CLOSING WRAP-UP, Jan. 2, Jody Osborne
Thursday January 2, 7:30 pm ET
biz.yahoo.com
New Year gets off to stellar start, with major market indices garnering impressive gains. The Dow (^DJI) rose 265.89 points, or 3.19 percent, to close at 8,607.52. The S&P 500 (^SPX) saw similar gains, tacking on 3.32 percent. The Nasdaq (^IXIC) moved to 1,384.85, a gain of 3.69 percent. Volume picked up from the holiday numbers, with the NYSE trading 1.22 billion shares and the Naz turning over 1.26 billion. Market breadth was sharply positive at 25-to-7 and 23-to10 on the Big Board and Naz respectively.
Though there remains plenty for traders to worry about, they instead focused on an unexpectedly strong manufacturing report this morning. The ISM Index rose to 54.7 percent in December, moving above 50 for the first time in four months. This news trumped a weak jobless claims figure, with traders preferring to concentrate on the positive today.
In sector action, networking stocks saw the strongest gains, with chip stocks not far behind. The AMEX Networking Index (^NWX) rallied 7.77 percent, taking the index back above its 50-day moving average. Even shares of Cisco (CSCO) tallied a 4.12 percent gain despite having its earnings estimates lowered at UBS . The Philly Semiconductor Index (^SOXX) added 6.68 percent, but even today's strength couldn't take the SOX above resistance. Only two components of the SOX rose less than five percent, with Advanced Micro (AMD) leading the charge by gaining 8.51 percent.
Goldman Sachs had negative news to report this morning when it announced the results of a technology survey. Goldman reported that a survey of technology firms showed that spending might fall about one percent in 2003. This was down from a previous survey that concluded that spending would grow around 2 to 3 percent. Goldman noted that sector valuations continue to be lofty compared to the S&P 500. Overall, this doesn't bode well for the tech sector, as IT spending is an important part of most companies' revenues.
Overall, I would be cautious buying into today's large advances. Though it is nice to see some strength, volume was still on the light side and nothing has changed with the economy or with problems overseas. In fact, traders might want to use this strength to enter bearish strategies, as earnings warnings season is about to start and could lead to lower stock prices down the road.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site |
