Wednesday, 5/8, Markey WrapUp

Financial Sense Online ^ | 5/8/2002 | Scott Middleton

[rohry]

 
Weekday Commentary from Jim Puplava
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The Cisco Systems Effect

Source: CBS MarketWatch

^{The Week in Graphs}

The Perfect Financial Storm
Part 10: Riders on the Storm

 

Wednesday's Market Scoreboard  May 8, 2002
Dow Industrials		305.28	10,141.83
Dow Utilities		1.95	306.35
Dow Transports		69.17	2753.01
S & P 500		39.36	1088.85
Nasdaq		122.47	1696.29
US Dollar to Yen			128.87
US Dollar to Euro			.9039
Gold		3.4	308.5
Silver		0.05	4.585
Oil		1.22	27.85
CRB Index		1.16	199.83
Natural Gas		0.07	3.746
All market indexes Storm Watch Geopolitical News in Focus Energy Resource Page Precious Metals

J. R. Nyquist 5/07 FSO Global Analysis Russian Twists and Turns Guest Editorial 4/12 Dr. Sam T. Cohen & Dr. Joseph D. Douglass, Jr. The Rogue Nuclear Threat	Jim Puplava's NEW Perspectives Series  Part 1: Hubbert's Peak & The Economics of Oil NOW ONLINE

 Market WrapUp for the Week 
Monday  l  Tuesday  l  Wednesday  l  Thursday  l  Friday

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^{Wednesday's Stock Market WrapUp}

The Cisco Systems Effect
Since Cisco was the darling of the Tech boom, it isn’t any surprise that after posting the first year-over-year revenue increase in five quarters, investors all over the world took the ball and ran with it, eternally hoping Cisco would lead the markets out of its current slump. At least it did for a day, along with some help from General Electric, who said it would meet predictions for profit growth. With these bellwether announcements, U.S. stocks posted their biggest gain since September 2001.

While Cisco’s report indicated a small 2% increase in revenues, CEO John Chambers stated that it was still too early to call a turnaround and indicated that revenues for the quarter would be flat to very low single digits. He added that the company’s ability to estimate future revenue remained impaired since customers are still cautious about ordering. He declined to provide estimates for fiscal 2003. Putting his comments into perspective, they really aren’t any different than what we heard earlier in the week from Intel CEO, Craig Barrett, and IBM CEO, Samuel Palmisano, as neither has a very bright outlook on the corporate environment for this year.

Today's Markets
Technology shares accounted for almost half of the 3.6%, or 37.68 gain in the S&P 500. The Dow Jones Industrial Average gained 306.11, or 3.1% to 10,141.97, led by International Business Machines gaining $5.50 to $82 per share. Volume on the big board stood at 1.49 billion shares with advancing stocks beating decliners by a 20 to 12 margin. The Nasdaq Composite Index gained 112.85, or 7.2% to 1687.29, its largest percentage gain in over a year. Volume was 2.37 billion shares as advancing issues outpaced decliners by greater than a 2 to 1 margin.

Oil stocks ended the day up, after two separate reports showed a sharp decline in weekly U.S. inventories, driving crude oil comfortably past the $27 a barrel level. Crude for June delivery on the NYMEX closed up $1.02 at $27.65. The contract reached an intraday high of $28.05 during the session.

Overseas Market
European stocks surged, led by Vodafone Group, Alcatel and Nokia Oyj after Cisco Systems Inc., the world's largest maker of equipment to link computers, reported quarterly profits that beat analysts' forecasts. The Dow Jones Stoxx 50 Index jumped 82.43 points, or 2.4% to 3495.14, rebounding from a seven-month low.

Asian stocks rose, led by Kyocera Corp., Samsung Electronics Co. and other computer-related companies, as Cisco Systems Inc.'s higher-than-expected profit marked the first sign this month that the industry is recovering. The Nikkei 225 stock average added 1.8% to 11,520.75. Indexes in South Korea and Singapore also got a boost after the U.S. said productivity last quarter grew at the fastest pace in almost 20 years.

Treasury Market
Treasury issues took a drubbing right from the onset of trading as fixed-income investors had to contend with stepped up interest in stocks. The 10-year Treasury note stumbled 1 3/32 to yield 5.21% while the 30-year government bond shaved a bruising 1 26/32 to yield 5.665%. Thursday's lineup includes weekly initial claims, the import and export price indexes for April, and the minutes of the March 19 FOMC meeting.

© Copyright, Scott Middleton, May 8, 2002

[rohry]

The stand-in writer is still filling in...

[rohry]

Cisco’s report indicated a small 2% increase in revenues..

And on this good news the market shoots to the moon? What is everyone smoking? This is like getting excited about the Tampa Bay Devil Rays winning the World Series because they brought up a new middle relief picher from AA ball...

[bvw]

This is what rallies in a bear look like. Opposite of drops in a bull. The same saw tooths -- only the blade is reversed.

[headsonpikes]

"This is what rallies in a bear look like."

Look at the sadass market internals! Breadth is non-existent; Arms Index is overbought. All IMHO. ;^)

[EVO X]

And on this good news the market shoots to the moon? What is everyone smoking? This is like getting excited about the Tampa Bay Devil Rays winning the World Series because they brought up a new middle relief picher from AA ball...

