Market Summary May 10, 2001 -->
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
from prudentbear.com
Rally Looks Very Tired
Asia was quiet last night with Hong Kong flat and Japan down a hair. Europe rose 2 percent after a 25 bp cut out of the BOE and a surprise 25 bp cut out of the ECB. The US futures rallied on the news as well, sending the NDX futures (yep, you guessed it) limit up. It seems we can’t begin the day anymore without the NDX being limit up or down. We gapped up big at the open, flopped around near the high for 30 minutes or so and then began marching lower, with the NASDAQ in the lead. The march lower continued all day long and accelerated right into the close where we ended right on the low of the day. Volume was just OK again (1 bil on the NYSE and 1.7 bil on the NASDAQ.) Breadth was slightly positive on the NYSE and negative by a hair on the NASDAQ. Big winners were in the retailers as the RLX rose 3 percent. Big losers were in the biotechs as the BTK fell 3 percent.
EMC confirmed its guidance last night, announced a stock buyback and said: “We're seeing a firming of IT budgets throughout the United States.” That’s interesting since nobody else seems to be, but the funny part was, the stock couldn’t rally on the news. After gapping up about 7 percent, EMC ended down 2 percent. So, we have another example of good news being sold, which is bearish. We also had a huge tout on the semi equipment makers that got everybody all stirred up this morning where the analyst said, “the train has left the station [don’t blink or you’ll miss it!]” Well, he’s right about one thing, the train has left the station, and it’s on a collision course with another even bigger train called “reality.” The result is going to be a train wreck. What makes this call look even sillier is the fact that equipment maker AEIS warned a couple hours later this morning saying that Q2 revenue would be down sequentially by 35%. More importantly, the news wasn’t ignored as it might have been a week or two ago, and AEIS ended down 4 percent. So, once again we see bad news mattering. After their initial euphoric gap up off the analyst tout, the equipment stocks all slid lower to go out on the lows of the day with NVLS and AMAT actually ending down slightly on the day. Once again, we see stocks reacting negatively to what should have been “good” news. That’s bearish. After exploding at the open with the equipment stocks, the SOX ended the day flat under the weight of sagging chips. MU and INTC both ended down 3 percent on the day, but the communications semis were hit the hardest as PMCS and AMCC both ended down 9 percent. CSCO added another 2 percent loss to yesterday’s slide and dragged the rest of the networking sector down with it. PCs were mostly weaker, and even IBM was weaker ahead of what may be Lou Gerstner’s last tout tonight. Tech was really weak across the board today, and what did manage to stay green merely limped into the close. Financials were a little stronger on the day, although they softened up into the close. The BKX and XBD both ended up a little less than a percent after being higher early on. GE ended up a hair after also trading higher. Retailers were on fire this morning after retail sales reports were much stronger than expected with the RLX rising 3 percent.
Oil rose 29 cents. The XOI and OSX were both off around a percent. Gold digested a bit of yesterday’s gains and pulled back 90 cents ahead of tomorrow’s option expiration. Lease rates were quiet once again. The HUI rallied again, rising another percent to just shy of a new high for the move. The US dollar index rose a hair. After the ECB caved in and cut this morning, the Zero (yep, we’re back to that again until the ECB shows us it wants a real currency) responded by slipping a hair but found support at the 88-cent level. Now, the dollar will likely eventually get into so much trouble that the euro will rally simply because it’s the lesser of two basket cases, but the ECB continues to show with today’s move that having a solid currency is not the top priority with these guys. We’ll probably want to keep an eye on gold priced in euros from here as well. Treasuries were smacked ahead of tomorrow’s PPI with the yield on the 10yr rising to 5.27%.
Tonight we have a couple of analyst cookouts, the first being IBM and the second being INTC. If the action of the last couple days continues, the news from these (which I suspect will be spun as “hopeful”) will be sold. Tomorrow morning we get the PPI data, which could be rather inflationary. We’ll see if anybody cares. Stocks should have rallied in response to the ECB’s surprise rate cut today, but they didn’t. Semi and semi equipment shares should have rallied off this morning’s tout, but they didn’t. EMC should have rallied the storage sector, but it didn’t. It’s looking more and more like this rally off the March low ended with Monday’s high. The market continues to look very tired. Like a marathon runner stumbling across the finish line, the next stage may be a collapse in the middle the street as we go into next week’s FOMC… |
