Today's prudentbear -->
Market Summary May 4, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Unemployment Number Confuses Market
Asia was lower last night with Hong Kong falling 2 percent (Japan was on holiday again.) Europe was up a percent this morning and the futures were limit down on the NASDAQ once again after a horrendous employment report. All that matters of course is the market’s reaction to the number, and they had a little trouble making up their minds. We gapped down at the open and flopped around on the lows for 30 minutes or so when a rumor went around of an imminent 75 bp rate cut, and then White House came out and said that the Q1 GDP number would likely be revised lower, which I guess people took as also leaving the door open to more rate cuts (as if a strong GDP number would keep this Fed from cutting rates anyway?) From there we launched vertical back to the unchanged level and proceeded to saw our way higher right into the close where we ended on the high. The market almost seemed confused as to what to do today and asking itself: do we like economic weakness because it means more rate cuts, or have things gone too far for that to matter anymore? For today, those that believe that rate cuts will make all this bad stuff go away soon obviously had the upper hand. Volume was OK (1.1 bil on the NYSE and 2 bil on the Naz.) Breadth was 2 to 1 positive on the NYSE and slightly positive on the Naz. Big winners were in the biotechs as the BTK rose 5 percent. Big losers were hard to find but the SOX did lose a percent.
After the initial dump off the unemployment number in tech, everything flipped around into the green, and we were off to see the wizard, except for the semi equipment shares that is. Semi equipment shares continued to be under pressure all day even as the rest of tech melted up right into the close. The equips outperformed early on during this rally, so that may be a sign of that this rally is indeed nearing an end if they continue to soften up. There’s no doubt that there’s nothing bullish going on in their businesses, but nobody cares about that at the moment. RMBS was halted late in the day after its patent infringement case against Infineon was dismissed. When it finally reopened, it fell 20 percent. Today was the general chaos bid once again in tech where everything was up simply because it was up as everybody bets that the Fed will pull a rabbit out of the hat. It is worth noting that most shares (as well as the NDX and COMP) failed to take out Wed’s highs. MSFT in particular ran out of gas around the 70-mark once again. So, we’ll see if those highs still hold on Monday or not. Financials were higher as well. The BKX rose a percent, and the XBD rose 3 percent. GE rose 3 percent. Credit cards were generally up 3 percent as well. Retailers were mostly higher again with the RLX rallying a hair.
Oil fell 9 cents, and gasoline hit another new all-time high (nope, no inflation here.) The XOI and OSX both rose 2 percent. Gold fell 20 cents, and lease rates were quiet. The HUI managed to close up a hair after trading on both sides of unchanged. The US dollar index slipped a hair, and the euro moved back above the 89-cent level. Treasuries began the day sharply higher and then moved back to the lows of the day in the longer end of the curve with the 30-yr actually closing down. Today’s unemployment number was a whopper. The unemployment rate in April rose to a greater than expected 4.5% from March’s 4.3% reading (the highest level since October of 1998.) April’s payroll loss was the highest since Feb of 1991 as the 1990-1991 recession was ending, and we’ve only just begun this economic debacle. Hourly earnings rose a greater than expected .4%, so we’re seeing a little inflation there too now. Anybody care for a stagflation sandwich?
For the week, all the major indexes ended near the highs as the rally continues. Bad economic data was bad news for a day and a few hours, but by today’s close we returned to “all news is good news” mode. As with yesterday’s selloff, stock prices continue to hold up rather well on selloffs and move up easily during rallies, which is bullish action. So, there’s not much to get too excited about in the trading action from the bear perspective at the moment. Today’s reversal after the early selloff on the unemployment data likely sets up another moonshot on Monday. While we wait for this move to exhaust itself, the thing to remember is that while the action may be bullish, that can change rather quickly when the fundamentals underneath are as poor as they are now. When this stampede of a rally finally flames out and prices begin to collapse, it could be rather violent, especially if the dollar finally begins to slide as well, which looks to be finally developing. |
