Interesting article in NY Times - about the broader market. Big cap growth stocks are coming back! Fresh money is coming into the market, into the big cap mutual funds. Hey, shouldn't the premier big cap growth stock - MSFT - benefit?
nytimes.com
<<NEW YORK -- NASDAQ stocks slumped for the third consecutive
session Thursday as investors took profits in high-technology shares,
casting a further pall over the market in general.
While some money was redeployed into issues sensitive to the business
cycle, helping push the Dow Jones industrial average up 32.93 points, or
0.3 percent, to 10,878.38, its fifth record in seven trading sessions, traders
and analysts seemed increasingly cautious.
"If technology continues to erode, I don't think there's much to bail the
market out," said John Peluso, head of listed equity trading at Lehman
Brothers.
The NASDAQ composite index fell 21.93 points, or 0.9 percent, to
2,528.44, while the Standard and Poor's 500-stock index fell 8.08 points, or
0.6 percent, to 1,342.83.
Contributing to the sober mood was the fact that stocks responded
scarcely at all to a government report that employers have been
exceptionally successful in holding down wage and benefit increases, a
development that also bodes well for the Federal Reserve's efforts to keep
inflation at bay.
Interest rates retreated along a wide front but the stock market seemed
oblivious. "You had an incredibly bullish employment cost index which in
most other times would have shot the market up a couple hundred points,"
said Thomas Galvin, chief strategist at Donaldson, Lufkin & Jenrette.
Moreover, Galvin found that a favorite short-term indicator showed the
market to be "overbought" because the percentage of New York Stock
Exchange issues trading above their 10-week moving average climbed
above 70 percent at this week's calculation. Last week it was 64 percent.
"Stocks to me are beginning to look tired," he said, predicting prices will
stay in a tight range for the next six to eight weeks until the shape of
second-quarter corporate profits becomes clearer.
One possible bright spot is shares of the nation's biggest companies.
According to the Investment Company Institute, investors put $12.7 billion
in net new cash into equity mutual funds in March, more than 17 times
February's $712 million in net sales.
And some of the nation's largest mutual fund companies say sales in April
are even higher as investors snap up shares of funds focused on large-cap
growth stocks.
The government report, showing the smallest increase in labor costs since
the series began in 1982, did seem to benefit some financial stocks. J.P.
Morgan rose 2 3/16, to 138; Citigroup increased 1 3/4, to 76 5/16, and
American Express climbed 2 5/16, to 135 3/8, accounting for the bulk of
the Dow's gain. At one stage the blue-chip gauge, which was paced by
Exxon's 3-point surge, to 84 1/2, had been up by nearly 83 points.
Brokerage firm stocks did little as investors awaited the initial public
offering by Goldman Sachs Group, now scheduled for next week.
Some cyclical stocks moved higher, with Alcoa reaching a new high of 65
5/8 before closing up 2 11/16, to 64 11/16. But some other stocks sensitive
to the business cycle, like International Paper and DuPont, gave back some
recent gains amid predictions that the recent popularity of this group would
wane. International Paper fell 1 1/8, to 56 1/4, while DuPont slid 3/4, to 72
3/4.
"The rotation into cyclicals is going to prove to be short-lived," said Philip
Orlando, chief investment officer at Value Line Asset Management. He
doubted they could sustain earnings growth in a disinflationary climate.
Morgan Stanley's Cyclical Index advanced 1.6 percent, compared with 2.6
percent Wednesday.
Among high-technology shares, Amazon.com skidded 25 1/4, to 168 1/4,
after losing 12 3/8 on Wednesday. The biggest Internet retailer warned of
wider losses as it spends heavily on promotion and new services. America
Online eased another 1 5/8, to 141 3/8, as investors took profits after its
strong earnings report.
James Paulsen, chief investment officer at Wells Capital Management,
described the current market situation as a battle between the forces of
disinflation, such as globalization and technology-driven productivity, and
more recent forces of reflation, such as interest-rate cuts and higher oil
prices.
But while the latter may fade, Paulsen fretted about being underinvested in
cyclical stocks in case inflation does pick up. This has been anticipated for
so long, wrongly so far, "you hate to be the guy who missed it," he said.
Volume on the New York Stock Exchange was a hefty 1 billion, with 80
stocks making new 52-week highs and 26 new lows. Rising issues led
falling ones by 1,664 to 1,322.>>
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