2HRS2GO: Investors still seek reasons to return
COMMENTARY--More corporate warnings and worrisome economic data make easy scapegoats for today's market retreat, but the truth is even shallower.
Market overview stories, including ZDII's own market midday piece, would have you believe that bad news from companies like Sycamore Networks (Nasdaq: SCMR), Extreme Networks (Nasdaq: EXTR), Intel (Nasdaq: INTC) and RadioShack (NYSE: RSH), along with government statistics showing higher unemployment, drove Wall Street back into a pessimistic mode.
Get real. Wall Street never stopped being gloomy. Yesterday's market blowout was nothing more than a celebration for the bears.
It certainly had all the signs of a short-covering rally. Following a losing streak, Indices were rising too much, too fast, too abruptly. It was only natural that short-sellers would lock in some profits after their recent winning streak. Professional gamblers know when to head for the cashier's window.
Market gurus will tell folks to buy in before the rally is clear and evident. They don't want to wait for the absolute bottom. They want to anticipate it.
That's a fine theory, but not many get it right, and many are not willing to try. Most amateurs are willing to give up a little bit at the bottom to avoid staying there for a long time.
For that great mass of investors, a real rally makes no sense at this stage. Oh sure, optimists said all the bad news would be revealed this week, given that the March quarter just ended, but that view ignored the reality that most investors already expected a bad quarter. No one cares about the first quarter anymore; it's over, it's in the past.
The market won't turn around until companies get signs that things are recovering, and that hasn't happened yet. Ask executives from Intel (Nasdaq: INTC) or Cisco Systems (Nasdaq: CSCO) when things will clear up, and you'll get a bunch of shrugs. In fact, anecdotal evidence is piling up that things are getting worse, as tech companies like Hewlett-Packard (NYSE: HWP) report signs of a European slowdown.
What the market truly needs is a slow, gradual uptick, because that's the sign of a true turnaround in sentiment. But Wall Street needs far more evidence to feel good.
It is not enough for a prominent Yahoo (Nasdaq: YHOO) bear to raise her rating on the stock, especially when her upgrade is largely founded not on prospects of a return to rapid growth, but on takeover potential. It's not an optimistic view; it's a cynical one.
SG Cowen Securities analyst Drew Brosseau typified the reaction: "We contain our enthusiasm."