Closing Market Commentary by Larry Wachtel of Prudential:
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January 4, 2001 5:15 pm ET
DJIA 10912.41 -33.34
Everything old is new again. Today's market session was devoted to a changing of the guard, nailing down the winners of last year and shifting into the losers. Thus, the defensive groups like drugs, utilities, insurance, food and beverages moved lower as money shifted into the retailers, the financials and assorted technology.
The shifting tide resulted in record big board volume, exceeding two billion shares for the first time in history. Nasdaq volume tailed off from its record high turning in a mere 2.5 billion shares.
The fact that the Nasdaq index fell back by 49 points after rising a record 324 points yesterday should not be surprising unless the laws of gravity have been repealed. Similarly a 33 point decline in the Dow Industrial Average after a rise of 299 points yesterday is not too shabby. The fact that big board winners outpaced losers could also be construed positively.
As far as we are concerned, the Fed rate cut was a big deal and carries friendly market implications. But it was never destined to turn the tide in one fell swoop. We still have to face up to a tough bottomline period ahead as well as further evidence of economic cooling. What the Fed did yesterday will not be felt in the economic mainstream for 6-12 months to come. But the change in psychology is important; the sense that Alan Greenspan is minding the store.
Drug stocks were weak across the board with merck losing four, Lilly five and American Home three. Of course, drug stocks had reached record high valuations last year as the tech money flowed into the sexiest of safe havens.
American International group led a weak insurance sector downward with a six point decline while Marsch Mclennan fell over four. In the food group wekaness ranged from general mills to anheuser busch.
Among the Dow 30 weakness in Merck, Procter & Gamble, Exxon-Mobil, Philip Morris and Johnson & Johnson gains in Eastman Kodak, Caterpillar, Disney and General Motors.
As for the Nasdaq, gains in software stocks like BMC Software and Citrix was overshadowed by declines in Qualcomm, Mercury Interactive and Q Logic. On calendar, a sharp rise in weekly unemployment claims reminds that tomorrow the December job figures could provide another insight into the state of a cooling economy. Consensus is for unemployment to rise from 4% to 4.1%, non-farm payrolls to expand by 100,000 and wage inflation to rise by 0.3%, the same as November.
One notable feature was the Dow Transportation Index, soaring 130 points, led by airlines, railroads and truckers. These groups have been helped by the Fed rate cuts, implying an economic revival later in the year.
The unprecedented volume spurred the brokers with E Trade and Ameritrade flourishing on line while Lehman and Bear Stearns represented the big board crowd. Tomorrow, we close out a frenetic first week of the new year with cross currents not to be believed. You want action- we've got it.
Ibexx |
