THE DAY AHEAD: Is Wall Street''s summer lull already over?

Wall Street, which is usually ahead of the curve, has investors wondering if the usual summer lull already happened -- in the spring.

Typically, the markets take the summer off. Light trading and slow news are usually the norm.

But the Nasdaq jumped 19 percent last week on soft economic data. To Wall Street it's great news when more people are out of work than the previous month. Now pundits reckon that the Federal Reserve may not tinker with interest rates at all when it meets at the end of June. Just a few weeks ago, the Fed was expected to jack up interest rates.

Time for a summer rally?

Investors reading the economic tea leaves all came to the same conclusion -- buy tech stocks now.

Those familiar tech names -- JDS Uniphase (Nasdaq: JDSU), Broadvision (Nasdaq: BVSN), Intel (Nasdaq: INTC) among others -- all had banner days Friday.

Is it party time for techs? Not so fast. The only thing investors can count on is volatility. The Nasdaq proved in April and May it could fall 20 percent in a week just as easily.

The Nasdaq is down about 1,200 points from its all-time high of 5,048 set in March. Meanwhile, good news is hard to come by. High-flying Cisco Systems (Nasdaq: CSCO) tops estimates by a wide margin, but investors worry that it can't keep up the growth. Lycos (Nasdaq: LCOS) finally gets bought out at a big premium, and the stock tanks. Mergers and acquisitions are panned as soon as they're announced. Dot-coms are on the ropes.

The tech-heavy Nasdaq is still down more than 6 percent for the year and 24 percent from its March high. Friday's volume was decent, but most days have been light.

Simply put, last week's market psychosis could turn in the other direction quickly. Sure, the economy is apparently slowing, but the "what ifs" are already piling up. What if stocks keep rallying and people start spending money again? What if the Fed's previous interest rate hikes do too much damage?

What if you just bought some solid stocks and held them for five years or so? That's probably the best "what if" of the bunch.

Time for summer camp?

Given the volatility, it's not surprising that some analysts are pushing for a breather.

"Summer camp might be a good alternative to Internet investing," said Michael Graham, an analyst with Robertson Stephens. "We think there's a good chance our group of stocks will stay flat through the summer, as investors continue recovering from their recent bruising and summer slowness sets in."

Graham said it makes sense to stick with the Internet leaders. Yahoo! (Nasdaq: YHOO) and America Online (NYSE: AOL) are well below 52-week highs.

Strong earnings could be irrelevant as most investors go Fed watching. Chuck Hill, director of research at earnings tracking firm First Call Corp., said first quarter earnings were stellar, but few investors noticed.

"Public companies threw one helluva of a party during the 1Q00 earnings reporting season, but it appears nobody came," said Hill in a research note. "The 1Q00 earnings reporting season was a successful one in every way except for the most important one. The spectacular results were not able to propel the market upward."

What's next?

The only thing folks can agree on are the mileposts this summer. Here's a look:

June 28/29: The Federal Reserve holds a two-day meeting and decides on its next interest rate move. At the April meeting, Greenspan and company raised short-term interest rates 50 basis points. Economic data released in early May indicates the economy is slowing a bit, which is good for the interest rate outlook. The consensus now thinks the Fed will leave rates unchanged. The Fed also meets in August. If the Fed skips a hike in June, there may be one in August.

July: Here come the second quarter earnings reports. With the Fed taking a month off, earnings reports take center stage. Will anyone notice? First Call's Hill said earnings growth for the second quarter will come in at least 20 percent. Analysts have been bumping up expectations since April. Hill said investors should also watch what analysts do with their fourth quarter and fiscal 2001 projections -- that's when the Fed's previous interest rate moves will be felt.

August: The Fed meets again and earnings go quiet. Investors should keep a close eye on the dot-com and IPO weeding out process. Many analysts said there is a glut of shares on the market. As unsustainable businesses fold, the glut will improve. In addition, many shaky initial public offerings will drop off the calendar, setting the stage for an IPO rebound. Business-to-consumer stocks could actually perk up in the fall on anticipation of the Christmas selling season.

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