<FONT COLOR=BLUE>MARKET SNAPSHOT--Nasdaq rallies, Dow edges lower
Solid showing for Nets, biotechs and chips
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:16 PM ET Nov 2, 2000
NEW YORK (CBS.MW) - Solid buying interest in Internet, chip and biotech issues perked up the Nasdaq Thursday, keeping the index comfortably in the plus column in generally steady action.
The market is seeing a rotational shift back into growth, observed Barry Hyman, chief investment strategist at Weatherly Securities.
"Growth [has been] out of favor because of legitimate concerns about the slowdown in capital spending and inventory buildup issues," Hyman continued. But as tech outfits have ratcheted down expectations and seen horrendous markdowns as a consequence, just meeting expectations will be a positive for these companies, he said.
The Dow Industrials traded close to the flat line throughout the trading day, losing some stream late in the afternoon. The blue-chip barometer got help from its tech components, which checked in with respectable advances, though losses in many of its cyclical stocks limited attempts to climb into positive terrain.
Thursday's market generated heated buying interest in the biotech and financial sectors while utility, drug and oil issues backpedaled. Oil service shares were the best performers on Wednesday but retraced some of those gains as December crude gave up 71 cents to $32.54. In technology, Internet issues enjoyed positive action for a third straight session, with the Goldman Sachs Internet Index ($GIN) rising a lofty 19 percent over the same period.
The Dow Jones Industrials Average ($DJ) edged down 18 points, or 0.2 percent, to 10,880. Heading south were shares of Alcoa, Exxon Mobil, General Motors, Home Depot and Honeywell. The Dow's frontrunners included Intel, IBM, Citigroup, Eastman Kodak and Wal-Mart.
The Nasdaq Composite ($COMPQ) tacked on 95 points, or 2.9 percent, to 3,429 while the Nasdaq 100 Index rallied 83 points, or 2.6 percent, to 3,308.
Keeping the Nasdaq's gains in check during the session were losses in shares of Oracle. The stock (ORCL) fell 6 percent, or $1.88 to $29.50, as false speculation made the rounds of trading desks that the company's chief financial officer was quitting.
The Standard & Poor's 500 Index ($SPX) added 0.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks climbed 2.4 percent.
Volume came in at 1.15 billion on the NYSE and at 2.09 billion on the Nasdaq Stock Market. Market breadth improved as advancers topped decliners by 18 to 11 on the NYSE and by 25 to 15 on the Nasdaq.
Separately, Trim Tabs observed that cash has been king at U.S. equity mutual funds - at least until Oct. 31, the last day of tax selling. In fact, at the end of September 2000, cash as a percentage of total assets topped 5 percent for the first time since November 1998. Cash peaked at 5.9 percent at the end of the September 1998 market bottom. In Trim Tabs' opinion, it indicates the market has bottomed.
Market's favorable seasonals
Stuart Freeman, chief equity strategist at A.G. Edwards, said the market is moving toward a seasonally favorable period of the year armed with better valuations, more rational growth expectations and the likelihood that the next Fed move on rates will be down in the next three to five months.
"We believe this market is heading into a period of outperformance for consistent growth stocks -- much like the activity experienced in the equity markets after the 1994 and early 1995 Fed rate increases," Freeman said.
"Investors will be seeking reliable earnings growth in an economy offering slower earnings growth in 2001. Large-cap, consistent-growth stocks with market liquidity should appeal to nervous investors seeking lower-risk entry points back into equities. As the market recovery continues, we expect quality mid-cap and small-cap growth stocks to participate," Freeman said.
In the current environment, Freeman expects the market's next leg up to favor the Nasdaq 100, Nasdaq, S&P 100, S&P 400 Midcap and S&P Smallcap indexes rather than the broad S&P 500, S&P 400, and the Dow Jones Industrial Average, Freeman concluded.
Sector activity
Chip monolith Intel (INTC) climbed $2.13, or nearly 5 percent, to $47 and took the Philly Semiconductor Index ($SOX) up 3.4 percent. Altera (ALTR), which saw its shares take a beating Wednesday, gained $1.13 to $33.69. Xilinx also recovered, adding $2.56 to $70.
At its analyst meeting Wednesday, Intel said it's on track to meet its already projected 4 percent to 8 percent sequential growth rate. In late September, Intel roiled markets with its announcement that third-quarter revenue would fall below its previous expectations due to waning demand in Europe. Intel gave a long-term forecast for revenue growth of about 18 percent at its Wednesday meeting.
"We are impressed with the status of Intel's manufacturing technology," PaineWebber said in a note to clients, notching up its 12-month price target to $52 from $45. But CIBC WorldMarkets said it'll remain cautious until visibility into PC demand improves.
Aside from Intel's reassuring words, the chip sector is benefiting from the Semiconductor Industry Association's rosy growth projections for 2000 to 2003. Late Wednesday, the SIA said the global semiconductor industry will exceed $200 billion for the first time in 2000 and grow by over 59 percent to $319 billion over the next three years.
Internet issues remained on a roll and even a plunge in shares of PSINet failed to dampen enthusiasm. Among the biggest gainers in Merrill Lynch's Internet Holdrs (HHH) were shares of CMGI, up $1.56 to $22.25, EBay, up $3.98 to $57, and Priceline, up 13 cents to $6.31. The latter (PCLN) will unleash third-quarter results after the close Thursday, with First Call anticipating a loss of a penny a share.
The Net sector's sore spot was PSINet (PSIX), which tumbled 56 percent, or $3.73 to $3, after warning it would miss fourth-quarter earning projections and announcing that its chief operating officer quit.
Telecom stocks continued to struggle, dragged down by WorldCom (WCOM), which lost another 6.3 percent, or $1.13 to $17.81, following a 20-percent drop on Wednesday after warning of lower-than-expected earnings-per-share growth. Merrill's Telcom Holdrs (TTH) inched down 0.2 percent, relinquishing the brunt of earlier losses.
Biotech issues swelled - the Amex Biotech Index ($IXBT) gained 3.2 percent -- as Affymetrix (AFFX) rallied 25 percent to $74.94 after a U.K. appeals court ruled in its favor in a patent dispute.
Treasury action
Treasury prices turned mixed but remained close to the unchanged mark. The 10-year Treasury note edged up 1/32 to yield ($TNX) 5.735 percent while the 30-year government bond shed 3/32 to yield ($TYX) 5.80 percent.
Thursday saw the release of non-farm productivity, which rose 3.8 percent versus the expected 2.9-percent rise expected by a survey of economists conducted by CBS MarketWatch.com . Closely- monitored unit labor costs grew by 2.5 percent.
The good productivity news was tempered by the rise in unit labor costs, noted Ian Shepherdson, chief U.S. economist at High Frequency Economics. The climb, he said, reflects a huge 6.4 percent rise in hourly compensation costs.
"It is hard to tie these data into the hourly earnings and ECI numbers, which are much less scary, but with compensation costs rising at this pace, any slowdown in productivity growth would be very bad news," Shepherdson concluded.
In other news, weekly jobless claims were unchanged in the latest week at 308,000 and leading economic indicators were flat in September. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the euro backpedaled but continued to hover at its highest levels since mid-October. As expected, the European Central Bank left short-term rates unchanged at its policy-setting meeting. The euro lost ground in the wake of the news with euro/dollar easing 0.2 percent to 0.8582 while dollar/yen edged up 0.1 percent to 108.29 |
