Two Areas Where Money May Shift

June 20, 2002
Daniel Beighley

Price action stumbled off the
opening bell, then found its footing to the downside, as the indexes cruised
south for the day. Gold and silver, Japan, airline, and transportation were
pockets of strength; biotechnology, semiconductors, computer hardware, and
Internet showed the heaviest losses.

The day’s sentiment was wrought
with earnings warnings and disappointing economic news, as the US dollar
(
DXU2 |
Quote |
Chart |
News |
PowerRating), down 0.71 to 109.48, hit a two-year low against the Euro. This was
commented upon by Mark
Boucher in his most recent column, where he said a clear cross below the 110
level will indicate a breakdown on the weekly chart, and may signal weakness for
the rest of the year. Today’s action just pierced the level, but was not
confirmed by heavy volume, though this area should be watched closely. A
breakdown here will lead investors to shift to more defensive areas against the
dollar, such as gold and foreign currencies.

U.S. Treasury Bonds were
down 1 ’01 at 103 ’10.

In economic news, the Philadelphia Fed business index
rose to 22.2% in June vs. the 9.1% reading for May. This easily exceeded
analysts’ expectations and was the highest level since June of 1998. Initial
jobless claims fell 2,000 to 393,000. Also, the US registered a trade
deficit of $35.94 billion, much wider than the $32.4 billion anticipated by
economists.

Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 1.20, and down–volume
over up–volume
by a 2.65 ratio. Nasdaq declining issues over advancing issues came in at 1.33,
and down–volume
beat up–volume
by a whopping 6.41 ratio. The
VIX
was up 2.23 at 31.94. The TRIN
was up 0.56 at 2.34.

Biotech firm
Imclone Systems (IMCL),
down 20.85% at 9.03, was told by the SEC that it could face civil action for its
mishandled marketing of the cancer drug candidate Erbitux.

Also in the biotech industry, Genzyme
Corp. (GENZ),
down 23.85% at 19.70, warned that its earnings for the year will come in lower
than previously anticipated due to slowing sales of its kidney drug Renagel.

Coffee retailer Starbucks Corp. (SBUX),
up 2.25% at 24.99, announced that it will triple its stock repurchase program by
acquiring another 10 million shares. The stock has also been added to JP
Morgan’s Focus List as its top restaurant pick.

Morgan Stanley has downgraded the auto sector to
"in line"
from "attractive" as it downgrades Ford Motor Co. (F),
down 4.55%
at 15.73, and General Motors (GM),
down 4.59% at 53.75, to "equal weight" from "overweight" due
to potentially weaker demand, pricing pressure, and absence of inventory build.

Recreational vehicle maker Winnebago
Industries (WGO),
down 1.67% at 45.80, has beat its third
quarter earnings
by 15 cents, as the company posted earnings of 90 cents a share vs. year–ago
earnings of 60 cents a share.

Investment services company Goldman Sachs (GS),
down 2.35% at 72.70, has beat its second quarter earnings expectations by 8
cents a share, as the company reported profits of $1.06 a share, the same as
year-ago earnings.

Entertainment giant Disney
(
DIS |
Quote |
Chart |
News |
PowerRating), down
6.23% at 19.56, fell after having its fiscal third quarter earnings estimates
lowered by Merrill Lynch who cited poor film sales.

Computer maker International Business Machines
(
IBM |
Quote |
Chart |
News |
PowerRating), down 2.41% at 71.58, fell to its lowest level since October of 1998
after First Albany cut its estimates on the company based on the expectation of
continued weakness in technology spending.

Mobile phone giant Nokia
(
NOK |
Quote |
Chart |
News |
PowerRating), up 0.24% at 12.43, warned that it
would not meet its second quarter earnings, though said it expected to meet its
targets for the rest of the year.

Two Areas Where Money May Shift

BUY THE FEAR, SELL THE GREED

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