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Tuesday, September 26, 2006

Is The Economy Slowing?: Everyone Warns

Stocks: (LOW)(PMCS)(LEN)

PMC-Sierra and Lennar warned on financial result yesterday. Even Lowe's warned One is in the semiconductor business and one in housing. Another is in home improvement retail. But, Wall St. has to wonder if, as the warnings grow in number, whether the trend points to a larger economic trend.

Lennar said it saw no bottom to the housing market. Lowe's warning was based on the slowing house market.

PMC joins a parade of semi-conductors that have said results will drop.

All of these stocks are already at or near lows. PMCS has dropped from $13.77 to $4.78. It now trades at $6.10. Lowe's has dropped from a twelve month high of $34.85 to $26.15. Its low for the period is $26.15. Lennar has fallen from $66.44 to $46.88. It is further from its low of $38.66.

If you add these to the picture of lay-offs at companies as diverse as Intel and Ford, the picture appears to growing darker.

There is a point at which the number of jobs lost, the amount of equity leaving the home market, and the drop in overall stock prices will start to hit consumer buying and the perception that things are getting worse and not better. If so, a recession is not far off.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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