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Bush nominates former NYSE chairman to head SEC

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In an effort to restore investor confidence, President Bush has nominated William Donaldson as chairman of the Securities and Exchange Commission. Donaldson, a former Marine and longtime Bush family friend, served as Undersecretary of State under President Gerald Ford in the mid-70's after he founded Donaldson, Lufkin & Jenrette in 1959. Then, from 1990 to 1995, Donaldson served as chairman and chief executive of the NYSE.

Donaldson said he would not go into particulars regarding his strategy as SEC head until the Senate confirms his nomination, but did say, "Let me just say that I am firmly committed to doing everything that I can do to restore the confidence of investors in the U.S. corporate and financial industry."

President Bush called his nominee "one of the most respected business leaders in the nation" and added "has shown an ability to take on big assignments, to confront big problems and to meet big challenges with a lot of energy and success."

One potential snag in Donaldson's confirmation as cited by Washing onlookers is Donaldson's extensive private investment holdings, which would have to be liquidated should he take the SEC's top spot. The snag coming from the possibility that Donaldson might not be able to garnish "satisfactory" value of those investments under current equity market and economic conditions.

Stocks look to have applauded Donaldson's nomination as stocks added modest gains since the announcement and hold near their session highs.

Technology sectors lead today rebound with the CBOE Internet Index (INX.X) 92.78 +6.6% and Fiber Optic Index (FOP.X) 49.05 +6.23% building on this morning's 4% gains, while the Semiconductor Index (SOX.X) 322 +4.9%, Networking Index (NWX.X) 139 +4.92% and Disk Drive Index (DDX.X) 74.28 +4% help the narrow-based NASDAQ-100 Index (NDX.X) 1,038 +2.31% to a 25 point gain, while the NASDAQ-100 Trust (AMEX:QQQ) $25.80 +2.33% adds 58 cents.

Gold stocks ad depicted by the Gold/Silver Index (XAU.X) 68.58 -3.38% continue to hover near their session lows, while the Dow Jones US Home Construction Index (DJUSBH) 289.69 -1.64% inches up from an early session low of 287.

Today's trading sees very light volume with the NYSE just now showing 667 million shares trade, while NASDAQ volume of 839 million is well below the 1 billion mark often found this time of day.

Breadth is positive at both the NYSE and NASDAQ. The big board has advancers outnumbering decliners nearly 2: 1 at a 19 to 11 margin, while breadth at the NASDAQ is positive with advancer outnumbering decliners by a 3 to 2 margin.

We've seen a bit of a reversal in the new highs versus new lows category than we've noted in recent weeks. The NYSE shows 22 stocks having traded at new 52-week high versus 18 stocks hitting new lows. The "reversal" I'm talking about is the NASDAQ showing 29 stocks trading new 52-week lows versus 24 stocks at new 52- week highs.

One think I'm noting in the recent couple of sessions is some of the smaller $1, $2, $3 "internet" stocks that had been soaring 35-50% per session in recent weeks are not participating in today's CBOE Internet Index (INX.X) 6.27% gain. This combined with a reversal in the new highs/new lows category of breadth on a rather positive trading session for stocks may hint that bulls are getting a little less aggressive and less willing to speculate. This can begin to put a "lid" on some of the rallies that the longer-term weak stocks have seen in recent months and make for attractive bearish trading opportunities.

Jeff Bailey

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