Closing Bell market update
bradhill.com
THE JOY OF GIVING (BACK)
Strong selling in heavy volume drags the Dow more than 200 points underwater, and the Nasdaq underperforms even that.
Air could be heard hissing out of punctured balloons all day today, as investors returned from the long holiday weekend to a piece of bad news. CNBC reported that the SEC announced it might raise margin requirements on certain stocks. This unusual measure would be directed specifically at Internet firms whose speculative value has decoupled from traditional financial reference points. Much of the buying frenzy centered on Net-related stocks has been fueled by individual investors margining their purchases with borrowed money. Margined speculation, when taken to extremes, can have disastrous effects. By making these stocks more expensive to individuals, the SEC would hope to moderate the demand for limited supply which drives share prices wildly upward.
The SEC announcement combined with simple profit taking to push the Net stocks sharply toward earth today. The rest of the stock market responded to the drop in euphoria with its own sell-off, as bonds rose.
OPEN QUESTIONS: Is the market overbought? Has it topped out? Analysts present a mixed bag of short-term caution and intermediate-term optimism. It was only last week that some prognostics called for Dow 10,000 by early 1999. One down day (today), and suddenly voices are heard saying this is the time to exit the market, await the next correction, then buy back in for the next surge.
SECTOR WATCH: Virtually every sector posted red ink today, led by the bloody group of Internet stocks. Insurance and real estate treaded water nobly in the midst of the carnage. Environmental companies and paper products likewise held their own without gaining ground.
CBS MarketWatch Industry Indexes:
cbs.marketwatch.com
TIDBITS: Sharper Image (SHRP) dusted off its image as an Internet-related stock by reporting a 300 percent jump in online sales of its catalog products. While the pure Internet plays were falling in flames today, traditional retailers who maintain an e-tail adjunct to their main business may look attractive. (Lands' End [LE] gained almost 10 percent today.) SHRP, whose bottom line is shared by store, mail-order, and Internet sales streams, enjoyed a 180 percent gain as its stock blasted almost 100 percent beyond its 52-week high.
QUOTE: quote.yahoo.com
TECHNICAL ANALYSIS: Time to revisit the Russell 2000, a favorite topic of this space. As speculated seven days ago in Closing Bell, the Russell completed a second assault on its resistance level of 400, and is now in retreat following today's 4.34-point drop. Technical analysts perk up on the third attempt to pierce resistance, as the third attack is predictably the successful one. Time will tell in this case.
bradhill.com
LOOKING AHEAD:
Wednesday: New Home Sales, released by the Census Bureau and Department of Commerce, 10 am ET.
biz.yahoo.com
Friday: The Employment Report, released by the U.S. Department of Labor, 8:30 am ET.
biz.yahoo.com
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Brad Hill
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