RECAP & STOCKS TO WATCH FOR WEDNESDAY, 1-4-01
Greenie the Grinch’s heart grew 3 sizes today as the Fed gave the markets a late Xmas present by slashing the fed funds rate 50 basis points to 6%, and the discount rate 25 basis points to 5.75% in a rare, inter-meeting move. The tech sectors rocketed on the news with the big-caps leading the way. The rally was widespread across all sectors, propelling the Nasdaq Composite to a 14% gain and the Semiconductor Index (SOX) to a 17.5% gain.
The trading day started with a gloomy mood as Lehman Brothers cut estimates on both Intel (INTC) and Dell Computer (DELL). The gloom was quickly lifted as news of the rate cut hit the newswires at 1:13 ET.
The Nasdaq Composite rocketed almost 325 points, its biggest point gain ever, to close at 2,616. Volume was an incredible 3 billion shares, with advancers swamping decliners by a 13-1 margin. Blue chips followed the techs as the Dow surged 299 points to finish at 10,945.
The Dow traded over the 11,000 mark for the first time since mid-September. Volume on the Big Board was 1.9 billion shares, with 337 stocks making new highs compared to 31 new lows.
Although the Fed’s move leaves us far from clear sailing, one important thing that it did accomplish was to surprise the markets and create a psychological shift in sentiment. The move effectively broke through the pessimism that has gripped the markets for months. It has also helped put that floor in the market that traders have been waiting for. This sentiment that the lows have been put in should attract the cash off the sidelines that has been waiting for a Fed action.
From a technical standpoint, support on the Nasdaq Composite stands at 2,250-2,200, with resistance at 2,640 and 2,900. A “bullish engulfing candle” was formed today on the daily chart, meaning that the daily range and the close today exceeded yesterday’s range and close. Chart of the Nasdaq Composite on a daily basis:
tradewindsonline.net
Inktomi (INKT): Company warns for Q1; sees EPS of breakeven to $0.01; current EPS estimate is $0.03. Revenue expected to be in a range of $80 to $81 mln. INKT cites slowdown in infrastructure spending. Warning could negatively impact other content delivery and caching stocks: AKAM, CFLO, ISLD and NTAP.
BMC Software (BMCS): Company issues upside pre-announcement for Q3; sees $0.18-0.20; current EPS estimate is $0.16. This could favorably affect other mainframe software companies: CPWR, SNRA, NESY, and CRA |
