From Briefing.com: There are good days and bad days. Friday's session for the tech sector was somewhere in between. Assuming most readers have taken the popular approach of being long the market, it wasn't good, because stock prices fell. By the same token, it wasn't bad, because there wasn't a whole lot of conviction behind the selling efforts; meanwhile, one of the sector's key leadership groups - semiconductor - bucked the broader trend with the SOX Index gaining 1.0%.
The Nasdaq, for its part, lost 1.1% for the day on 1.48 bln shares, which marked the lightest volume total of the week. That is noteworthy given the barrage of economic data, highlighted by a relatively disappointing July employment report, that hit the market on Friday. The Nasdaq was down 0.9% for the week, so it can be said that Friday was a swing day in a certain respect.
Considering the Nasdaq was up nearly 30.0% for the year heading into the week, the modest decline is definitely tolerable. The sector's resilience aside, though, we are still inclined to take a cautious view of things with interest rates backing up, the market entering a typically weak seasonal period, and Cisco (CSCO) due to report its results after Tuesday's close.-- Patrick J. O'Hare, Briefing.com
4:56PM Weekly Wrap :
Thursday's action served as a good barometer of where things stand right now as positive economic news in the form of the Q2 GDP, initial claims, and Chicago PMI reports, and reassuring earnings news from the likes of Procter & Gamble (PG) and ExxonMobil (XOM), was ultimately overshadowed by the weakness in the bond market that saw the yield on the 10-yr note hit 4.56% at one point.
As it so happens, Thursday's session was the high watermark for the market in terms of trading excitment this week as the indices made a substantive move in the morning trade only to sell-off late in the day to finish the session with modest gains. Outside of Thursday, the trading action this week could be characterized as lackluster. Friday, admittedly, saw some of the bigger point moves, but volume was on the light side of things following a mixed batch of economic data that was punctuated by a relatively disappointing July employment report.
For the week, an awareness that the earnings and economic news, in aggregate, continues to bode well for an improved performance in coming quarters kept selling interest in check. At the same time, though, the recognition that the good news has already been discounted in stock prices acted as a counterbalance that interfered with a new round of sustained buying activity. As such, neither bulls nor bears were able to gain any siginificant traction this week, and fittingly, the indices remained range-bound.
To be sure, the backup in interest rates has been a worrisome issue for the market as higher rates threaten to crimp economic growth and undermine the appeal of equities. For the time being, the rise in rates can be tolerated as they are a by-product, more or less, of asset re-allocation and the unwinding of the deflation trade that drove Treasury yields to aberrantly low levels. By the same token, the jump in rates is a harbinger of stronger economic activity. Thus, the equity market has continued to hold its own as the Treasury market, driven by mortgage-related selling, has been broad-sided.
The equity market's resilience notwithstanding, there were certainly some signs this week pointing to the concern over the threatening influence of rising rates. In particular, the Mortgage Bankers Applications Index fell 24.3% - the biggest weekly drop since Oct. 1998 - led by a 32.9% plunge in the refinancing index. The purchase index held up better with applications down just 3.5%. Separately, the homebuilding, banking, utility, oil, and airline groups were among the more notable industry laggards.
Overall, the action this week fit with Briefing.com's cautious, near-term outlook. Heading into next week, we see little reason to alter that stance and would urge investors to consider employing some defensive strategies as we enter a typically seasonally weak period for the market. For more perspective on doing so, you'll want to (re)read the Big Picture Stock Brief that was posted on Thursday.-- Patrick J. O'Hare, Briefing.com
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 9284.57 9153.97 -130.60 -1.4 % 9.7 %
Nasdaq 1730.70 1715.62 -15.08 -0.9 % 28.5 %
S&P 500 998.68 980.15 -18.53 -1.9 % 11.5 %
Russell 2000 468.88 468.08 -0.80 -0.2 % 22.2 %
Close Dow -79.83 at 9153.97, S&P -10.16 at 980.15, Nasdaq -19.43 at 1715.59: Economic reports are King and today's session confirmed their ruling power... Given the limited number of corporate news, the market's full attention was on the overwhelming number of economic reports, which could be best described as a "mixed bag"... Specifically, the highly-anticipated Employment report comprised of better-than-expected Unemployment Rate (at 6.2% versus consensus of 6.3%) and Hourly Earnings (at 0.3% versus consensus of 0.2%)...
However, Nonfarm Payrolls (at -44K versus the consensus of 10K) and the Average Workweek (at 33.6 hours versus consensus of 33.8) raised more concerns regarding the troubled employment market and sent the indices lower at the open... The revised reading for the Michigan Sentiment report (at 90.9 versus consensus of 90.5) came and went largely unnoticed... However, the ISM Index report (at 51.8 versus the consensus of 52.0) sent the indices sliding despite the fact that it was the first 50+ expansionary reading since February... Other economic reports included June's Personal Income (at 0.3%, in-line with consensus), Personal Spending (at 0.3%, consensus 0.4%), and Construction Spending (unchanged, consensus 0.4%)...
As a result, the indices reached their session lows in the first hour of trade and spent the rest of the session drifting sideways... The negative bias was supported by the bulk of influential sectors, such as financial, biotech, retail, drug, utility and transportation... As a matter of fact, very few sectors finished the day with gains to show for it, including the semiconductor, oil services, tobacco, and electronic manufacturing services groups...
The market closed near its session lows and was down -1.4%, -1.9%, and -0.9% for the Dow, the S&P 500, and the Nasdaq, respectively, compared to last Friday's closing levels... Elsewhere, the bond market closed the day near its highs, with the 10-year note down -2/32, with its yield at 4.41%... NYSE Adv/Dec 914/2344, Nasdaq Adv/Dec 1039/2082
3:30PM : Sellers have stepped into the fray again and the indices are on their way to their respective session lows... With this week almost over, a look at next week is in order... A quick glance at the Earnings Calendar will reveal the fact that earnings season is winding down... As a matter of fact, the only truly market-moving announcement will be that by Cisco (CSCO 19.20 -0.29) on Tuesday...
On the Economic Calendar, there are only six reports to speak of, with July's ISM Services report on Tuesday and the Initial Claims report for the week of 8/2 on Thursday being the most likely to garner the market's attention... For more information on what's to come next week, make sure to read Briefing.com's Looking Ahead Story Stock... NYSE Adv/Dec 924/2309, Nasdaq Adv/Dec 1022/2069
12:34PM Intl Rectifier added to Focus List at Wedbush Morgan; target goes to $39 from $28 (IRF) 30.84 +3.24: Overall, firm sees an improved tone in IRF's business, including an upturn in end-market demand, low channel inventories, short lead-times, and a favorable mix-shift to more proprietary products away from commodity products.
JP Morgan adds BRKS and ASML to Focus List : JP Morgan added Brooks Automation (BRKS 19.39 +0.14) and ASML Holdings (ASML 13.47 +0.53) to its Focus List, saying that the recent activation of numerous fab projects should spark an order surge for automation and other long lead-time capacity items in 2H03; firm also cited compelling valuations. Price target for BRKS is $51, target for ASML is $29.
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