Closing Market Commentary by Larry Wachtel of Prudential Securities (1//2/01):
*****
January 2, 2001, 5:25 pm ET
Happy New Year. . . Bah Humbug. Wall Street, which encountered hostility through most of 2000, kicked off the New Year with a definitive dump. Stocks cratered in the first hour and never looked back. Part of this had to do with high tech disillusion as further evidence of economic slowdown contributed to prospects of capital spending cutbacks. Part had to do with investors nailing down profits for the new tax year. And part had to do with fears of bottom-line blues as a potential new wave of negative pre-announcements looms ahead.
The final figures were downright ugly. The Dow Jones Industrial Average fell 140 points which was bad enough but Nasdaq lost 178 falling to the lowest level since March of 1999. The Nasdaq hickey was the seventh largest loss in its 29 year history and comes on top of a 39% slide last year, including 33% in the fourth quarter.
Basically, stocks are trying to adjust to a fast cooling economy that will trigger a sharply declining profit picture. Today the National Association of Purchasing Managers Index fell to the lowest level in 10 years, while prices for raw materials rose. This report underscores again the contraction in the manufacturing sector of the economy while services continue to grow at a fairly healthy pace. Of course, technology is much more linked to the manufacturing side which explains this unrelenting downside assault.
Aiding and abetting the tech slide was an early downgrade of tech stocks by Robertson Stephens. The brokerage cut the rating on storage giants like EMC Corp (down 12), Veritas (down 21) and Network Appliance (down 12).
The tech carnage was universal. Bellwether Cisco fell over four points to a new low while recently buoyant Juniper fell 23. The business to business stocks got clobbered with Manugistics down 13 while i2 technology lost 11. And communications chip stocks were hard hit with Brocade down 16 and PMC Sierra off by 11.
Among the Dow 30, General Electric finally hit the wall falling over four points and bringing its merger partner Honeywell down by three points. Other blue chip losers included Boeing, United Tech, American Express, 3M Corp, and Johnson & Johnson. Oil stocks bucked the downtrend as crude oil prices firmed after Saudi Arabia said it supports a production cut by the Opec cartel. Exxon Mobil rose by two points while Chevron was a point sized winner.
U.S. Treasury notes staged their biggest one day gain since October of 1998 on expectations the economic slowdown will trigger rate cutting action by the Federal Reserve. Federal Funds futures are pricing in a rate cut well in advance of the next Fed meeting on January 30-31. Analysts say the Central Bank may act as soon as Friday if the December job figures come severely short of expectations.
If today is an example of 2001 hospitality, we may seek out an island, like Tom Hanks. For now, we will play it one day at a time, though bruised and beaten.
Cheers,
Ibexx |
