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Williams slashes 2002 EPS targets

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Energy trader Williams Company (NYSE:WMB) $8.70 said it is slashing its 2002 earnings estimates to $1.35 from $1.70 per share, well below its previously expected $2.15 to $2.30 per share estimate. Williams said it is cutting its commitment for its risk management and hedging business to $1 billion, down from $1.5 billion, and actively seeking partners for the business. As a result, the firm said its risk management segment profit is now seen at $750 million to $1 billion, down from $1.3 to $1.6 billion. The cutback in the risk management business is expected to save Williams about $50 million per year. Finally, the company said it expects to announce certain asset sales over the next few months.

Stock futures edge higher

Stock futures are edging higher this morning as S&P futures gain 1.4 points to 1,029.70. NASDAQ futures are trading up 6.5 points at 1,144, while Dow futures are gaining 20 points at 9,610.

Fair value for the S&P 500 today is $0.10. That price will not change during the day. HL Camp & Company has their computers set for program buying at $1.30 and set for selling at $-1.55. Fair value for the NASDAQ-100 today is $0.90.

If you would like more information about fair value, its uses and calculation, please visit www.programtrading.com.

Last week's market averages/sector action

Last week we talked about the deteriorating internals of the "market" as depicted by the NYSE Bullish % ($BPNYA) from www.stockcharts.com and other widely used bullish % charts. All had reversed into columns of O's on their charts, which signaled that supply was really beginning to take control.

Well, while some "external" damage had been done prior to the broader NYSE Bullish % ($BPNYA) reversing into O's, earlier noted deterioration in the narrower based S&P 500 Bullish % ($BPSPX) and NASDAQ-100 Bullish % ($BPNDX) gave plenty of "heads up" for what took place last week.

As you can see, the HMO Index (HMO.X) 632, was the only sector that managed any type of "meaningful" gain last week and once again is challenging the Gold/Silver Index (XAU.X) 78.8 for this year's sector winner. The Dow Jones Home Construction Index (DJUSHB) finished fractionally positive, recouping some losses from earlier in the week.

It will be interesting this week to keep an eye on the Gold/Silver Index (XAU.X) to see if it can hold its strong upward trend that has been in place since mid-November.

It's been often referred to that the home builders would be the last to fall and mark doom for the U.S. economy, as the nay Sayers have pointed to the bullishness in gold stocks as hint that the U.S economy is set for a double dip recession.

Some of the more "economically" sensitive sectors had the Retail HOLDRS (RTH) 92.2, Transports (TRAN), Forest/Paper (FPP.X) and Cyclical Index (CYC.X) trading to the downside, but relatively stronger than the market averages.

Aside from the GSTI Software Index (GSO.X) 118 and a -1.7% decline on the week, technology stocks once again got hit lower. The stock that software sector bulls continue to monitor are share of Microsoft (NASDAQ:MSFT) $51.98, which posted a gain of 2% on the week. While Intel's (NASDAQ:INTC) $22 mid-quarter update had the Semiconductor Index (SOX.X) falling -7.4% on the week, it was the longer-term weakening Networking (NWX.X) and Wireless (YLS.X) sectors that found the greater declines.

Despite the Semiconductor Index's (SOX) decline last week, it still looks to be the "better" performing sector in technology so far this year. Intel's news from its mid-quarter update will most likely weigh on any type of overly bullish rallies in the next couple of months, until some COMPANIES (not analysts) have something more positive to say about things near-term. While Intel (INTC) was bullish on growth in the latter half of the year, equity bulls seem to be focused on near-term gains, not promises for the future.

Traders should keep that in mind when trading many of the 4-lettered technology stocks. As you can see from the year-to- date losses in the various sectors, if you get a 7% gain or more from an underlying stock in a short period of time, you've handily beat the markets on year-to-date basis.

The MARKET has now brought the S&P Banks Index (BIX.X) back down to par on a yearly performance basis with the KBW Banks Index (BKX.X) after the more regional banks of the BIX.X had been outperforming. One reason for the marked underperformance and 10% decline in the BIX.X last week was concerns about the strength of the economic recovery here in the U.S. Again, the BIX.X is comprised of banks with a more domestic exposure, while the BKX.X holds banks that have more relationships overseas as well as here in the U.S.

This weekly development and "coming back to par" on the year-to- date performance, perhaps gives some credence to past observations that money has indeed been leaving the U.S. and opting for foreign markets where risk/reward is perhaps viewed as more attractive.

Two foreign equity markets we've discussed in recent weeks had the Japan iShares (AMEX:EWJ) $8.78 declining 2.4% on the week, while the Australian iShares (AMEX:EWA) $10.50 lost just 2-cents last week. One thing I will attempt to figure out this week in regards to the Australian iShares, is just what classification of stocks comprise this basket of securities. Australia has many natural resources and one thing I need to know is what type of weighting gold mining stocks may have in this group. While all that matters is price action, an investor that already has their account weighted heavily in gold mining stocks may not necessarily seek further exposure if the Australian iShares are heavily weighted in that industry.

Jeff Bailey
Senior Market Technician
Option Investor

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