A Reason to Give Thanks

No, I'm not talking about family, good health and economic prosperity. (C'mon, that's a given.) No, I'm talking about the stunning turnabout in Florida today where Miami-Dade County officials abruptly called off a manual recount of presidential ballots. This could be the light at the end of tunnel, meaning we will soon be able to turn on the television and not be inundated with endless banter on the differences between swinging, hanging, pregnant and dimpled chads. (I don't know how you parents deal with these double entendres when the little ones are around).

Oh yeah, and we just might be getting a new president, too.

Unfortunately, this prospect impressed the market for all of a nanosecond, as stocks continued their downward spiral today on continued concerns over a slowdown in the tech sector.

The tech-heavy Nasdaq Composite Index (COMPX) was stung particularly hard, ending the day down 116.11 points, or 4.04 percent, to 2,755.34, its lowest close since October 19, 1999. What's more, the COMPX never had chance. The index gapped down 43 points at the open to 2,828, rallied briefly to the intra-day high of 2,872, and then sold off through the remainder of the morning to 2,760. From there, it got a brief pop to 2,810 on the possibility of George W. taking office. But alas, those pesky earnings concerns return to the fore, and the COMPX spent the rest of the day returning its gains.

Pressuring the COMPX for most of the day was a cache of Internet and software stocks led by CacheFlow (CFLO), which tanked $39.00 to $37,81. The Internet infrastructure concern posted a second-quarter loss of $0.09 a share, beating the First Call estimate for a loss of $0.11 by two pennies. However, the company's sales rose only 45 percent to $32.5 million while many on the Street were expecting sales to rise by 60 percent. Remarkably, CacheFlow traded at $145 a share as recently as November 7th.

Another earnings clunker was Portal Software (PRSF), which sank $11.88 to $6.75. Like CacheFlow, the company posted better-than-expected earnings. And like CacheFlow, investors were fixated on the company's lackluster revenue growth. Portal, which specializes in Internet billing software, earned $0.03 a share, one cent ahead of the First Call estimate. But the company also said growth from service providers in North America slowed because of those businesses concerns about capital spending. Portal has fallen hard and fast this month. As recently as November 5th, the company's stock was fetching $40 a share.

Other technology stocks slumping today included Oracle (ORCL), which lost $1.56 to $22.31; Sun Microsystems (SUNW), which dropped $5.13 to $80.00; and Cisco Systems (CSCO), which skidded $3.13 to $50.56.

And then there was my nominee as the disaster du annee, Yahoo! (YHOO), which lost another $3.50 to $39.19. The king of all Internet portals is now trading at a $210, or an 84 percent, discount to its 52-week high of $250.06 set on January 4, 2000. I realize that there are other stocks trading with larger percentage losses than Yahoo but this thing has always been peddled by Wall Street's brightest as investment-grade material. Some in investment. Yahoo is now trading at November 1998 levels. For you unfortunate souls who have hung in there for the past two years, I hope you at least enjoyed the ride.

As for the Old Economy, it held up a little better, but not much. The Dow Jones Industrial Average (INDU) lost 95.18 points, or 0.91 percent, to 10,399.32. Like the COMPX, the INDU sold off at the open and quickly moved to higher ground before selling off through most of the morning. Then, on the election news, the INDU got a pop that moved it higher. In fact, it even moved back to positive territory to trade at its intra-day high of 10,493.27 before the reality of earnings concerns and the threat of Democratic litigation brought the INDU back to earth, and then some.

Pressuring the INDU through most of the day were some of its more pedestrian components. Philip Morris (MO), Citigroup (C), J.P. Morgan (JPM), Boeing (BA), General Electric (GE) and Home Depot (HD) all finished lower on the day. Countering the fall was soft-drink king Coca-Cola (KO), which gained $4.31 to $59.56 after announcing it was no longer in the hunt for Quaker Oats (OAT).

On the economic front (and it wasn't much of a front), jobless claims rose last week to 336,000 from a revised 329,000 a week earlier. Moreover, the four-week moving average again moved higher, which is a further sign of a slowing economy and some easing in labor markets. The level of jobless claims is now back to where it was in mid-1998 when the economy was beginning to feel the impact of the global economic crisis. I suppose this jobless claims trend report is a positive for the market, but I've also thought that the benefits of more people working outweighed the costs.

Furthermore, the economy usually doesn't slow selectively (like labor demand). In other words, it doesn't just slow where we want it. Forecasts for fourth-quarter earnings are plummeting. According to a report released Tuesday night by earnings tracker I/B/E/S, analyst forecasts for earnings growth for those companies comprising the S&P 500 (SPX) have been whacked to 8.7 percent from the 16 percent expected at the end of the third quarter.

What's more, for 2001 many on Wall Street were originally expecting earnings growth of 14 percent, but that has recently been cut to 10 percent. Unfortunately, I/B/E/S is even gloomier; it's only counting on earnings growth for 2001 of 6 to 8 percent.

Okay, so with all the doom-and-gloom (earnings, elections and VP heart attacks, etc.), the question remains, is the worst finally over? Readers of this column know I've been a die- hard optimist (J. P. Morgan once said that any man who bets against this country will go broke) over the past few weeks. I'm not ready to give up the ghost yet. I still think we can rally heading into the new year. The fact is, we'll have a President by then (but do we really need one?) and the cut in earnings estimates will likely be fully factored into stock prices.

In the meantime, if you're going to trade in this market, you'd probably be best served by keeping your stops tight and play picking conservative (that's what we've been doing).

With that said, tomorrow the markets are closed and so are we, but we'll be back to work on Friday for the abbreviated trading session (market closes at 1:00 PM EST). Until then, enjoy your Thanksgiving Day feast.