Investors, too busy trying to figure out this decimal thing, were unable to do much of anything with the market today. The tech sector added a few decimals in a mostly positive session that continued to lack volume or much of anything in the way of catalysts.
The
Nasdaq, which won't go decimals until next year, closed up 27.91, or 0.7%, at 4070.59 after trading as high as 4097.33, getting help from the
Dow Jones Industrial Average, which was up more than 100 points much of the day before settling up 60.
TheStreet.com Internet Sector index ended down 10.57, or 1.3%, at 793.04 due to weakness in
Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks).
Over at
RealMoney.com our own
Benny the Bull, James Cramer, listed 10 reasons to get excited about the market. Here's a snippet of Cramer's insight that pertains to the technology sector.
We like the way tech is shaping up for the fourth quarter. Sure we had that overabundance of handsets in the system, but that will clear up. And yes, maybe we had too many chips that were being made for too few handheld devices. But the overall tone of the personal computer market is healthier than it has been in a long time and these stocks and their cohort aren't that expensive. It makes me want to plunge in with both feet. Sure, Cisco (CSCO Quote - Cramer on CSCO - Stock Picks) hasn't acted that well. And yes, Mister Softee (MSFT Quote - Cramer on MSFT - Stock Picks) has melted under federal scrutiny and soft Windows 2000 sales. However, these stocks are well off their 52-week highs and nothing justifies further price appreciation than being able to say "I am buying this much lower than it has traded before." That's a recipe for higher prices if there ever were one.
Yahoo! had a rough time after
Lehman Brothers analyst Holly Becker slammed the stock due to concerns over online advertising and high valuation. It ended the day down 12.19, or 9.1%, at 122.06.
Becker suggested that the decline of many dot-com companies would eventually catch up with the advertising dollars Yahoo! receives. And she said that traditional advertisers were not picking up the slack.
"Our contacts suggest that the environment continues to worsen," Becker wrote. "Dot-com companies are laying off employees by the dozen and in many cases, filing for bankruptcy. Marketing funds are being stretched as far as possible, but will likely not last beyond Christmas. While we recognize that leading portals, like Yahoo! and AOL, will get the last dollar from burgeoning Internet startups, it is only a matter of time before we see the impact on Yahoo!'s results."
But while being careful not to slam Becker, Chris Dixon, analyst with
PaineWebber, said he saw no impact on Yahoo! from a slowdown in advertising, and intimated that the Lehman analyst did not understand where Yahoo!'s strengths would be down the road.
"The Internet is a lousy advertising medium," admitted Dixon, who said that banner ads are not where the opportunities lie. "It is a great marketing medium. It's important to recognize that the real power of these platforms is to enter agreements with marketing partners."
Dixon said the future of advertising through the Internet will no doubt include opt-in email direct marketing. He said direct marketing is a $44 billion business, and direct marketers will undoubtedly be turning to the Internet to deliver their message. In addition, he said that Yahoo! is working directly with companies on advertising and marketing. It also has it's Enterprise Services Corporate Yahoo!, which enables corporations to construct an internal portal that embeds Yahoo!'s services. And looking further out, Yahoo! is involved in all kinds of ventures with telecom partners to become the main portal on wireless platforms.
Our own Adam Lashinsky was on top of what was in store for Yahoo! in the future back in
May, when he detailed many of the above initiatives.
Becker's note appeared to have an impact on other online advertisers.
DoubleClick (DCLK Quote - Cramer on DCLK - Stock Picks), which has rallied of late, closed down 2.31, or 5.5%, at 39.50.
24/7 Media (TFSM Quote - Cramer on TFSM - Stock Picks) finished down 1.13, or 6.8%, at 15.44, though
Engage Technologies (ENGA Quote - Cramer on ENGA - Stock Picks) added 1.13, or 10.1%, to finish at 12.94. Gains in Engage came on news that it had entered an alliance with
yesmail.com to allow its publishers to collect opt-in email names, giving them another avenue for generating revenue and offering marketers a list of potential customers to reach online. Both Engage and yesmail.com are majority-owned operating companies of
CMGI (CMGI Quote - Cramer on CMGI - Stock Picks).
Finally
Sabre Holdings (TSG Quote - Cramer on TSG - Stock Picks) made a bunch of news that had far-ranging impact. The travel services firm announced layoffs of 1,200 positions and cost-cutting measures that are expected to save it $100 million annually. It finished down 94 cents, or 3%, at 28.81.
But losses were most likely linked to Sabre's purchase of
GetThere (GTHR Quote - Cramer on GTHR - Stock Picks), a business-to-business travel services operator, for $17.75 a share. It finished up 5.06, or 42%, at 17.19.
Travelocity.com (TVLY Quote - Cramer on TVLY - Stock Picks), which is majority owned by Sabre, closed up 2.75, or 21%, at 15.88.
1:43 P.M.: Tech Holds Its Head Up, but DOT Slips Into Afternoon Trading
Another day of slow but steady progress for the technology sector. To find out if it was going to last, we went to our friendly technical analysts for their calls.
The Nasdaq
was up 23.99, or 0.6%, to 4066.67 in recent trading.
TheStreet.com Internet Sector index, the
DOT, was down 11.31, or 1.4%, to 792.30.
