered profit estimates on the sector, J.P. Morgan analyst Eric Chen upgraded Applied and four competitors, KLA Tencor (KLAC), Novellus Systems (NVLS), ASM Lithography (ASML) and Varian Semiconductor Equipment (VSEA). Chen said declines in business are moderating and the worst for the beaten sector may be over. He put a Long-Term Buy on the shares and they all rose sharply.
Sycamore Networks (SCMR), a big player in the data-networking gear space also warned, but rose 9%. The company expects fiscal third-quarter earnings to come in on the low end of its estimated range of 32 cents to 39 cents.
Despite the Nasdaq's resilience, Dick Dickson, a technical analyst for Scott & Stringfellow, said he won’t be satisfied that techs are primed for a rally until the index shows such fight for an extended streak. "You’re going to have to see bad news becoming good news consistently before you see good news become good news again. We’re not quite at that point yet," Dickson said.
Steven Goldman, market strategist for Weeden & Co., said Nasdaq stocks became overvalued during January 12% run-up and will remain shaky while earnings warnings continue to come by the barrel. "[Price-to-earnings] ratios are generally high for the Nasdaq," said Goldman. "Until we see the whites of the eyes of a recovery, it'll be hard for those stocks to sustain an advance."
