The Tug-of-War Continues
Torn between earnings fears and awesome bargains, the bulls
and bears played tug-of-war today within the equity markets.
Trading action seesawed back and forth as repeated attempts
to rally the markets failed. Today's volatility is attributable
to fund managers' positioning themselves for third quarter "window
dressing" when they sell their losers and try to add winners,
causing vicious sector rotation. Also, if there is a particular
stock in favor mutual fund managers will want to add it to the
portfolio right before the end of the quarter, giving the
perception that they have been holding the stock all along.
Intel rose for the first time in five days, ever since last
Friday's release of disappointing sales revenue. The Nasdaq
Composite slid 32.80 points, or 0.9 percent, to close at 3,656.30.
Decliners beat advancers by 25 to 15 on very strong volume of
1.95 billion. Although 3Com captured the Nasdaq 100's biggest
jump today, the Index still lost 10.69 points, or 0.3 percent, to
close at 3,571.90.
On the big board, the Dow Jones Industrials Average lost
2.96 points, or 0.02 percent, to close at 10,628.26. Fifteen
stocks fell for every thirteen that rose on the NYSE, with
1.17 billion shares trading hands. The S&P 500 Index
slipped a fraction of a point, closing at 1426.57.
The Nasdaq Composite chart below shows today's decline and
retest at the 3,600 support area. The next lines of defense
for the bulls are at 3,500 and then 3,400. Hopefully, the
Nasdaq can finish September above the 3,600 level. Will the
previous pattern of three-days-down and one-day-up return
tomorrow?
Nasdaq Composite Index, Daily.
netbulls.com
Corning, the No. 1 maker of fiber-optic cables, announced an
agreement to buy 90% of a Pirelli SpA unit for $3.6 billion
in cash. Cisco owns the other 10% of the business. With the
purchase of the Pirelli unit, Corning will boost its capacity
to make lasers, filters, and fibers used to beam, direct, and
strengthen light signals sent on telecommunications networks.
As Internet traffic is doubling every few months, the demand
for fiber-optic equipment is soaring. This year alone,
Corning has spent billions of dollars to buy businesses,
build factories, and expand production of parts used in
optical equipment, boosting the amount of data, voice, and
video that the hair-thin strands of glass carry. Corning has
more than doubled in 2000 and is currently the fifth-best
performing stock on the S&P 500.
A decline in crude oil inventories sent energy prices higher
intraday, before prices declined into the close. November
crude oil lost 4 cents to close at $31.46 after reaching
an intraday high of $32.25. Late Tuesday, the American
Petroleum Institute reported that crude oil supplies declined
2.2 million barrels versus an expected rise of 1.4 to 1.8
million barrels. The unexpected drop in crude oil supplies
renews concerns over the nation's tight supplies of winter
heating-oil. Crude oil's inability to hold onto early
session gains in the face of bullish news could indicate
temporary and limited upside potential. In light of the
government's recent release of crude oil from the strategic
reserves, traders will likely wait for confirmation
concerning its effect on the tight oil supply before
positioning themselves.
The increased demand for airplanes, electronics, and
industrial machinery reflected the strength of the economy
in the August Durable Goods Orders data released today. The
overall figure rose 2.9%, and beat expectations of 2.4%.
Excluding transportation, August orders added only 1.9%. The
government also revised the July Durable Goods report downward
to show a decline of -13.1%, instead of -12.4%. Economic data
reports scheduled for rest of the week include: Final Q2 GDP
and Initial Claims tomorrow, and Personal Income and Chicago
Purchasing Managers' Index on Friday.
Is searching for signs of life in our current battered Internet
market an Olympic-sized order, or am I dreaming of gold?
My hunch is that the Nasdaq's run-up into the close today
portends a positive opening in the morning. The bargain
hunters maintained their positions all day, greeting every
sell-off with a rally. This fortification of bodes well
with my current outlook. Hopefully, once the fund managers
have jettisoned their losers, the bulls will come back in
full force to give this market a sustainable rally.
I am encouraged to see that the pressing concerns over higher
energy prices eased today, witnessed by crude oil's inability
to hold onto its early gains. I do remain cautious about any
additional land mines in the road ahead, as earnings-warning
could cause serious derailment of any rally attempt. Barring
unexpected bad news, I feel that we could end the week on a
positive note. However, as always, the outcome of this
tug-of-war remains a toss-up, so keep your protective stops
in place.
Aaron Sutherland
Assistant Editor
NetBulls.com |
