Option Investor
Index Wrap

Indices chug higher, while REITs hit lower

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The major indices recouped the bulk of Wednesday and Thursday's losses with sector action broadly higher. Despite some intra-day table-pounding from brokers, many Real Estate Investment Trusts were hit with renewed selling, as fears of rising interest rates resurfaced, sending this interest-rate sensitive REITs to their lowest levels of 2004.

Market Snapshot / Internals - 04/12/04 Close

Once again we'll note a rather high number of new lows at the NYSE and a quick check of the NASDAQ's ETF Heatmap would show the Cohen & Steers Realty Major iShares (AMEX:ICF) $102.90 -5.18% sharply lower and closing below its rising 200-day SMA ($103.40), while the Dow Jones U.S. Real Estate Index Fund iShares (AMEX:IYR) $95.60 -4.87% and the StreetTRACKS Wilshire REIT Index Fund (AMEX:RWR) $145.74 -4.55% was also notably weak.

ETF strength had the MSCI Taiwan Index Fund iShares (AMEX:EWT) $12.90 +2.54% and the Merrill Lynch Market Oil Service HOLDRs (AMEX:OIH) $71.00 +2.34% among the top percentage gainers.

Small caps of the Russell 2000 Index (RUT.X) 599.65 remain pegged near the 600 level for a fifth-consecutive session, but some previously undiscovered video-security stocks with a small-cap flavor like IPIX Corporation (NASDAQ:IPIX) $22.16 +42.96% and Mace Security (NASDAQ:MACE) $8.00 +162% gather attention from momentum bulls. Momentum that Winona Ryder and her orange- handled scissors, while training for a movie role, would deem impressive!

Pivot Analysis Matrix -

The move was up at the open for the major indices, where the S&P Banks Index (BIX.X) 343.76 +0.12% was the only equity-based index within this week's rather narrow WEEKLY matrix levels to see a trade at its WEEKLY R1. While REITS and some continued fallout of rising Treasury YIELDs on financials with exposure to mortgage lending are present, it would be that observation which still has the major indices looking a bit tentative to press higher in recent sessions.

Outside the Pivot Matrix, sector action was broadly positive with the Oil Service Index (OSX.X) 105.01 +2.42% leading today's list of percentage gainers, with the CBOE Oil Index (OIX.X) 343.07 +1.54% close behind. Strength for both sectors came as the June Light, Sweet Crude Oil futures (cl04m) closed at a contract high of $37.30.

S&P 100 Index (OEX.X) - Daily Intervals

After trying to cover some of the stocks in the video-security arena in today's market monitor, the major indices seem to have traded with a slow, yet methodical building of gains. Higher crude prices may certainly have had some impact in today's trade as three of the OEX's percentage losers have ties to energy prices, where a higher trade in oil or natural gas would have some negative impact. Energy giant Exxon/Mobil (NYSE:XOM) $43.11 +1.55% closed at a new 52-week high and has moved into the #2 slot of market cap size for the cap-weighted S&P 100 Index (OEX.X).

I wasn't aware that fellow analyst Leigh Stevens was writing an Index Wrap for Thursday, and would have addressed a trader's question regarding what stocks in various sectors the OEX is comprised of. Here's a quick look at the OEX, where I've sorted by "Industry Name" from A-Z, to give traders and investors some larger-cap names of various sector representation.

S&P 100 Components - Aerospace-Healthcare

Electric Utilities are represented by 5 stocks in the OEX, and it was a bit of "group think" for today's weakness. Late this morning, Los Angeles International Airport experienced a brief power outage, where later in the day it was reported that the power failure was apparently caused by a bird coming in touch with both the power line and a cross-arm or some other device that was grounded, creating a brief short-circuit.

As a precaution, approximately 80 to 100 Los Angeles-bound flights were affected, with delays ranging from 15 to 90-minutes.

While this news was thought to have been responsible for this morning's decline in the Utility Index ($UTY.X) 313.73 -1.74%, an intra-day chart shows the UTY.X seeing a slight bounce from the 313 level to 315 area as the power outage was brief, but so brief in my opinion, that today's trade looks to be more indicative of concern toward rising energy prices, than that of fear of rolling blackout, or today's LA Intl. Airport news.

S&P 100 Components - Insurance - Tobacco

Financial sectors highlighted in BLUE, PINK and BROWN held tough, despite the benchmark 10-year YIELD ($TNX.X) edging further higher by 3.3 basis points to 4.230%. Today's gains among energy components in GREEN accounted for just about the last week's rise, if not more.

Dow Industrials (INDU) Chart - Daily Intervals

Earnings season really gets geared up this week with Dow components JNJ, INTC, C and IBM all scheduled to report earnings. Quarterly earnings comparisons are considered "easy" as it was a year-ago that the U.S. was first beginning war in Iraq, but most likely it will be further visibility with factors such as higher energy prices, potential Fed tightening and a plethora of other economic issues that will be important to investors and traders. I'd view a break above the 10,600 as a bullish sign that further economic growth can overcome the "wall of worry" list (oil prices, rising rates, geopolitical, etc.), while a break much below 10,300 more negative.

NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Interval

The most "shocking" thing I note in today's QQQ trade is the lack of volume, where the 55.4 million shares trades was LIGHTER that Thursday's trade. No directional bias could be determined, but I'm just a little surprised that volume was so light after a 3- day weekend, and traders and investors seem to be very content with current price.

Semiconductor equipment maker Novellus (NASDAQ:NVLS) $34.64 reported first quarter earnings after the close and provided Q2 EPS guidance of $0.18-$0.20 per share, which was at the high end of consensus estimates for $0.18. NVLS' last tick in after-hours was higher at $35.92, but the tech-heavy QQQ rose a more fractional 3-cents to $37.20.

The Semiconductor HOLDRs (AMEX:SMH) $41.34 +0.70% rose $0.36, or 0.87% in after-hours trade to $41.70.

Jeff Bailey

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