The latest interest-rate cut lifted U.S. stocks to new post Sept. 11 highs, despite concerns that the Fed's unprecedented streak of rate reductions won't continue to prop up stocks unless the economy does its part.

Triple Threat?
European investors hope Bank of England (meeting today), and the the European Central Bank (meeting tomorrow) will follow the Fed and slash rates further. The banks are expected to cut rates by 25 basis points each.

Nikkei down 3.3%; banks tumble
Asia markets mixed following U.S. rate cut

The Tokyo Nikkei sank 3.3 percent Wednesday, ignoring a rally in Wall Street, as bank shares crumbled on renewed fears over bad loans. The Nikkei Average dropped 348.74 points, or 3.3 percent, to close at 10,284.98 -- its lowest close since October 10. The broader TOPIX index lost 2.4 percent to 1,038.52.

Bank shares continued to suffer from heavy selling, hit by bad loan concerns -- a core problem for the world's second biggest economy from recovery.

-QCOM missed earnings by 2 cents, trims its profit forecast for 2002. Profits decline 13% in the Q.

Expect the stock to pressure other tech, wireless and telecom stocks. In fact, much of the Nasdaq's weaknesss will be attributed to this miss.

In the fourth quarter ended Sept. 30, Qualcomm said pro forma profit totaled $162.7 million, or 20 cents a share, compared with $186.1 million, or 23 cents, a year ago.

Qualcomm shares dropped $5.01 in euro trading to $49.72 amid disappointment in the company's lowered profit forecast for 2002. Instinet said it had a bid on the stock at $50, where it traded in the overnight. Qualcomm lowered guidance for 2002 Q1 to 21 - 24, from a projecting 27 cents.

Sales should improve as the U.S. economy recovers and carriers accelerate network-modernization plans, but analysts are unsure if that uptrend will kick in next year. Many phone companies have slashed 2002 spending plans, though some indicate they'll boost purchases of wireless gear.

-MSFT States Split Evenly on Microsoft Settlement, Starting Final Court Round, Public Review

Half of the 18 states in the Microsoft Corp. antitrust case rebuffed last week's Justice Department settlement, forcing the three-year-old case into a final round in federal court.

The other nine co-plaintiff states struck their own agreement with Microsoft and will join the Justice Department in settling the bitterly fought case. Those states got a handful of changes in the language of the Justice Department's proposed settlement, after chaotic negotiations that lasted into the predawn hours Tuesday.

Some of the remaining states said the amended agreement didn't go far enough. While "it's a positive step forward ... it's not enough steps," said Bill Lockyer, the California attorney general. The agreement "doesn't provide adequate remedies for businesses that would be victim to Microsoft's illegal use of its monopoly power."

-HWP / CPQ Does anyone in the office care the least about this merger / non merger?

-CPQ AVOID

-HWP Bears some watching . . .

AOL broke out of the triangle to the upside -- a bullish development. Traders look for 37 - 38; Longer term buyers could have a mid 40s target.

EMC Building a nice long base here. Money Stream and Relative Strength both move off the lows. Unlike lots of other tech stocks, this one is not even remotely overbought. Short term traders look for 18

ITWO Big volume breakout yesterday; Use any weakness to build positions; Short term target $7, 90 day holders can hold til $9.

AMCC Buy on pullback, between $10.50 - 11.25 Higher highs and higher lows are encouraging base building; A breakout thru $14 gives us an $18 price target. Fundamentally, yesterday's analyst meeting was termed " Encouraging;" Continues to aggressively invest in R&D and is expanding sales force.

Technimentals (Kevin Lane)
Two to watch: Readrite (RDRT) and Hutchenson Technology (HTCH)

Be sure to review the sector analysis he did this morning -- lots of great info.

"Surprise! Mr. Bin Laden. We are still here. Every day the markets open, and trade in an orderly manner. America was careless, yes. We were set up for a sucker-punch, yes. We put our chin out there for you to hit, and we let you give it your best shot. We staggered against the ropes but we never went down. But, how could you have known the strength of the capitalist system.

