The Week ahead

Rebound?

Grinding out this column can be a little difficult some weeks. You have the same data, same parameters, right a little more than 50% of the time. This week is a little easier. In spite of a late week bounce, technology stocks seem a little oversold.

Some technology issues took a 25% hit in the past two weeks in spite of very strong earnings numbers for the industry in July. As I noted last week the source of the anxiety was an IDC report that showed slowing sales of computers both to consumers and business.

The bottom line there is that there still is growth in the industry and it looks like year to year growth in the second quarter was 22%. Not bad for most industries, but probably not enough to support P/E levels over 100.

On the plate for next week is productivity numbers for the second quarter, due on August 8 and the Producer Price Index, due on Friday of next week. The productivity numbers are very important. Any lessoning of productivity growth could lead to more fears on interest rates.

On the earnings front, Dell Computer(DELL), Cicso Systems(CSCO), Applied Materials(AMAT) and Walmart(WMT) all report this week. The Dell numbers have to be good or fears of a train wreck in technology could cause shares to plummet.

Last weeks economic numbers were pretty good and there is nothing that leads me to believe next weeks will be any worse. As a matter of fact, barring a major emergency I think that interest rates will be held steady until after the Presidential election. The August meeting of the Federal Reserve is the last realistic chance for Greenspan to adjust policy without being accused of interfering with the election.

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Shmuel Protter
investmenttool.com