RECAP & STOCKS TO WATCH FOR MONDAY, 2-12-01
After ignoring bad news for the past month, the markets last week reverted back to their familiar, worrisome ways, as traders and investors became increasingly concerned about the threat of a recession and the ever deteriorating earnings outlook. The Nasdaq ended on Friday exactly where it began the year, effectively wiping out all of January's gains.
On Friday, the Nasdaq Composite shed another 91 points, or 3.6%, to close at 2,470. Volume was 1.88 billion shares, with decliners beating advancers by 12 to 7. Blue chips followed the techs as the Dow lost 99 points to finish at 10,781. Volume on the Big Board was 1 billion shares with decliners beating advancers by 17 to 14.
Friday's declines were prompted by a number of factors, including concerns over Oracle's (ORCL) database business, a SEC inquiry into Lucent's (LU) accounting practices, and a report of impending layoffs at Dell Computer (DELL).
Over 80% of the S&P 500 companies have reported their Q4 earnings, with earnings up 4.8% from the same time last year. However, estimates going forward for Q1, Q2, and Q3, continue to be guided lower, especially in the tech arena. Since Jan 1st, tech earnings estimates have dropped from a 4% gain to a 14% decline for Q1, from a 2% gain to a 13% decline for Q2, and from an 11% gain to a 25 decline for Q3.
The most important event on this week's calendar is Fed Chairman Alan Greenspan's appearance on Tuesday before the Senate Banking Committee to discuss monetary policy. Right now, Greenspan is fighting the toughest kind of war, a psychological one based on sentiment. This week's economic calendar also contains a number of key releases: January Retail Sales, the Producer Price Index, Housing Starts, Building Permits, Industrial Production, and Capacity Utilization.
Many newsletters right now are hyping the fact that the markets are oversold and are “predicting” a bounce this week. We all know how the saying goes when everyone is “predicting” the same thing.
From a technical standpoint, the Nasdaq Composite has broken support at 2,500, the 62% retracement of the January 3rd to January 31st rally. New support stands at 2,300, with resistance at 2,660-2,700. On a weekly basis, the Nasdaq has settled under its 200-period Moving Average for only the 3rd time since 1991 (see chart). The DJIA is testing support 10,750, with stronger support in the 10,650-10,700 area. The Semiconductor Index (SOX) broke support at 635, its 50-day MA, with new support at 600 and 560.
The Nasdaq Composite on a weekly basis: tradewindsonline.net
Earnings Spotlight: The following companies are among those due to report this week: Applied Materials (AMAT), Clarus (CLRS), Human Genome (HGSI), PurchasePro.com (PPRO), and Sycamore Networks (SCMR) on Tuesday, and Ciena Corp. (CIEN), Agile Software (AGIL), Hewlett-Packard (HWP), and Novell (NOVL) on Thursday. |
