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2HRS2GO: Market was ready to rebound

It took another day of earnings to turn the market around. Or was that really it?

Alan Greenspan spoke before Congress this morning, but what he said -- the economy hasn't definitely slowed -- could be taken as a good or bad sign: the economy is doing well, meaning continued healthy sales; or the economy is still on its heated pace, meaning there could be more interest rate hikes coming.

That major indices remain higher after Greenspan's testimony illustrates the market's good mood. Today's shareholders seem inclined to pour more water into the half glass rather than empty it.

Wall Street's giddiness is understandable. IBM (NYSE: IBM) reported an improving picture and more important, Advanced Micro Devices (NYSE: AMD) indicated fears about a slowing chip market appear baseless.

Yet I suspect those were just excuses for Wall Street to rejuvenate itself after two lousy days. After all, nothing has really changed.

The tech stock sell-off earlier this week began with jitters prior to Tuesday's earnings bombardment. Those quarterly reports turned out to be mixed at best, with Intel (Nasdaq: INTC) still relying heavily on investment income, Apple (Nasdaq: AAPL) posting slightly disappointing revenue, DoubleClick (Nasdaq: DCLK) sounding cautious about the near term and Microsoft (Nasdaq: MSFT) reiterating the slower growth projection that depressed everyone three months ago.

So what happened yesterday? IBM repeated its first quarter call of a stronger second half. AMD produced the same story -- a very positive one, but nonetheless, nothing new -- it's been producing since the year began.

And this morning Greenspan carried out his usual double talk, which always boils down to: we'll see what happens.

Think about it. Tuesday and Wednesday saw nothing terribly surprising or different.

Okay, there was one thing. Stocks went down.

And that was all the reason investors needed to climb back in today.

Take a look at the Nasdaq Composite Index. It spent most of June bouncing 3,800 before picking itself up when this month began. That level followed a steep climb in the last week May.

This week it retrenched again following some decent July gains. The mindset was ripe for it, and Microsoft's outlook merely provided the excuse.

Now that psychology has been satisfied, stocks are rising again today. Again, AMD and IBM merely provided the catalyst for shareholders to satisfy their tendencies.

None of that means that yesterday's news ought to be dismissed. It was good news by any standard.

But nothing new.

Other thoughts:

  • Lucent
  • (NYSE: LU) was supposed to clear up these product transition problems by now. I gave them the benefit of the doubt at the start of this year, but why get toasted again? The company says -- again -- that demand for circuit switching is falling faster than expected, but you can only use that excuse for so long.

    It's no secret that everyone wants optical networks, so why can't Lucent, with all its resources and intellectual capital, accomodate demand? Now might be a good time to hold management accountable. 22GO>