CLOSING WRAP-UP, June 11
optionetics.com
By Jody Osborne, Optionetics.com
6/11/2003 6:45:00 PM
Stocks continue to rally, sending S&P 500 ($SPX) within 3 points of 1,000. The SPX rose 12.64 points, or 1.28 percent, to close the session at 997.48. The Dow ($INDU) tacked on 128.33 points to finish the day at 9,183.22. The Nasdaq ($COMPQ) underperformed the broader market, but this gained 1.13 percent to 1,646.02. Volume picked up from Tuesday’s figures, with the NYSE trading 1.5 billion shares and the Naz turning over 1.9 billion. Market breadth was positive by a 24-to-9 and 19-to-13 margin on the Big Board and Naz respectively.
Ironically, stocks rose sharply despite a decline for chip stocks. The Philly Semiconductor Index ($SOX) came off earlier lows, but still lost 0.60 percent on the session. Texas Instruments (TXN) added their name to the group of companies warning about the impact of SARS on their financial results. Shares of TXN fell 7.50 percent on the news, as several analysts lowered their rating on the stock. Morgan Stanley lowered its view on the whole chip sector because of valuation and possible near-term earnings risks. After the bell, the Semiconductor Industry Association lowered its 2003 growth target to 10.1 percent from a range of 10 to 15 percent. For 2004, the SIA lowered its growth projection to 16.8 percent from 22 percent.
Economic news wasn’t particularly strong on Wednesday, but traders bought stocks on hopes of a brighter future. The Fed’s Beige book report showed little improvement across the 12 Fed districts, but traders were glad to see that conditions didn’t worsen. The employment situation continues to be a major concern and traders will get more information on this front Thursday when weekly jobless claims data is released. Despite the slight improvement in economic data, there is little doubt that the FOMC will lower rates later this month. In fact, it no longer is a question of if the Fed will cut rates, but by how much. Fed fund futures are pricing in a 100 percent chance of a 25-basis point cut and a 36 percent chance of rate being lowered by 50-basis points.
Despite the large advances for stocks on Wednesday, the CBOE Market Volatility Index ($VIX) traded flat on the session. The VIX did move as low at 21.79, but closed at 22.12. Nonetheless, we need to keep an eye on this indicator for a sign of when the bulls might have run their course.
Jody Osborne
Senior Staff Writer & Options Strategist
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