July 3, 2001

Bad News Overshadows Good News

A government report indicating an increase in factory orders failed to create excitement in the stock market, as stocks slipped in today's shortened trading session. Does this surprise us? No way!

The manufacturing sector has been in a deep slump all year -- through May, factory orders for 2001 were down 4.8% from the same period last year. In fact, even though orders increased in May, they were down 6.2 percent from May 2000. And, the National Association of Purchasing Management just reported that in June the manufacturing sector declined for the eleventh month in a row -- reflecting that the sector is still in recession.

Plus, the stock market continues to be battered by disappointing earnings warnings. Late yesterday, chemical giant DuPont lowered its second quarter earnings estimates, citing a global economic slowdown, poor demand, and a strong dollar. And the list of companies issuing warnings continues to grow: Axsys Technologies ... Epiphany ... i2 Technologies ... Broadvision ... Internet Security Systems ... ... Payless ShoeSource Inc. ... Rational Software ... Roadway Express Inc.

Until investors are assured that earnings will improve, there is no light at the end of the tunnel.

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