From Briefing.com: Updated: 03-Feb-03 - General Commentary - Traders likely to return from their weekend in a somber mood, due to the crash of the space shuttle Columbia and the very real threat of war in Iraq. Whether the mood improves throughout the week will depend on the following key events.
ISM Index: Renewed anxiety over the pace of economic growth will have investors paying considerable attention to this read on the slumping manufacturing sector. Street looking for a reading of 53.0 (Briefing a bit more optimistic at 54.5). Based on strength of Chicago numbers, don't be surprised if the week's first key reading on the economy is better than expected. Overall, manufacturing sector has been slowly pulling out of its downturn for the past year. A strong reading here could give market a much needed early boost. If, however, the number is soft then look out below.
Cisco's Earnings: Tech giant due to report results after Tuesday's close. General view on street is that CSCO will mirror the majority of tech companies in beating the consensus estimate by a one or two cents while remaining cautious about the near-term outlook. If company does just that then tech unlikely to get much help from CSCO report. However, in recent quarters CSCO has had some success in rallying the sector/market around its numbers/outlook. And with expectations on the low side going into the report, any encouraging words/developments might be enough to trigger a moderate rebound.
Employment Report: Have to wait until the end of the week for this one, and the outlook here isn't very promising. Seasonal factors likely bolster nonfarm payrolls number from last month's miserable decline of 101k. However, most eyes will be on the unemployment figure itself. Another uptick off 6.0% would be considerable at least a modest negative as it would lend credence to view that we're experiencing a jobless recovery - which if you're one of the jobless doesn't seem like much of a recovery. Unless this report comes in better-than-expected across the board, afraid it won't help lift investor spirits very much.
Of course, there will be other factors that pop up throughout the week that influence sector/market direction. Market/sector is oversold and ripe for a bounce - now it just needs a catalyst or two to get it started in a more positive direction. These three events, along with the ongoing talk of war, offer best bet to bolster morale and jumpstart a recovery rally. Then again, if all three come up negative, the selling will get ugly fast.
Robert Walberg
4:28PM Weekly Wrap: Same old story. Threat of war, unimpressive economic data and disappointing earnings/guidance combined to keep buyers on the sidelines. Lack of buyers created one-way market headed south.
Though indices staged a modest recovery effort in today's session it wasn't enough to offset the early week losses. As a result, major market indices posted their third consecutive weekly loss. While orderly in nature, selling was broad-based with most of the indices and several sectors falling below important support levels.
Worse yet, the indices ended the month in negative territory and, as noted in the January 31st Stock Brief entitled, "As Goes January," a down January usually presages a down year. After three straight years of painful declines, that's not the kind of news investors want to hear. No wonder money continues to flow out of stocks.
Week's biggest losers led by Tire, Insurance, Wireless, Coal, Auto, Aluminum, Chemical and Forest Product stocks. Fact that many of these groups are tied closely to the economy shows just what investors were thinking about the prospects for recovery. Groups leading the list of gainers included Consumer Electronic, Precious Metals, Toys, Water Utility, Household Product and Consumer Services. Not surprisingly, many of these industries considered to be "defensive" in nature.
Theme next week should be much the same. Threat of war will hang over market while companies such as HUM, SPC, ALA, CB, CL, CVS, HEW, OHP, TWTC, WPI, BSX, CSCO, CSC, HET, PCS, WHR, BUD, EXPE, ALL, NUE, PEP, R, SWY, MHK, GT and TIN report earnings. For a full list of companies scheduled to release results next week/month, see Briefing.com's Earnings Calendar. It also going to be a busy week in terms of economic data, as investors will be asked to digest Auto/Truck sales, ISM Index, Factory Orders and Employment data.
No question stocks are short-term oversold. However, with so many uncertainties it's indices will struggle just to launch a modest, corrective bounce. Until buyers have good reason to come off the sidelines, any recovery attempts will prove limited and short-lived.
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 8131.01 8053.67 -77.34 -1.0 % -3.5 %
Nasdaq 1342.14 1320.91 -21.23 -1.6 % -1.1 %
S&P 500 861.40 855.70 -5.70 -0.7 % -2.7 %
Russell 2000 375.06 372.17 -2.89 -0.8 % -2.9 %
Close Dow +108.68 at 8053.81, S&P +11.09 at 855.70, Nasdaq -1.44 at 1320.91: It was a tale of two indices as the blue chip averages posted respectable gains for the session, while the tech-heavy Nasdaq spent most of the session hovering around the unchanged mark and ultimately finished lower for the day... The Composite bore the brunt of the selling pressure due to sizeable weakness in the semiconductor sector, which was undermined by a Q1 net orders warning from Applied Materials (AMAT 11.84 -1.11)...
The world's largest supplier of products and services to the semiconductor industry announced that orders would fall 35% sequentially, which effectively fueled concerns about the pace of economic activity and the ultimate timing of a pick-up in end demand- issues that have plagued the market throughout the Q4 earnings season ... That point aside, blue chip issues bucked the technology trend today, aided in part by the appeal of relatively attractive valuations... Groups such as drug, financial, brewers, retail, and defense were the main target of buyers... Other factors contributing to the resilient showing of the blue chips issues included the Chicago PMI Index, which checked in at 56.0, above the consensus estimate of 53.0 and the prior reading of 51.3...
The improvement in the index served as a reminder that the manufacturing sector's slump in late summer/early fall was just a brief drop, and that manufacturing is hanging in there with the rest of the economy... Additionally, Disney's (DIS 17.50 +1.15) well-received Q1 earnings report, Honeywell's (HON 24.26 +0.76) in line Q4 report and announcement that several deals are in the works to rid itself of asbestos claims, and Boeing's (BA 31.92 +1.26) news that it received a $6 bln aircraft order from Ryanair, provided added support to the blue chip averages...
One area of the broader market, however, that failed to participate in the blue chips' rally was the gold sector, which fell prone to profit-taking and the improvement in the dollar that weighed on gold prices... The treasury market, for its part, was largely unchanged, with the exception of the long bond, which benefited from the dollar's strength...NYSE Adv/Dec 2335/931, Nasdaq Adv/Dec 1877/1373
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