Is A 25-BP Cut Enough?

• June 27, 2001
• Greg Che

Trading was muted throughout the morning as the markets waited in anticipation for the announcement from the
Federal Reserve Board on Wednesday.

The Federal Reserve Board’s decision to
cut rates by 25 basis points greatly affected the markets as the verbiage from
the Federal Reserve showed the risk of a weakening economy. Minutes after the
announcement the markets lost all of the gains made in the morning session
flushing out the weak hands, then attempted a rally only to close mixed for the
day.

The Dow Jones Industrials closed lower
by 0.3%, while the Nasdaq Composite gained 0.4%

In speaking with two hedge fund
traders with respect to the rate cut, the consensus between the two was
positive. They feel that the Federal Reserve recognizes that the economy is
improving, however it has not attained full recovery. Both traders also
view the action taken by the Fed is constructive and that the markets could see
a possible rally.

Among individual stocks gaining today,
Plantronics Inc.
(
PLT |
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PowerRating) gained 19.9%. The maker of communication headsets surged higher as investors were betting that New York state will rule in
favor of banning handheld wireless phones.

Prepaid Legal Services Inc
(
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notched higher 8.8%.

C&D Technologies Inc.
(
CHP |
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rose 7.6% after the company announced a first-quarter cash dividend of 1.375
cents per share.

Cirrus Logic
(
CRUS |
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21.9% after Thomas Weisel upgraded the integrated circuit maker from Buy
to Strong Buy.

Software maker Serena Software
(
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pushed higher 17.6% after Business Week placed the company at number 38 on the
publication’s annual list of 100 Hot Growth Companies. Serena has made the
magazines list two years in a row.

The sector leading the charge higher
was the Airline Index
(
$XAL.X |
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PowerRating) as the sector rose 2.4%.

The Transportation Index
(
$TRX.X |
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gained 2.1% and the Internet Index
(
$GIN.X |
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Among individual stocks sliding lower
Wednesday was Digimarc Corp.
(
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on Tuesday that Schiffrin & Barroway, LLP has filed a law suit against a
number of companies including Digimarc for violations of Federal securities
laws.

CVS Corp.
(
CVS |
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pummeled after the company was downgraded by two analysts.  Merrill Lynch
lowered the company’s rating from NT Buy to NT Accumulate, and JP Morgan lowered
CVS from Buy to Market Perform. CVS slid 17.2%

Also losing ground on a downgrade was
Danaher Corp.
(
DHR |
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PowerRating). Janney Montgomery Scott downgraded Danaher from Buy to
Accumulate. Danaher dropped 11.2%.

Delta and Pine Land Co.
(
DLP |
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fell 14.6% after the cottonseed producer reported a decline in quarterly profits
of almost 34%.

The Oil Services Index
(
$OSX.X |
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lost 5.0%, followed by the Oil Index
(
$XOI.X |
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impacted by the downward move in the majority of energy futures.

After moving up four days in a row,
the Semiconductor Index
(
$SOX.X |
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PowerRating) lost some ground as it shed 1.7%.