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Lower valuations

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European and Asian Markets, S&P Futures, U.S. Dollar, Intel, and Ford all have one thing in common: lower valuations. Concerns seem to revolve around the ISM report scheduled to be released at 10 a.m., as traders fear the 51.8 consensus estimate is likely too high. Other factors include the Nikkei at new 18-year low and cautious comments on Intel.

Japan's Nikkei falls to new 18-year low

Most major world equity markets came under pressure as the Japanese benchmark index lost 3.2 percent to close at 9217, a new 18-year low. Japanese traders seem to be concerned once again about the Japanese banking system. Cash leaving the Nikkei seemed to find its way in U.S. Treasury bonds, as the 10-year note rallied to near the four percent area. This represents a yield not seen in almost 20 years.

Cautious Comments on Intel

Dan Niles at Lehman Brothers believes the company will lower revenue guidance of $6.3-$6.9 million to $6.4-$6.7 during their September 5th update. Niles also expects earnings to be lowered by a few cents for 2002 and up to 0.05 for 2003.

Speaking of companies within the Semiconductor Sector Index, National Semiconductor (NSM) is one of the few companies expected to report earnings this week (Wednesday during market hours). This should be particularly important as the entire SOX.X index is on the verge of collapse.

Chart of National Semiconductor Company

Chart of the Philadelphia Semiconductor Index (SOX.X)

Citigroup cut from hold to sell; Ford downgraded

Prudential downgrades Citibank to sell and lowers earnings estimates for 2002 by $0.05 to $2.85. Citibank's earnings for 2003 was lowered by $0.20 to $3.30. Concerns vary from Latin American exposure to risk over an increase in lawsuits. UBS Warburg downgrades Ford to reduce from hold and cuts price target to $9.50 from $12. Reasons include pension problems and threat of credit downgrade.

AT&T could be silver lining in down market

Closing on Friday at 12.22, shares of T could find buyers on Tuesday following an upbeat article published in the New York Times. This article suggests that as competitors Worldcom, Global Crossing and Williams Communications Group went into Chapter 11 bankruptcy, T is in position to whisk away customers from its struggling rivals. Technically, the key is to stay above 11.80 a share.

Stock Futures

S&P futures are decidedly in the red this morning, currently lower by 15 points. The Nasdaq futures are also showing signs of a weaker opening, lower by 16.5 points and forecasting an opening underneath the 1300 area. September Dow Futures currently show an opening 100 points lower, while December Dow Futures are lower by 122.

John Seckinger
Option Investor


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