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Accounting worries trump housing starts

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Stock futures are lower this morning despite a stronger than expected January housing starts number, which grew 6.3% to a 1.678 million rate, much higher than the 1.60 million rate that had been expected by economists.

Despite the strong housing number, investors have their eye on International Business Machines (NYSE:IBM), which took a 4.6% drubbing on Friday, after a New York Times story pointing out that the hardware giant's accounting of the sale of a business unit to JDS Uniphase (NASDAQ:JDSU) may have padded its earnings. IBM said it would begin releasing more details in its financial statements on items that had typically been lumped together.

Ciena to buy ONI Systems

Fiber optics maker Ciena (NASDAQ:CIEN) is trading lower in pre- market action at $8.66 after announcing that it will buy rival ONI Systems (NASDAQ:ONIS) in a stock deal valued at around $866 million. Ciena (CIEN) says it believes the merger between it and ONIS will bring a more rapid return to profitability thanks to the cost-savings generated by the acquisition.

Wal-Mart meets estimates

Retailing giant Wal-Mart (NYSE:WMT) reported earnings that meet Wall Street's earning's estimates of $0.49 a share. The company reported that revenues rose 13.5% to $64.21 billion versus a consensus estimate looking for $64.02 billion. "Although we did not attain a goal of increasing earnings at the same rate of sales, our 8.9% growth in earnings per share in the fourth quarter, represents more than triple the growth rate experienced in the first six months of the year." Wal-Mart (WMT) later provided guidance for its first quarter 2002 for earnings to be $0.35-$0.36 a share, which is inline with current consensus of $0.35 and for full-year 2002 earnings to be $1.74-$1.76, which is slightly higher than consensus of $1.73.

Stock futures lower

Stock futures are lower across the board as S&P futures trade down 7.40, NASDAQ futures are off 18.50 and Dow futures are down 57. Fair value for the S&P 500 today is $0.13. HL Camp & Company has their computers set for program buying at $1.32 and set for selling at $-0.85. Fair value for the NASDAQ-100 today is $2.38.

Jeff Bailey
Senior Market Technician
Option Investor

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