No Wonder the Market Is Stunned
July 19, 2004
Almost two weeks ago, I glibly took note of all the smaller tech companies that were spewing forth venomous earnings warnings. At the time, I declared the warnings felt "ominous," but I put my bearish alter ego aside and essentially declared that the market would shake off these blues. After all, we had just gone through one of the mildest pre-announcement seasons in a very long time. Well, reality just came like a ton of bricks in the form of this quote from Reuters:
"More U.S. companies warned that quarterly profits would miss Wall Street estimates than beat them last week, marking the worst weekly performance of pre-announcements in more than two years, according to Reuters Estimates." ("Stocks Stumble on Profit, Oil Worries", July 6, 2004).
Talk about a RUDE awakening! As the warnings and less than stellar earnings results have continued to roll on in, the market has indeed been awakening to a nightmare. It would be nice to know what fraction of these warnings are from tech stocks, small vs big-caps, etc., but the overall message is breaking through. Something fundamental may have changed out there, and we would do well to pay attention. We can hope that this abrupt shift in the rosy economic recovery scenario is nothing but an anomaly and an aberration, but, until the market proves worthy again, all rallies should be sold. I have said this earlier in the year and did not execute my own advice faithfully…and to great regret I might add. And I write these things so you do not make the same mistakes, I make --- so please don't! J
Be careful out there!