There's still plenty of time left in the trading session, but with key economic data now released, the Dow Industrials (INDU) 8,697 -0.51% faces its first potential four session decline, something that hasn't been seen since to powerful rally from 7,500 in early October.
This morning's gains in U.S. Productivity wasn't enough to offset continued concerns for technology investors as Hewlett-Packard's (NYSE:HPQ) $18.36 -4.52% CEO Carly Fiorina said that it is still finding a cautious tone from its corporate customers and tightened IT spending from top level executives which continues to keep a lid on sales.
The non-manufacturing sectors of the economy were expanding strongly in November as depicted by this morning's Institute for Supply Management Services report. Its monthly diffusion index rose to 57.4 from 53.1 in October. Readings over 50 indicate expansion. The non-manufacturing sectors have been expanding for 10 months, while the manufacturing sector has been contracting mildly for three months. In November, non-manufacturing orders rose to 58.0 from 50.9. Employment fell to 45.9 from 46.2, indicating the slow pace of hiring. Purchasing managers' comments continued to be mixed, the ISM said.
In other economic news, the Commerce Department reported that factory orders were up 1.5% in October, which was slightly below the 1.7% forecast. September factory orders were revised to a slightly larger -2.4% drop.
Bookings at manufacturers for durable goods rose 2.4%, a downward revision from the 2.8% gain reported by the government in a previous release.
Year-to-date, new orders for 2002 are down 1.5% from the same period a year ago.
A more up-to-date look at the factory sector, the Institute for Supply Management's monthly index (November data were released on Monday) has also shown modest improvement for this laggard sector of the economy.
In October, transportation equipment had the largest increase, up 4.2%, on demand for cars, light trucks and boats. Increases in these categories more than offset a drop in orders for defense. Non-defense aircraft orders were near flat.
Manufacturing orders excluding transportation rose 1.1%, as electrical equipment demand helped this category. It was the third increase in four months for orders ex-transportation.
Factory demand without the impact of military spending rose 2.3%, while durable goods orders excluding defense rose 3.9%.
Shipments of manufactured goods rose 1%, while unfilled orders fell 0.7%, after falling in September as well. Inventories increased slightly, although the inventories-to-shipments ratio fell to 1.32 from 1.33.
Technology stocks are under some heavy selling pressure this morning with continued profit taking in Internet (INX.X) 97.37 -8.64% and Fiber Optic (FOP.X) 51.36 -8.92% leading the declines. Key technicals here have the Fiber Optic Index (FOP.X) gapping below its still trending lower 200-day SMA of 55.
The longer-term 200-day SMA also looks to be in play in the NASDAQ-100 Index (NDX.X) 1,056 -2.93%. It was our observation weeks ago that bullish gains in some technology sub sectors like Internet, Wireless and Fiber Optic would have the NASDAQ-100 and QQQ trending higher toward their 200-day SMAs, and that certainly took place. However, all is fair in love and war and today's breaks back below the 200-day in the FOP.X now has the 200-day SMA in both the NDX and QQQ becoming bearish trader leverage points.
One stock mentioned last night in the market monitor that is a NASDAQ-100 component for bearish traders to be looking short/put are shares of Broadcom Corporation (NASDAQ:BRCM) $16.99 -6.39%. This stock achieved its bullish vertical count of $21, and today's trade at $18.00 has the stock giving a double-bottom sell signal. As such, this action would take one stock away from the NASDAQ-100 Bullish % ($BPNDX). As of last night, the NASDAQ-100 Bullish % was "bull confirmed" at 82% and "overbought" above the 70% level on a longer-term basis. A reversal to 76% would have this index in "bear alert" status. While I haven't looked at all 100 stocks today, it would be my opinion that this index has seen a near-term top from the recent rally lows.
While some gains are being taken out of tech, there are some yearly losses that continue to build. Shares of Brocade Communications (NASDAQ:BRCD) $4.86 -6.9%, which never did participate in the NASDAQ rally, breaks to a new 52-week low today. Look for this stock to see continued selling into the end of the year as disgruntled bulls look for a tax loss write-off.