By Clyde Noel

Stock Report

The Fed’s comments last week about possible higher interests rates caused the Dow Jones industrial average to break its streak of five consecutive weekly gains.

Investors are concerned with business profits and any barrier to the economic recovery will cause investor selling and no buying.

For the week, the Dow lost 170 points, or 1.7 percent.

The Nasdaq composite lost 0.91 percent, but the Town Crier Index - which is made up of stocks listed in the Nasdaq - increased 0.3 percent.(basically flat).

Right now, the big picture is pre-announcements of first-quarter earnings. If corporate earnings show promise, then look for the economy to escalate and stock prices to increase.

It appears the HP merger with Compaq will go through and the future of the new company should be rather interesting. Mergers in technology are difficult to accomplish and, in most part, large tech mergers fail.

Mergers often don’t go as anticipated because of a clash of corporate culture, encroachment from competitors, distracted employees, numerous write-downs and employee layoffs.

Compaq has not had success with its past mergers. It had difficulty incorporating Digital Equipment Corp. (DEC) which it purchased in 1998. Compaq wanted access to Alpha servers and the benefits never occurred from the $8.55 billion consolidation.

Silicon Valley investors probably remember Tandem Corp. in Cupertino. Compaq wanted Tandem’s main frame business; now, when you drive down interstate 280, the former Tandem buildings are vacant.

HP and Compaq will have to resolve culture clashes, mesh product lines, soothe customers and provide separation benefits to a planned 15,000 layoffs at both companies.

That’s not the “HP Way.”

This is my basic reason to sell both company stocks now. You can always buy them back in 31 days if the future looks brighter, but history tells us: no way.

Back to the overall market, we are still in a restless circle in the market and investors are sitting out the uncertainty. They’re afraid the Fed may move rates too quickly and choke off growth. Stocks will likely drop in the short term, but should move higher by the end of the year, possibly to 11,000.

Don’t be too optimistic for the immediate term. Don’t sell stocks you like, and don’t rush out to buy.

Volatility will continue for the rest of this year and you can get whacked at any time.

Noel, a seasoned investor, covers the stock market for the Town Crier.