NEWS AND COMMENTARY
April 10, 2001
Truth Is Hard To Swallow
The rumor mill may be what's spearheading stocks higher today, but the truth will choke this bear market rally. Although whispers of an interim interest rate cut by the Fed and wishful thinking that Motorola could issue a positive earnings report spurred stocks higher today, this rally won't last As we told you before, stocks will fall even further once investors realize that there's no truth to the rumors.
In reality, companies continue to announce disappointing earnings and layoff plans. Telecom giants Marconi and Siemens today announced that they are slashing 5,000 jobs in the U.K. and Europe. North American telecoms Lucent and Nortel already have more than 30,000 layoffs in the pipeline.
In earnings news, Cypress Semiconductor warned that it will miss already lowered first-quarter earnings targets. Health insurance giant Aetna confessed this morning that its first-quarter profit was "significantly" below estimates. And this is just the start of such earnings announcements. There are still many more companies that will issue disappointing first-quarter earnings reports.
And, despite the rumors of another interest rate cut, let's not forget what the last set of rate cuts did for the stock market: Stocks fell. Investors know that any interim rate cut will signal that the Fed believes that the economy is indeed in a recession and that only drastic measures will start the recovery process. That's not cheerful news, folks. As we've said, any rally in the stock market right now should be used as an opportunity to sell any stocks you own or short the market for potentially huge profits.
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