Hopefully, this isn't equivalent to the old oak tree raining acorns before it dies. It will be interesting to see what kind of support exsists Thursday.

[rohry]

I agree and am well aware that this is a bear market rally.

See my post from Monday on another thread:

Bear Market Rallies

I guess I'm just astounded at the gullibility...

[rohry]

Hopefully, this isn't equivalent to the old oak tree raining acorns before it dies.

Wow, what a fantastic image..kind of like salmon going back upstream to die...and lay their eggs.

[Gritty]

So, on the news that one company, Cisco, is making a slightly larger profit than expected,... the NASDAQ soars 7.1%, the DOW leaps 3.2% and the S&P rockets 3.4%?

If these Markets didn't have me scared before, they sure have succeeded now! Things must really be bleak down there on Wall Street....

[razorback-bert]

Note that 80% of trading volume occurred in the first 15 minutes of the market.

[rohry]

Wow! Thanks for posting that chart. Since the report was so short let me link another story about gold derivatives and Enron:

Dinsa Mehta, J.P. Morgan Chase, Derivatives, Enron and Gold

Enron was trading every market in the world, most in SIZE. They were leveraged to the hilt. Dinsa Mehta was one of the chief honcho’s in The Gold Cartel and a well-known gold derivative specialist. He also knew the gold price was rigged as he was instrumental in doing the rigging dirty work. I have been told that Enron often paraded him around at their Dog and Pony shows. How could Enron not have utilized the gold carry trade to finance their operations? How could they have passed on the 1% gold interest rates, knowing the gold price was rigged? How could they not have been short hundreds of tonnes of gold, in their off-shore operations (Mahonia Ltd.)?

Maybe the real Enron story is still hidden?

PS I don't know how much of this true...

[rohry]

I thought there was some other positive news. Productivity gains and such.

Check out Wyatt's Torch post that I linked in yesterday's Market WrapUp. It shows that productivity gains were caused by people working fewer hours. The French think the world works better by working fewer hours, but not any conservative economists.

Also,did Nokia drive the market down over 300 points?

[Dukie]

It appeared that a switch was thrown to get everyone in the pool. Recall the FOMC January meeting comments about the possibility of using "extraordinary measures" to jump start the US economy if interest rate reductions proved ineffective. A comment on another site suggests that such may have been the case today, given the massive reversal. Might narrow breadth correlate with such extraordinary measures.

[rohry]

Again, interesting chart. Dukie had speculated that the PPT was at work this morning (Tuesday's Market WrapUp). This seems to support that theory

[Wyatt's Torch]

If these Markets didn't have me scared before, they sure have succeeded now! Things must really be bleak down there on Wall Street....

Yep. This is a "things don't totally suck" rally. While Cisco is relatively good news (the hit the upper end of their already downwardly adjusted earnings), the also refused to give guidance for future quarters except for they expected no growth. In this market, no growth is better than negative growth.

[Wyatt's Torch]

Some productivity stats (from David Gitlitz at Trend Macro) -

In the first quarter, hours worked in the nonfarm businesses fell by nearly 2%. Consider the durable goods manufacturing sector, which had an eye-popping 13.3% jump in first quarter productivity. The single largest factor in that number, however, was a 7.3% decline in hours worked. For comparisons sake, bear in mind that during the so-called "productivity revolution" of the latter half of the 1990s, strong gains in both output and hours worked were the norm.

[Dukie]

Thanks for the pat on the back, rohry. Just speculating on the possibilities, of course.

[EVO X]

Wow, what a fantastic image..kind of like salmon going back upstream to die...and lay their eggs.

I'll admit I am trying to time the market bottom with some loose after tax money I have laying around. The idiots that run my state retirement plan are clueless. They just go with the flow and do what other big institutional investors do.

[Gritty]

but if Nokia can drive the market down what is wrong with Cisco driving it back the other way

Well, nothing. But usually one stock doth not a Market make, especially for a "correction" of this size. When one does, there is something fundamentally wrong!

I admit it does seem a bit of an overeaction to modest news but after a week of declines prices were down and it was a good time to buy IMO.

I agree. As a Day Trader, it is a good time to buy as one is usually in and out the same day. But, if you are looking for a long term investment, it is lousy timing. The time to buy was yesterday, or maybe in six months or so when everyone is sick of getting whip-sawed downward and have withdrawn in despondency and fear - i.e. when the Market has reached approximate bottom. IMHO, the Market will continue to ramp another day or so and then come crashing back to reality, down again (although I hope not).

This rise was too far, too fast, for next to no reason other than "irrational exuberrance" (as our old pal, Alan Greenspan would say, several years ago when the DOW was a 6,000 and heading for the moon). That is a "poor" fundamental.

[Dukie]

I've been fascinated by the GATA's allegations of gold price rigging and all of the ramifications, especially since guys like Larry Kudlow keep pointng to its price stability is an indicator that the monetary supply situation is under control. If indeed gold shows signs of a melt up, would not the central banks attempt to flood the market with their bullion reserves ? .