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Making a comeback

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The major indexes have made a valiant comeback in the late afternoon session as the Dow Industrials (INDU) 8,428 -0.26% tries to join the NASDAQ Composite (COMPX) 1,311 +1.42% in an upside move.

Technology stocks are leading the gains after Alan Greenspan addressed a conference sponsored by the Labor Department and the American Enterprise Institute where he suggested America's productivity may be in better shape than some observers have speculated.

Sectors benefiting most have the PHLX Semiconductor Index (SOX.X) 284.86 +7.46%, with some investors citing "trough-like" numbers out of equipment maker KLA-Tencor (NASDAQ:KLAC) $32.45 +6.15%, after trading as low as $28.70 earlier in the session. Some sector analyst's point to the recent drop in new orders as being historically comparative to past bottoms in the very cyclical industry and that the future may not be as bleak as the recent past.

Storage stocks as depicted by the Disk Drive Index (DDX.X) 61.13 +8.15% have built on earlier gains with Storage Technology (NYSE:STK) $15.70 +21.23% challenging early morning highs of $16.48. Fellow Disk Drive Index component SanDisk (NASDAQ:SNDK) $21.33 +7.6% breaks to 4-month highs after reporting upside earnings last week.

Though the Treasury bond market is closed, here too we saw a slight reversal take place with the 5-year (fv02z) 111'115 +0.05% and 10-year (ty02z) 112'045 +0.08% finishing just slightly positive, while the "riskier" and longer-dated 30-year (us02z) 107'20 -0.08 finished with a marginal loss after trading in positive territory for the bulk of the session.

At 02:15 PM the Fed's Beige Book on the current economic conditions was released. Troubling to bears was the market's bullish response to the words "stagnant," "sluggish" and "lackluster."

Most of the sectors of the economy were weak or weakening, the Fed said. "Retail sales were weak across the nation," while "manufacturing activity had declined or grown more slowly."

Only housing and consumer load demand bucked the downward trend, the Beige Book said.

Inflation was described as "not a problem." Prices were reported as stable , except for health care, insurance and shipping. Wages were generally subdued.

The Beige Book is presented to the Fed's governors and bank presidents about two weeks before each meeting of the FOMC to guide their deliberations.

The federal funds rate currently stands at 1.75%, a 40-year low. On November 6th, the FOMC meets and will decide on any further changes in policy. Current odds of a FOMC interest rate cut at the November 6 meeting are 27%.

Jeff Bailey

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