INDEX:

I. Market News: Economic Data Thumps Market
II. Heroes: Premenos, Desktop Data, U.S. Robotics, Semtech
III. Goats: Liberty Tech., Sun Healthcare, Wickes, Spectarian
IV. Investment News: The "Market" and The Fool
V. Calendar: Friday's Economic Events

MARKET CLOSE

DJIA: 4767.40, down 25.29
S&P 500: 583.00, down 3.77
NASDAQ: 1058.51, down 6.58

MARKET NEWS

With the dollar lower against other major currencies today and economic data suggesting that the Fed may not have any reason to cut interest rates next week (see Investment News), the bond market dipped and pulled the stock market in with it. Issues across the board ended up in the deep end. Will the Fed throw a few floaties into the pool? Will it maintain enough chlorine in the balance? Only your lifeguard knows. (Translation: Stocks went down today.)

HEROES

Premenos Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:PRMO)") else Response.Write("(NASDAQ:PRMO)") end if %> up $6 1/2 to $33. Premenos, a California-based marketer of electronic commerce software products, came public on the 19th with 4.3 million shares priced at $18 per share. Since its IPO, the stock has continued to skyrocket, now up 83% in its first few days of trading.

Desktop Data <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DTOP)") else Response.Write("(NASDAQ:DTOP)") end if %> up $4 3/16 to $36 1/2. A news release this morning says that there is no corporate news for Desktop. A 13% gain on a day when the market tumbled and there's no news? Anyone want to predict how long before there WILL be some news?

U.S. Robotics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:USRX)") else Response.Write("(NASDAQ:USRX)") end if %> up $4 7/8 to $90 3/8. U.S. Robotics, which has been on a tear lately, got a boost by all those mutual funds who attempt to mirror the market indices. Today marks the first day of trading for USRX as part of the S&P MidCap 400 Communications Equipment industry group.

Semtech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SMTC)") else Response.Write("(NASDAQ:SMTC)") end if %> up $3 1/2 to $27 1/2. South Coast Capital analyst Brent Clukey initiated coverage of Semtech today with a "buy" rating. His earnings forecast is for $1.15 a share in the fiscal year ending January 1996, and for $1.85 in fiscal 1997. Clukey cites strong demand for the company's voltage regulators and transient voltage suppressers as computer makers adopt higher-powered chips.

GOATS

Liberty Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LIBT)") else Response.Write("(NASDAQ:LIBT)") end if %> down $1 1/4 to $5 1/2. Here we go again. Liberty announced today. . . you guessed it. . . the company will not meet earnings expectations for the second half of the year. Liberty provides diagnostic, condition monitoring, and nondestructive testing systems and services for the power and process industries worldwide. The expected earnings shortfall is because product revenues are below plan and sales in international markets are slower than expected.

Sun Healthcare Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SHG)") else Response.Write("(NYSE:SHG)") end if %> down $1 5/8 to $13 1/2. Sun shares were slapped down in response to a quarter-page Wall Street Journal advertisement by the Service Employees International Union, exposing what it calls "The Dark Side of Sun." The ad calls for shareholders, customers, and vendors of Sun Healthcare to help the FBI investigate allegations that the nursing home chain filed fraudulent Medicare claims.

Wickes Lumber <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:WIKS)") else Response.Write("(NASDAQ:WIKS)") end if %> down $1 3/4 to $11 3/4. Wickes announced that third-quarter results will fall significantly below last year's earnings. Earning $1.11 a share in the third quarter last year, analysts had been expecting Wickes to post between $0.95 and $1.26 a share this time around. Soft housing activity in July and August is being blamed.

Spectarian <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SPCT)") else Response.Write("(NASDAQ:SPCT)") end if %> down $3 7/8 to $37 3/4. Montgomery Securities analyst Matthew Robinson downgraded Spectarian from a "buy" to a "hold" today, based on the company's stock price valuation. Spectarian supplies amplifiers to wireless communications manufacturers.

INVESTING NEWS: The Emotional Market

One of The Motley Fool's primary lessons about the stock market is that Fools don't invest based on emotion. Some time ago, we opened a folder in the Fool's School area devoted to The Emotional Investor, much like the folder devoted to Dumbest Investments, as a way for us Fools to share our Wisest moments in order to laugh at ourselves and learn from our mistakes.

But today's action in the stock market points to a larger "emotional" investing phenomenon---trying to out-guess the market on a short-term basis. Inevitably, the trading sessions before any Federal Open Market Committee meeting are volatile ones. Traders try to predict the future direction of interest rates based on government data and "play" the market accordingly. The problem with that for Fools is that the data is so contradictory and the interpretations of each number so varied, any such prediction is usually nothing more than a wild guess anyway.

Today seems a perfect example of just how futile it can be to predict such short-term movements in the market. With each piece of new data to scrutinize, the market reacts---often wildly---as it believes it has figured out the true direction of the economy. But as often as not, the numbers are contradictory, leaving us in a rapidly moving market, but one moving for dubious reasons. This morning, for example, the weekly jobless claims report was higher than expected, with 365,000 claims filed in the week ending September 16 compared to the 354,000 that economists expected. Normally the bond market would interpret such a number as a sign of a weakening economy, increasing the chances of the Fed lowering interest rates.

But another economic report out today gives exactly the opposite picture. The Federal Reserve Bank of Philadelphia reported that its diffusion index of general business conditions rose from 4.4 to 26.3 in August. Since economists were predicting the number would actually fall to 3.4, the suggestion that the economy is picking up strongly---exactly the opposite picture given by the employment numbers---combined with today's weakness in the dollar sent the bond and stock markets into a tailspin.

What's a Fool to do? The point of all this is that such "market" reactions and turmoil have little to do with the fundamental strengths and weaknesses of individual stocks. With eyes on a much more distant time horizon, Fools ultimately have to ignore the "market," if that sounds feasible, and concentrate instead on what their individual companies are up to. We will continue to report news about the economy, of course, because let's face it, it is news and it does affect how Wall Street reacts. But as Fools, let's keep in mind where our investment priorities lie---in making the best decisions about strong individual companies for the long-term accumulation of wealth. How else are you going to afford the FoolMobile when it becomes available in FoolMart?

CALENDAR: Friday's Economic Events

---August Treasury Budget Report (2:00)

Byline: Befumo/Sheard (MF Templar/MF DowMan)