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Banks and retailers lead stock gains

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It has been a seesaw session this morning, but stocks are nearing the best levels of the session as a rebound in banking stocks along with retailers has the major indexes now in positive territory.

While the S&P Banks Index (BIX.X) 246 +3.87%, KWB Bank Index (BKX.X) 633 +3.45% rebound after getting pummeled in the recent months, talk that President Bush will surely seek help from the California Courts to open up the West Coast ports has helped lift the S&P Retail Index (RLX.X) 260.76 +2.85% as many have expressed that the holiday shopping season could be at risk with inventories sitting offshore and clogging supply chains.

Technology stocks as depicted by the NASDAQ-100 Index (NDX.X) 803 -0.14% continue to lag bullish moves higher. Shares of Cisco Systems (NASDAQ:CSCO) $8.29 -8.7% plummets to another 52-week low after Merrill Lynch and Bear Stearns became the latest brokerages to slice estimates on the networking giant. The Networking Index (NWX.X) 79.97 -2.04% leads tech sector declines and also trades a new 52-week low.

Chip stocks as depicted by the Semiconductor Index (SOX.X) 213.43 -2.96% have also traded new lows following a cautious earnings preview of the group by Lehman Brothers. The firm believes weakening order trends in the second half of the year and downward analyst revisions to 2003 numbers will put further price pressure on semiconductor stocks and could lead to a disappointing fourth-quarter outlook. Lehman feels that KLA- Tencor (NASDAQ:KLAC) $26.51 +0.37% and Cymer (NASDAQ:CYMI) $16.90 -4.8% are best positioned to "weather the storm." Shares of semiconductor equipment giant Applied Materials (NASDAQ:AMAT) $10.56 -2.85% lost ground and traded a new 52-week low.

According to Dorsey/Wright and Associates, the semiconductor bullish percent is currently "bull correction" at 7.2% bullish. In essence only 7.2% of the stocks "classified" as semiconductor currently have a point and figure buy signal associated with its chart. This group is "oversold" on a longer-term basis and current levels of bullishness/bearishness are close to that found in early August of this year and September of last year, when the sector bullish % reached lows of 8% and 6% respectively. In essence, BEARS carry the bulk of the risk at these levels and tight stops on any bearish open positions should be used.

With the Dow Industrials showing a -7 point decline, S&P 500 +4.79 points, NASDAQ Composite (unchanged) and NYSE Composite +1.89 points, markets remain mixed.

Volume is just about average for this time with just over 1 billion shares traded at both the NYSE and NASDAQ.

Breadth is negative at both the NYSE and NASDAQ, with the big board showing decliners having the upper hand by a 19 to 11 margin, while NASDAQ breadth is equally weak at 19 to 12.

New highs versus new lows continues to "stretch" with a greater number of stocks hitting new 52-week lows. The NYSE shows just 18 stocks at new 52-week highs versus a staggering 466 stocks at new lows. Meanwhile, the NASDAQ shows just 7 stocks at new 52- week highs versus 402 stock at new lows.

Jeff Bailey

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