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January 19, 2005

Did Someone Mention a Party?

The tech party looks a lot like it’s being crashed. Yahoo’s report didn’t get anyone yodeling, as the Nasdaq shed about 1% by early afternoon and closed down about 1.5% with the other indices following close behind. Even Yahoo itself, after being up nearly 3% by mid-morning, closed down over 3.5%. I covered my short before the close yesterday to get out of the way of the report and re-shorted it at a higher price this morning. Good or bad earnings announcements tend to come in streaks. Since Yahoo hadn’t posted an unfavorable report in some time, I decided not to gamble that this would be the first. Such moves make traders feel clever, but let’s see how it works out.

A couple other techs are worth noting. Intel was off over 1.5% after details of incoming CEO Otellini’s reorganization plan had time to be masticated and indigested. Many folks are praising the re-organization along with its recent earnings release as signs of strength for the company. But if things are so good, why do they need to re-organize? My belief is that the revered, outgoing CEO painted a nice picture for his departure and now we’re going to see the cracks. Maybe this re-org will help Intel find its footing, but there is bound to be choppiness as it takes place.

The other tech in the spotlight today is Seagate. Although supposedly beating 4th quarter earnings expectations (29c vs. 24c) and raising guidance for this quarter, the stock plummeted 6%. Either expectations were not what people said they were, or we’re just in a stock-bashing mode.

It is also interesting to note that both Fannie Mae and Freedie Mac predictably lowered their dividends today in order to preserve capital. These guys are the bellwethers for the housing industry and were down on the news. Regardless, housing stocks were up sharply most of the day before closing about even.

Author’s disclosure: Short YHOO, Short INTC


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