2HRS2GO: Market still looking for a savior

COMMENTARY -- This quarter's initial Messiahs came and let Wall Street down.

It doesn't get much worse when the day's few positive movers are rising not because of their own accomplishments, but rather on rivals' problems or a reprieve from a potentially bad situation. Among this afternoon's 10 most active securities on the Nasdaq and NYSE, five stocks gained a bit of ground: Microsoft (Nasdaq: MSFT); Cisco Systems (Nasdaq: CSCO); Sun Microsystems (Nasdaq: SUNW); Nortel Networks (NYSE: NT); and EMC (NYSE: EMC).

Microsoft investors are slightly upbeat because the company got four months to file briefs in its antitrust appeal, meaning the case will be stretched beyond the presidential changeover; conventional wisdom says a new (read: Republican) administration might be more sympathetic to Microsoft. Whether or not that proves to be true, any breathing room for Microsoft gives the company that much more time to continue its business transformation to .NET, which could make the antitrust case irrelevant. Or at least that's what investors are thinking.

A direct line of thinking fuels the network equipment makers' gains: Lucent Technologies (NYSE: LU) warned, so Nortel and Cisco must be beneficiaries.

Why the latest Lucent stumble should be enough to drive Nortel and Cisco higher against a negative market trend puzzles me, because this isn't news; Nortel has long been the established market leader, and Lucent's problems go all the way back to last year. I would have thought those situations were factored into their respective stock prices before today.

A lot of factoring has already gone into Cisco's stock price. CSCO shares have lost 26 percent of their value since July 20, as the market pounded tech leaders on what seem to be valuation concerns, since the companies themselves hadn't shown any signs of operational stumbles. And again -- what has changed today to suddenly make Cisco worth buying in a down market? Nothing. The competitive situation remains the same, the business remains the same. But people are reacting to Lucent's ongoing underperformance.

Sun and EMC are rising on an even more simplistic viewpoint. Basically, everything else has been beaten up, so the market flees to stocks that haven't been hit yet.

So today's heavy volume "gainers" say more about the state of people's pessimism than anything else. They're disappointed that this earnings season's first line of defense proved to be softer than they'd for.

Investors were hoping for encouragement from Yahoo (Nasdaq: YHOO) and Motorola (NYSE: MOT). During yesterday's conference call, Yahoo COO Jeff Mallett suggested 10 "takeaway" messages, all of which can be summed up thusly: We're big and our users are doing more things with us.

Here's what investors actually took away from the Yahoo call: the company still gets more than 40 percent of revenue from dot-coms; sales and marketing costs might end up as a slightly larger percentage of revenue than before; and there is no certainty that revenue growth will maintain its historically robust pace. About the dot-com industry as a whole, Yahoo essentially said, "Not our problem. We'll do well no matter what."

Not terribly comforting to industry watchers.

Motorola provided no comfort at all. The quarter was mediocre compared to expectations. A lowered growth forecast for wireless handsets was downright depressing.

None of this is really news either.

Yahoo was already beaten up over the last few months on concerns about revenue growth; the Yahooligans might not have completely alleviated those worries, but they certainly didn't say anything to make them worse. If anything, Yahoo's picture looks better than it did three months ago, when pure Internet companies made up a higher portion of the Web portal's business.

And a slowdown in wireless growth shouldn't be surprising at this point. Various reports have been seeping out not only from Motorola but other handset-related companies over the last few months. As early as July, Salomon Smith Barney analyst Jon Joseph warned of slowing shipments of communications chips, based on falling demand. His prediction was hotly contested at the time.

Either way, nothing coming out of Motorola and Yahoo should have shocked anyone, yet the Nasdaq Composite Index plunged as much as 137 points this morning. Techs have staged a minor rally this afternoon, but the mood remains dampened.

At this point, Wall Street just doesn't want to hear anything negative or just mildly positive, even if it's nothing more than a confirmation of what people already know. Investors don't want to hear it again -- they want encouragement from a savior, and until they get one, stocks won't do much. 22GO>