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Market Summary April 18, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Uncle Al Panics: Stocks Party, Dollar Disapproves
Asia was higher last night as Hong Kong rose 4 percent and
Japan rose 3 percent. Europe was up 3 percent this morning as
we rolled around to the open in Vegas... errrr I mean New York
where the futures were limit up on the Naz. We gapped up at the
open and were off and running. About 2 hours into the session
things slowed down a little as those in the "know" waited on the
rate cut from their buddy Uncle Al. The Fed announces a surprise
50 bp rate cut and whoosh, the spoos launched 2 percent quicker
than you can say "print more money!" From there, volume picked
up considerably as we flopped along for the rest of the day near
the highs in a sideways chop. The last hour saw us drift lower
and end at levels below where the majority of trading took place
today after the rate cut jam. The day is coming when this sort of
nonsense will be laughed at and sold hard, but the currency has
to come under pressure first. Speaking of the dollar, it didn’t like
today’s rate cut. The US dollar index slipped into the red by a
percent and ended on the low. With today’s act of recklessness,
the fed funds rate is now at 4.5% and below the ECB’s
comparable rate at 4.75%. Volume today was near a record (1.9 bil
on the NYSE and 3.1 bil on the Naz.) Breadth was 2 to 1 positive
on the NYSE and just shy of 3 to 1 positive on the Naz. Big
winners were in the semis as the SOX rose 12 percent. Big losers
were in the oil services as the OSX fell 3 percent.
INTC said last night that they think the 2nd half will be better (like
they always do and are then forced to warn repeatedly just like
they have for the last 2 quarters), and they kept their ludicrous
$7.5 bil cap ex number. HWP warned this morning and
announced more job cuts, but said that Q2 might be the bottom.
However, that remains to be seen. TER, a semi equipment maker,
said orders were at the lowest level since Q3 of 1998. TXN said
orders fell 32 percent sequentially, and they expect revenue to
decline 20% sequentially. They also cut their cap ex estimate to
1.8 bil from 2 bil. LLTC said next quarter’s revenue would be
down up to 30% sequentially. However, nobody cared about any
of that today because as a friend of mine said earlier this week:
we’re back in "nothing matters" mode. All anybody wanted to
focus on was INTC’s fairy tale, HWP’s hope, and the coming Fed
cut that somebody obviously knew about, which explains the
buying over the last few days in the face of all the horrendous
news. All that mattered today was that Uncle Al was passing out
cheaper confetti, and now that things have turned the derivative
momentum monkey is running the show till it has exhausted
itself, at which point we’ll go down again and take out lows.
Whether we finally get the "acceleration" I have been talking
about depends on when the dollar breaks. Financials were the
same story as tech. The BKX rose 4 percent, and the XBD rose 7
percent. GE rose 5 percent. Credit insurers were the anomaly of
the day. ABK gapped down this morning and was down as much
as 10 percent even after the rate cut, and I don’t think it had
anything to do with their earnings report. MBI was hit for 5
percent. Clearly there is a problem out there somewhere, and
that’s probably one of the big reasons that Uncle AL panicked
today. Maybe he just wanted to jam stocks? That wouldn't
surprise me either, but we'll probably know which it was in a few
days if and when some bad news leaks out somewhere. Anybody
that thinks this was done today because of some economic data
is fooling themselves. Retailers were hot as the RLX rose 6
percent.
Oil fell 29 cents. The XOI fell a percent, and the OSX fell 3 percent.
Gold rose 20 cents, and lease rates were quiet. The HUI rose 2
percent. The US dollar index fell a percent on the news of the rate
cut. The euro traded down to 87 cents this morning before
recovering to close above 88 cents and in the green for the day.
Treasuries were a touch higher.
With this latest panic move by the Fed (recall the last one was in
January at higher levels), the dollar may now finally get sold as
foreigners give up on the Fed and the US economy. Once the
currency comes under pressure, the countdown to a collapse
begins. I continue to be amazed that the dollar has lasted as long
as it has. The fact that the dollar remains near its highs against
most currencies as the economy and stocks collapse even as the
Fed is slashing rates is simply amazing. And stocks have
certainly been propped up to some extent because of it. However,
once the currency is moving to the downside, the Fed’s hands
become severely tied (much like the ECB's have been). Today’s
rate cut will not erase the enormous amounts of consumer and
corporate debt in the US. Rate cuts aren’t going to encourage
anyone to go out and buy a new PC or server, and it doesn’t
mean that the banks would loan you the money even if you
wanted to. You can’t reinflate a bubble once it has popped. The
fact remains that we have a huge glut of equipment, enormous
overcapacity, and gargantuan debt levels. And, the rest of the
world is beginning to suffer as we slow as well. The Fed may
have played its final card today and put the stake in the heart of
the dollar. What we’ll want to watch for now is how the dollar
trades over the next few days. If it begins to slide hard, you'll
know that a collapse is just around the corner. Otherwise, we'll
have to wait and see where this rally in stocks exhausts itself and
go from there. I'm not ready to say we have indeed put in a
tradable low and this is the rally I thought we'd get off that low,
because we haven't had a panic yet. However, I am now open to
the possibility that the March low was that low, and I failed to
recognize it at the time. We'll just have to see what happens over
the next couple weeks and reevaluate at that point. Make no
mistake though, unless the dollar comes under severe and
sudden pressure, the bulls are in control for the moment. And
they can flop things around for a while before we inevitably roll
over again and go lower. The only certainty is that we have by no
means seen the lows in this bear market.
Close
Change
% Change
Close
12/29/00
YTD
Change
Dow
10615.83
399.10
3.9%
10786.85
-1.6%
S&P 500
1238.16
46.35
3.9%
1320.28
-6.2%
NASD
2079.44
156.22
8.1%
2470.52
-15.8%
NASD 100
1830.79
159.28
9.5%
2341.70
-21.8%
Morgan Stanley Hi
Tech
608.17
52.08
9.4%
668.22
-9.0%
TheStreet.com
Internet
251.83
19.29
8.3%
300.63
-16.2%
Biotech Index
554.65
33.44
6.4%
634.32
-12.6%
S&P Banking Index
892.54
37.18
4.3%
901.42
-1.0%
Morgan Stanley
Cyclical
542.71
29.54
5.8%
511.18
6.2%
Morgan Stanley
Consumer
535.99
2.10
0.4%
613.91
-12.7%
Russell 2000
466.51
10.93
2.4%
483.53
-3.5%
Wilshire 5000 TOT
11343.78
419.98
3.8%
12175.88
-6.8%
Gold Bug Index
53.47
1.02
1.9%
51.41
4.0%
Dow Utilities
394.44
-1.24
-0.3%
412.16
-4.3%
Bloomberg IPO
761.68
35.37
4.9%
932.37
-18.3%
Dollar
116.15
-0.21
109.32
6.2%
Euro
0.88415
0.00
0.94
-6.2%
Gold
$261.25
$0.25
$272.25
-$11.00
Oil
$27.88
-$0.36
$26.70
$1.18
10 Year Bond Yield
5.15
-7
5.112
4
30 Year Bond Yield
5.66
0
5.457
21
Spreads:
Last
Peak
12/29/00
YTD
Change
Dollar Swap
84
102
102
-18
US Treasury vs:
10 Year Fannie
74
90
90
-16
10 Year Freddie
70
90
90
-19
10 Year FHLB
69
85
85
-15
Cur. Coup. Mtg.
145
179
179
-34
10 Yr AA Corp
104
127
127
-23
TED Spread
0
79
66
-66 |
