This is a combined Lunchtime/Evening News report, as the market was only open for half a day today. Tomorrow Fooldom will be offering our usual weekend news magazine, Fool's Gold, including, among other things, a Sector Snapshot on temporary employment companies, Industry Updates, and the Weekend Research Center. Featured will be MF Templar's discussion of "liquidity", as he demystifies our friend The Balance Sheet. Check it all out -- it'll be on our main screen tomorrow! Enjoy!
Optical laser system developer VISX <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VISX)") else Response.Write("(NASDAQ: VISX)") end if %> beamed up $5/8 to $24 5/8 today. In its last trading session, it had taken a mighty tumble, in sympathy with SUMMIT TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BEAM)") else Response.Write("(NASDAQ: BEAM)") end if %>, which warned of an upcoming second quarter loss. Following Summit's announcement, VISX issued a note saying that their earnings should be "at least in line" with analyst estimates. In the VISX message folder, MF ETurkey details his call to VISX investor relations and offers his take on the company. For its part, Summit dropped slightly, down $3/16 to $10 1/2.
Well, not many shares of stock were trading hands today at the market, and most shares being traded were moving South, not North. We really did try hard to come up with some stories of stocks which were up on interesting or important news, but alas... to no avail. So here are some stocks which were up for no reason that we could find, but which at least have funny ticker symbols. UNITED PAYORS & UNITED PROVIDERS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: UPUP)") else Response.Write("(NASDAQ: UPUP)") end if %> lived up to its ticker, rising $1/8 to $11 7/8. DEEPTECH INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DEEP)") else Response.Write("(NASDAQ: DEEP)") end if %> hit a ball deep into the bleachers, rising $7/8 to $6 3/8. GOLDEN POULTRY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHIK)") else Response.Write("(NASDAQ: CHIK)") end if %> laid a golden egg today, scrambling up $2 1/4 to $12. FOUNTAIN OIL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GUSH)") else Response.Write("(NASDAQ: GUSH)") end if %> erupted, up $13/32 to $5 23/32.
Year-2000 legacy software developer COMPUTER HORIZONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHRZ)") else Response.Write("(NASDAQ: CHRZ)") end if %> slumped $4 to $37 today. Computer Horizons is dedicated to fixing software packages that only allow for two-digit year designations, and which are set to return to the year 1900 when we go to the year 2000. The two-digit phenomenon stems from the fact that many software designers bypassed the internal date abilities of languages like UNIX and Cobol and hard-coded 2-digit designations. Although the companies in this industry have a great story and there are huge estimates floating around about how much it will cost to fix, many of them have traveled to the stratosphere of valuation.
Semiconductor equipment manufacturer ETEC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ETEC)") else Response.Write("(NASDAQ: ETEC)") end if %> slumped $2 1/2 to $23 1/2 today. The mask pattern equipment maker had a fairly innocuous public offering back in October but exploded in early May when Intel Corp. revealed it was taking a stake in the concern. What investors failed to recognize as they drove it up to $39 a share in late May is that ETEC still remains steadfastly in the semiconductor equipment industry -- an industry that has come under very heavy selling in the last five months. Many have stressed that its products are crucial to making next-generation chips, but with an Enterprise Value/Sales ratio two to three times higher than many of its peers whose equipment is just as vital, it still could have considerable downside left.
Car makers continued to slide, after an announcement from FORD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FORD)") else Response.Write("(NYSE: FORD)") end if %> earlier in the week that its domestic sales had dropped by 2.4%. Today CHRYSLER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> noted that its Canadian sales were also slumping. Ford was down $5/8 to $31 1/4, Chrysler was off $2 1/4 to $57 5/8, and GENERAL MOTORS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GM)") else Response.Write("(NYSE: GM)") end if %> fell $2 to $50 1/8.
