Sep 21, 2002|
Wall Street: Corporate warnings dominate
The bourses in the US saw selling dominate for all the days of the week except Friday. The buying on the last day was due to bargain hunters moving in after four days on consecutive selling. A positive sales outlook from Qualcomm, a wireless firm, from the beleaguered technology sector, further aided the buying. Consequently, the Dow closed up by 44 points, while the technology index Nasdaq gained 5 points on Friday.
The week began with major brokerages forecasting a bleak outlook for semiconductor industry. Consequently, the Philadelphia Semiconductor index declined to its four year low. The pessimism was further aggravated by the possibility of war with Iraq and its impact on the US economy. The US Govt. has already run up a high fiscal deficit, and investors feel that war with Iraq could widen the gap.
It was on Tuesday that the stock markets took a severe beating. Firstly, fast food giant, MacDonald’s came out with a profit warning. However, it was the weak industrial production growth number that did more damage. According to the Federal Reserve, industrial production declined by 0.3%. The markets were expecting a rise in industry activity. Thus, uncertainty about the economy once again dominated the concerns and investors sold.
From the technology sector, Oracle’s revenues were marginally below expectations. Markets were also disheartened by the company’s earnings outlook. During the day J.P. Morgan also lowered its earnings outlook. The bad news for the technology sector continued with, IT services major, EDS issuing a profit warning late Wednesday. On Thursday, the Dow fell by 230 point and fell below the 8,000 for the first time since July.
Thus, during the week flurry of corporate warnings took a toll on the bourses. The reason for concern is the fact that the warnings were not only from the technology sector. Other sectors such as FMCG and financials also witnessed profit warnings. The economic numbers that came out during the week continued to point to an uncertain environment going forward. While Iraq gave in to demands for UN inspection of its weapons facilities, the threat of a war looms as large as the Bush administration is still very skeptic of the Iraqi move.
|(Price in US$)
Most of the Indian ADR’s closed in the red. Only Infosys, HDFC Bank and MTNL managed to close the week with gains. Most of the technology stocks were beaten due to the profit warnings by technology majors like EDS and Oracle. However, the case in favour of Indian software companies is that they provide more of integration, development and migration services, while the global technology majors provide new technology. In wake of the economic slowdown the corporate spending is directed towards getting more from existing systems in place rather buying new technology. This could be fueling the buying in Indian IT services firms. Last week it was Wipro that had gained.
The major losers were Satyam Infoway and Silverline. Dr. Reddy’s and ICICI Bank also witnessed significant decline during the week. There have been reports from an American brokerage that the FDA (Food and Drugs Administration) in the US had raised concerns over clinical trails of the generic version of Norvasc, a successful hypertension during from Pfizer, that Dr. Reddy’s is trying to replicate. However, the company has stated that there is no truth in the reports and it was on course.
Nikkei bucks global trend
Nikkei for the second week in running bucked global trends and managed to gain. However, the other far eastern market Hang Seng closed in the red. The growth engine of the world, the US economy is sending out mixed signals and therefore, investors globally are keeping away from equities.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407