You didn't know, did you, that you were dealing with a system that had such resilience? You obliterated the very heart of America's financial structure, and we closed our markets for just four days. Before you ever struck our markets were already reeling, and had been for a year and a half. You thought any punch would send us down for the count, but you were wrong. Could you have imagined that within just a few weeks our markets would be trading above where they were when you hit us?

Would you have believed, Mr. Bin Laden, that a firm like Cantor Fitzgerald would still be in business? You wiped out seven hundred of their people, and a week later they were trading again. Would you have believed that many hundreds of survivors, who had rushed away from the collapsing buildings in a mael-strom of debris, would, just days later, be reporting for work at makeshift locations. Would you have believed companies would be lending office space to their competitors, in order to prop up the entire system? No, Mr. Bin Laden., you could not have imagined any of these things, because you did not know the strength of our people and our system.

Even your follow-up has not stopped us. Every day we hear of more cases of anthrax. Our government warns us of imminent attacks. We have guards on our bridges because of your threats. Under such circumstances our markets would seem likely to col-lapse, but instead they go higher. Before September 11th we wEre seeing occasional ral-lies that could not hold, and persistent selling that drove markets inexorably lower. Now we are seeing persistent buying in the face of every sort of negative news, punctuated by short-lived spates of selling. You intended, Mr. Bin Laden, to destroy our markets with your attack, but it seems as though your action pro-vided the impetus to turn the markets higher rather than lower."

--Dick Arms
Mr. Arms is a well known market technician, and is the inventor of the TRIN, also known as the Arms Index.

Dell and EMC feel the love
By Eric Moskowitz, Red Herring

Red Herring speculates that a merger between these two giants is a real possibility -- AND, it makes sense. Here's an excerpt:

Two years ago, EMC's purchase of Data General was expected to create a huge rift between the data storage titan and Dell Computer, an upstart storage competitor that got most of its storage products from Data General's Clariion division. Dell subsequently signed a storage deal with IBM, and the lines were drawn.

Now it looks like EMC and Dell have not only patched up their spat, but bankers are starting to whisper about a deeper relationship.

The speculation began late last month when both companies announced a five-year, multibillion dollar deal for Dell to become the lead seller of EMC's Clariion product line. Dell will also offer EMC's higher-end Symmetrix line to its enterprise customers, and the two companies said they will look for other ways to expand their storage area networks businesses jointly.

Ever since this seemingly win-win deal was announced, bankers have started to speculate about some of the other strategic fits between the two companies. "The talk here is whether there is more to this deal than a partnership," says Vince Formato, a managing director inside SG Cowen's investment banking arm. "Dell's not the acquisitive type, but Dell needs a sales force and EMC has a great one."

Amazon losing ground in core area: Books
By Greg Sandoval, C/NET

EXCERPT:
Not long ago, Amazon.com stunned the publishing industry by seizing a huge part of its business seemingly overnight.

Now, as the company continues to struggle with a vastly expanded retail strategy that includes such mass-market stalwarts as Wal-Mart, the e commerce pioneer from Seattle is losing ground in the business that the company was created for: selling books.

According to estimates for the last quarter, the online retailer has lost significant market share to archenemy Barnes&Noble.com, whose parent company was at one time emblematic of the brick-and-mortar world's sluggish reaction to online competitors. Mark Rowen, the Prudential Securities bond analyst who reviewed the combined U.S. sales for both companies last week, said he had seen indications of problems with Amazon's book business more than a year ago.

"Amazon's books, music and video segment has exhibited deteriorating sales patterns for the past seven quarters," Rowen said. "We estimate Barnes&Noble.com's share this quarter is higher than ever."

The increased competition in books could not come at a worse time for Amazon, which promised Wall Street that it would become profitable in this quarter. To reach that goal, the company has aggressively reduced expenses, no longer able to afford the kinds of advertising blitzes that helped turn it into one of the most recognizable names on the Web.

--Barry Ritholtz
November 7, 2001

If you would like a free subscription to my bi-weekly market comments, please send an email to email to Ritholtz@aol.com, including the word "SUBSCRIBE" in the subject matter line. Previous market comments are archived here.

---

Copyright © 2001 Barry L. Ritholtz, All Rights Reserved worldwide. May not be copied, stored or redistributed without prior, written permission. Home

---