Dick Dickson, technical analyst with
Scott & Stringfellow, was cautiously optimistic, noting that he was seeing nearly as many positives as negatives in the market. As a result, he said he expected the market to churn for the near term, making things difficult for short-term players. He pointed to price action on Friday, when the
Nasdaq pushed higher only to close near the lows, providing mixed signals for traders. And while action was positive again today, Dickson said that traders may just be looking to put some money to work ahead of the holiday early in the week before taking off toward the end of the week.
Although sentiment indicators are positive, Dickson said there has not been the strong volume associated with the positive sentiment needed to really ramp the market higher. In addition, while seasonal factors are somewhat negative as the market enters the September/October period, he notes that during an election year they are positive. And although investors are looking to buy into tech, insiders are looking to get out, seeing many stocks that are trading far better than they were a month ago. His recommendation for short-term traders is buying stocks when they pull back to support levels or when they break out to the upside with strong volume.
"It won't be like late last year where you could ride the wave of tech enthusiasm higher," he said. "You'll have to do your homework."
But Dickson said he remains optimistic in part because August is not supposed to be a great month, but has been pretty decent. And though he would like to extrapolate that and forecast that the next two months also will be positive, he said that he is aware of the negative factors that could still hurt the market, including a resumption of offerings once the Labor Day holiday passes. Dickson was leaving the option open that the Nasdaq would correct, with support coming in around the 4000 level, which is psychological support and also near the 200-day moving average (around 3996 today). He saw resistance at the July 17 high at 4290, but felt that the market would get above there.
Also taking the cautiously optimistic viewpoint was Robert Dickey, director of technical research at
Dain Rauscher Wessels.
"The 'problem' with the uptrend," Dickey wrote in his daily trading note, "is that it lacks the wild momentum that we have come to expect. A few of the tech stocks are popping, but most of these moves appear to be of the trading variety that will fall well short of their previous highs. As a result, the Nasdaq uptrend will be more in line with the rest of the market, until closer to year-end, when we could see the enthusiasm grow for the group as the 2001 estimates start to come into focus. A bit more patience all around will likely be rewarded in the months ahead."
Over at our
RealMoney.com sister site,
Helene Meisler notes that the Nasdaq was showing some signs of internal strength that have not been seen for a while. She points out that market breadth (the number of stocks trading higher vs. the number trading lower) has been positive 10 out of the past 11 days. In the same time period, the
New York Stock Exchange has had only seven positive days.
Also at
RealMoney,
Gary B. Smith presented perhaps the most bearish outlook, noting that gains of late have come on declining volume, which he suggests could be bearish. Even today's gains, he said, have come on "pathetic" volume.
10:59 a.m.:Lehman Slams Yahoo!, but Tech Rallies Overall
Tech stocks have been able to weather an early-morning setback and sharp losses in
Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) to begin the week on the upside.
The Nasdaq
was up 45, or 1.1%, to 4088 in recent trading after trading as low as 4048.01 early on.
TheStreet.com Internet Sector index, the
DOT, was up 5, or 0.7%, to 809.
Yahoo! was having a rough morning, down 8.06, or 6%, to 126.13, after
Lehman Brothers put out a company update on the Internet portal, saying the outlook "remains worrisome." Analyst Holly Becker noted concerns about weakness in online advertising, but also took issue with the company's valuation, which she noted was a "staggering" $81.9 billion with the stock trading around 134 1/4.
"Our contacts suggest that the environment continues to worsen," Becker wrote. "Dot-com companies are laying off employees by the dozen and in many cases, filing for bankruptcy. Marketing funds are being stretched as far as possible, but will likely not last beyond Christmas. While we recognize that leading portals, like Yahoo! and AOL, will get the last dollar from burgeoning Internet startups, it is only a matter of time before we see the impact on Yahoo!'s results."
Lehman continues to rate Yahoo! a neutral, which is about the weakest rating Wall Street uses with any regularity.
Elsewhere,
Sabre Holdings (TSG Quote - Cramer on TSG - Stock Picks) was down 2.7%. The travel services firm announced layoffs of 1,200 positions and cost-cutting measures that are expected to save it $100 million annually. In addition, Sabre announced it had purchased
GetThere (GTHR Quote - Cramer on GTHR - Stock Picks), a business-to-business travel services operator, for $17.75 a share. GetThere was soaring 42.3%. Sabre also has a majority interest in
Travelocity.com (TVLY Quote - Cramer on TVLY - Stock Picks). It was up 9.5% early on.
In other analyst actions,
U.S. Bancorp Piper Jaffray reiterated a strong buy rating and price target of 51 on
AskJeeves (ASKJ Quote - Cramer on ASKJ - Stock Picks). Analyst Safa Rashtchy wrote that sales and demand for the company appeared healthy and he expected announcement of new products and key customers. He also noted that valuation remained attractive and the stock was trading at nearly a 50% discount to its peer group. Ask Jeeves was up 3.7%.
Analysts whose firms helped bring
SpeechWorks (SPWX Quote - Cramer on SPWX - Stock Picks) public earlier this month began coverage with favorable ratings. SpeechWorks provides speech recognition software.
J.P. Morgan began coverage with a buy rating and a $90 price target. And
Chase H&Q initiated coverage with a buy rating and 12-month price target of 95. It was up 5.6% early on.
David Shabelman
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