Todays IBD Big Picture for those that are interested..
The Big Picture
Friday, May 25, 2001
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In Bullish Pattern, Stocks Close Strong
Investor's Business Daily
Stocks started weak and finished strong Thursday, a familiar pattern for a bull market.
Bear markets usually follow the opposite path. A burst of early buying succumbs to selling as the day wears on. The change in character is just another factor working in this market’s favor.
Even when the market averages were at their lowest levels Thursday, volume was running lighter than the day before. That indicated there wasn’t any serious selling behind the decline.
Around 2 p.m. EDT, a modest wave of buying took hold. The major averages all swung from negative to positive ground. The Nasdaq made the most of the late rally, running up 1.7% by the close. Trading volume dipped 3% to 1.83 billion shares.
The S&P 500 turned in a 0.3% increase as the Dow industrials gained 0.2%.
Technology and medical stocks teamed up to turn the market around.
The medical sector got some action as Goldman Sachs started coverage on hospitals. The brokerage put three hospital chains on its buy list: HCA-Healthcare (HCA), up 8.4%; Tenet HealthCare (THC), 3.4%; and Community Health Systems (CYH), 3.8%.
The buying wasn’t limited to hospitals. Biotechs moved up for a second day. Other medical groups among the day’s best performers included outpatient/home care, health maintenance organizations, generic drugs and dental services.
A number of medical stocks have taken leading roles in the past few weeks. U.S. Physical Therapy (USPH) has run up 50% since breaking out May 1. ResMed (RMD), which makes and sells devices to treat a breathing disorder called sleep apnea, has been consolidating since bursting out of a base May 2. The stock shot up 9.40 to 54.80 in massive volume that day.
Leading stocks move in packs. When you see a few companies making bullish moves, look for related stocks to follow. The table of 52-Week Highs & Lows in the print edition is sorted by sectors with the most new highs for that very reason.
Real estate investment trusts, regional banks and savings and loans have clogged the top of the list in recent weeks. They’re benefiting from the Fed’s rate cuts. But they’re not typically areas where you find big winning stocks. Look a little farther down the list and you’ll see the computer, medical and retail sectors. They have a better track record of generating market leaders.
Nineteen stocks in the tech-heavy Nasdaq 100 gained more than 5%. Inktomi (INKT) led the pack with a 15.7% jump. That’s less impressive now that the Internet software developer trades for 10.47 a share, 96% below its March 2000 peak.
Even with the Nasdaq rallying for seven weeks, bottom fishing for tech stocks remains risky. The latest casualty was Sawtek (SAWS), a maker of filter components for wireless devices.
The company expects earnings of 6 to 8 cents a share in its fiscal third quarter, nowhere near the 18 cents analysts expected. There was little indication of trouble in its stock chart. From April 9 through Tuesday, Sawtek rallied more than 130%. The stock retreated Wednesday and then broke hard Thursday after the news came out. It dropped 8.32 the past two days to 23.39, wiping out more than a month of gains. |
