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Traders have gotten a mixed market picture today on what normally has been a rather light trading session, as traders will be heading for the exits to get an early jump on the three-day weekend. On Monday, U.S. markets will be closed in observance of Labor Day.

But traders did stick around this morning to take a look at the economic data. After a quick bite of economic data before the opening bell, which showed a flat personal income level for the month of July, but a stronger gain of 1% in spending, the 10:00 AM EST hour brought a second helping of economic data for traders to digest into the weekend.

The University of Michigan's final consumer sentiment number for August came in at 87.6, which was slightly below expectations of 88 and just below July's reading of 88.1.

The final U of M sentiment numbers took a back seat to the August Chicago Purchasing Managers Index, which rose a bullish 3.4 points to 54.9% in August, which is encouraging to economic bulls after July's 6.7 point plunge to 51.5%. Readings above 50% are indicative of growth, while numbers below 50% are tied to contraction.

The Chicago PMI data did have the Dow Industrials (INDU) 8,697 +0.3% reaching their best levels of the session at 8,745 just after the PMI data was released, but those gains have been partially given back.

Technology stocks are under some pressure this morning after Baby Bell BellSouth (NYSE:BLS) $22.73 -6.26% trimmed its 2002 earnings guidance, saying it sees EPS of $2.06-$2.13, representing a 7-cent decline from prior guidance, and at the lower end of analysts' estimates of $2.13 EPS. BellSouth (BLS) cited continued softness in wireless revenues, a recently announced restructuring charge for Cingular Wireless, and continued weakening of economic indicators in BellSouth's domestic business.

The news from BLS has brought on sector weakness in the North American Telecom Index (XTC.X) 391 -1.9%, Wireless Telecom Index (YLS.X) 40.53 -0.92% and more noticeable weakness in the Networking Index (NWX.X) 127.12 -2.10%, which is full of telecom equipment stocks that depend on spending from telecom service providers like BLS.

Telecom weakness and sector associated with telecom have been a drag on the NASDAQ this morning as the NASDAQ Composite (COMPX) 1,328 -0.54% and NASDAQ-100 Index (NDX.X) 954 -0.76% have been in the red for the better part of the session. Networking bellwether Cisco Systems (NASDAQ:CSCO) $13.87 -2.25% is the second most actively traded stock on the NASDAQ at 26 million shares traded.

As would be expected on a Friday before a three-day weekend, volume is light at both the NYSE and NASDAQ. Current NYSE volume is just 343 million shares traded, while the NASDAQ is showing just over 464 million shares changing hands.

Breadth is bullish at the NYSE, with the NYSE Composite (NYA.X) 498 +0.61% showing gains. Advancers at the big board outnumber decliners by a healthy 2 to 1 margin. Breadth at the NASDAQ is just slightly negative with 14 stocks declining for every 13 stocks advancing.

Jeff Bailey
Senior Market Technician
Option Investor

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