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Shelley Souza, Optionetics.com
October 5, 2001

One minute analysts are talking about a potential revival in the job market place, the next we hear of more leading technology companies further slashing their workforces. The other day it was Nortel Networks (NT); today it is Sun Microsystems (SUNW). Sun will cut its workforce by 9 percent and blames the continued weakening economy and the September terrorist attacks for wider-than-expected first quarter losses.

Leading PC makers Gateway (GTW) and Compaq warned of bigger losses, as did storage leader EMC (EMC). These companies also blamed September 11 as a major contributing factor to the sudden halt in business that typically is robust during this time of the year, which usually gives companies a strong fourth quarter.  Dell Computer Corp (DELL), however, went against the general trend and said they expect to meet their projections. Dell said business came back more quickly than they had anticipated, following the attacks.

The interesting reaction to Dell’s announcement is that it helped lift shares, even though they announced nothing more than the fact that they are hopeful of meeting their earnings projections. An analyst with CS First Boston, Kevin A. McCarthy, who covers Dell, said the reaction “just shows you that the market has been so beat up that even neutral statements are being received very well.” One of the first signs of a bull market is that bad news is discounted and good news lift share price. The key will be the not only the volume but who has come in and done the buying. Have institutions been buying this week, or is it smaller traders?  

In the current uncertainty, traders usually like to close out open positions on Fridays. The Nasdaq is pretty close to flat from yesterday’s close; how it trades next week will give investors a little more indication of sentiment. In the meantime, as the late Malcolm X once said, “Any time you see someone more successful than you are, they are doing something that you aren’t.”  Investors might want to check out what Dell is doing to generate confidence in their product and service that is so different from their competitors, who, following the attacks, lament that business virtually ground to a halt.


Shelley Souza
Senior Writer & Trading Strategist
Optionetics.com ~ Your Options Education Site
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