RECAP & STOCKS TO WATCH FOR MONDAY, 1-8-01
History was made this past week as the Federal Reserve cut the Fed Funds rate by 50 basis points in a surprising and rare inter-meeting move. Stocks staged an impressive rally on the news, but nervousness over the state of the economy still hovered as a black cloud. Sector rotation immediately began, with funds pouring out of the biotech and healthcare sectors and into the battered tech and Internet companies. While the Fed’s rate cut and new stance is positive for the markets, it will likely not be until Q3 before the results are felt.
We experienced incredible volatility this week in the markets, with the Nasdaq Composite slipping 63.65 for the week, and the Dow giving up 125 points. Volume was impressive for a holiday-shortened week as both indices set new 1-day volume records.
Friday’s weakness first stemmed from rumors that the country’s biggest bank, Bank of America (BAC), would be hurt by a line of credit drawn by California utilities, and from large losses from derivatives trading. Even when the bank squelched the rumors, disbelieving traders sent the stock and the markets tumbling. Fuel was added to the fire as sentiment transpired that the Fed’s rate cut was engineered to bail out the ailing financial sector, which has been pressured by concerns over weakening credit quality and trading losses.
The Nasdaq Composite fell 159 points on Friday to close at 2,407. Volume was 2.1 billion shares, with 58 new highs compared to 80 new lows. Blue chips plummeted as the Dow lost 250 points to finish at 10,662. Volume on the Big Board was 1.4 billion shares with 187 stocks making new highs compared to 13 new lows.
Looking ahead this week, earnings season will officially kick off with Yahoo! (YHOO) and Motorola (MOT) due to report on Wednesday. On Tuesday, President Clinton will traveling to California for a critical meeting on the energy problems there. On Friday, the markets will digest the Producer Price Index, with an expected decrease in the overall report to (0.1%) from 0.1%, and a 0.1% increase in the core rate.
From a technical standpoint, support on the Nasdaq Composite stands at 2,250-2,200, with resistance at 2,600 and 2,875. The Semiconductor Index (SOX) penetrated support at 635, and 600 stands as new support. Chart of the Nasdaq on a daily basis:
tradewindsonline.net
Earnings Spotlight: Some closely watched earnings reports this week include Infosys Tech (INFY) on Tues., Motorola (MOT), Rational Software (RATL), and Yahoo! (YHOO) on Wed., and Ariba (ARBA), Cree (CREE), DoubleClick (DCLK), and Rambus (RMBS) on Thur.
New Era of Netwks (NEON): Company warns for Q4. Sees loss of $0.35 per share (including a $0.10 per share charge) vs. current EPS estimate of $0.11. Revenues are expected to be approximately $40 mil for the quarter. NEON will record a restructuring charge as part of its Q4 2000 results. News of a class-action lawsuit against the company was also announced after the earnings warning.
Krispy Kreme (KREM): Company files for 2 mil share common stock offering.
Caliper Technologies (CALP) and Aclara Biosciences, Inc. (ACLA): Both companies have dropped their patent suits against each other, and agreed to cross license. In addition, Alcara will pay Caliper $37.5 mil over the next 3 years in stock, cash, and royalties.
Verticalnet (VERT): Company announces that President and CEO Joseph Galli is expected to be named as the new CEO of Newell Rubbermaid (NWL). Galli has been CEO of Verticalnet since July, after 13 months as the #2 man at Amazon.com. |
