The Federal Reserve is expected to cut interest rates this week for the fifth time this year. Investors want a 50 basis point. Anything less won't get this market going again. Until the Fed makes its move, the market will be in a holding pattern.
Last Friday's news about a pickup in consumer confidence and retail spending made investors less certain that a half-point cut is certain. Whether it's a half or a quarter point, it may only give the market a temporary boost.
After stocks enjoyed a nice rebound this spring, last week's market performance showed how tentative the market is. The Nasdaq composite index ended down 3.37 percent and the Dow was down 3.8 percent.
The Town Crier index was also down 3.4 percent for the week because of several declining issues. Apple was bit with a 11.26 loss for the week, while BEA Systems was down 10 percent, 3Com lost 17.39 percent and Yahoo! took another 11.6 percent loss.
Rambus, saddled with court cases, is down 67 percent for the year and will continue in the teens until the court decides it's destiny.
Hewlett-Packard Company, BEA Systems, Applied Materials and Dell Computer report earnings this week. What's interesting at this point is to watch how they present their earnings. If we get a gloomy report like Cisco Systems' last week, we can expect a downward stock trend with a lot of back filling.
If we get a feeling the companies reporting their earnings have bottomed, then look for a rebound in technology stocks.
The market is in the midst of a digesting process that could take a quarter or two, so as issues come down, buy on weakness. This is the kind of climate where it is possible to make interesting stock selections.
It's also interesting to report here about the opinion of a chief market strategist at Raymond James, in St. Petersburg, Fla., on the return of technology stocks.
"When a bubble breaks, good stocks go down with the bad and it will take years for a once-leading sector to resurface," the strategist said. "For years, companies effectively exaggerated earnings growth by compensating executives with stock options. But when you see a collapse like the tech wreck, investors start peering through the numbers and they might not like what they see. I think technology as a sector is dead in the water."
Don't you believe technology is dead. You just have to select your situations and keep a close watch on them.
Suggestion: When Yahoo! goes under $15, buy it. Then sell it when it goes over $21. That's is what you call "fresh-air analysis."
A May 21 Business Week article explains Yahoo!'s problems.
Noel, a seasoned investor, covers the stock market for the Town Crier.