QUICK CUTS: Recent firewall initial public offering (IPO) CHECKPOINT SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CHKPF)") else Response.Write("(NASDAQ: CHKPF)") end if %> checked out of $7/8, falling to $19 3/8... ORTHOLOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OLGC)") else Response.Write("(NASDAQ: OLGC)") end if %> slumped $5/8 to $14 3/4, still under pressure as a result of a Food & Drug Administration warning letter sent last week... Canadian client/server concern COGNOS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: COGNF)") else Response.Write("(NASDAQ: COGNF)") end if %> sluffed off $1 to $21 today after hitting recent highs on better-than-expected earnings news... News that MERCURY INTERACTIVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MERQ)") else Response.Write("(NASDAQ: MERQ)") end if %> had adopted a shareholder's rights plans, staving off any potential mergers, cut the stock down $1/2 to $12 1/2... The battle between the longs and the shorts in DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> continues to wage on, with the stock down $2 3/4 to $42 3/8 today.
An Investment Perspective
by Randy Befumo (MF Templar)
FOOL ON THE HILL
CRUNCH!
Anyone who checked in on this abbreviated trading session today got an absolutely stunning glance at what illiquidity combined with shifts in asset allocation can do to the fragile indicies. Didn't understand a word of that last sentence? Fret not, Fool... by the end of this little squib you will be able to dazzle your friends and neighbors when they come crying to you today after checking their mutual fund quotes.
It all began early this morning when the June job report came in much stronger than expected. The unemployment rate fell a whopping 0.3% to land at 5.3%, the lowest level in this decade. Approximately 239,000 jobs were added to the economy, about 100,000 more than analysts had anticipated. Particularly worrisome for inflation hawks was the nine cent increase in hourly wages, the largest single increase since the government started tracking this metric. Wage inflation is a major contributor to overall inflation, something to which the Federal Reserve is highly allergic.
Now that there appears to be a danger of inflation heating up, the Federal Reserve might need to hike rates at the next meeting of the Federal Open Market Committee (FOMC). The rates the Fed would hike would be the Federal Funds rate, which is the rate at which it lends money to banks, and the discount rate, which is the rate at which the Fed says banks can lend money to each other. By hiking these rates, the Fed would decrease the money supply by making it more expensive to borrow money. Decreasing the money would hopefully stave off inflation, the Fed's main preoccupation. In anticipation of an August increase, the bond market tanked this morning, with rates surging toward the 7.2% mark.
The reason why stocks got smashed today as a result of this is because of the massive money controlled by relatively conservative pension funds, insurance companies and other global asset allocators. These are the guys that are constantly measuring the riskless rate of return possible in bonds versus the potential in stocks and who divy up their money accordingly. Small shifts in the overall asset allocations when bonds get more attractive mean big swings in the stock market as money goes pouring out. As much of this money tends to be concentrated in the bluest of blue chips, the S&P 500 and the Dow suffer the worst.
Add to all of this fretting that the economy is going too well the continued pessimism over the second quarter due to growing economic weakness in Europe and you have a recipe for disaster in the Nasdaq. If people aren't pulling money out because growth is too much, they are pulling it out because growth is too slow. A little schizophrenia never really hurt anyone. On top of all of this, no one was at the market today. Looking at the volume, you might notice that the market was down big on relatively light volume. When all of these worried people were out selling, there were not a heck of a lot of people out buying. This illiquidity meant that there was all sorts of added volatility, in spite of the fact that the so-called sidecar restrictions were turned on and block trading was stopped.
There ya have it folks, the market decline in a nutshell. Armageddon? Nah. In fact, the bad news combined with the illiquidity might make for some short-term market inefficiencies to take advantage of. Add to this the few stocks like DVI INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DVI)") else Response.Write("(NYSE: DVI)") end if %> and DSP TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DSPC)") else Response.Write("(NASDAQ: DSPC)") end if %> that actually moved up enough to take out new highs today in a massive surge of selling and you might actually see what was moving up in order to see what people *really* like.