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Market Wrap

Dow 11,000 in a whirlwind trading session...

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       4-14-99          High     Low     Volume   Advances Decline
DOW    10411.66 + 16.65 10526.54 10367.81  956,421k  1,737   1,279
Nasdaq  2507.28 - 76.22  2628.19  2507.28 1420,400k  2,208   1,924 
S&P-100  668.93 - 12.52   685.41   668.54   Totals   3,945   3,203
S&P-500 1328.44 - 21.38  1357.08  1326.41            55.2%   44.8%
$RUT     417.39 +   .15   425.55   417.24
$TRAN   3443.32 +146.88  3452.79  3294.63
VIX       28.05 +  3.63    28.37    24.22
Put/Call Ratio      .62

Dow 11,000 in a whirlwind trading session...

Oops! Sorry, getting a little ahead of ourselves here. We won't be writing that wrap until the first week of May. At least that is what some traders expect. With the Dow setting yet another record close, can Dow 11,000 be that far off? We'll see...

First, the daily market commentators seemed to be left scratching their heads as to how to decipher today's trading performance. After yesterday's earnings announcement from Intel, the sentiment was for a down day today. Intel had beat the street estimates by $.02 but had failed to meet the analysts revenue numbers (similar to the move Dell pulled on us last time). Intel's stock was taking a beating in after hours trading yesterday.

Yet, this morning, J.P. Morgan (JPM) announced better than expected earnings numbers that not only shattered the Street's expectations but blew away the black cloud that had been hovering over the market. JPM earnings were $3.01 beating estimates of $1.73. Suddenly, traders forgot Intel and we opened the day positive.

Unfortunately, the gain was short lived for the Nasdaq. After gapping up (over 2600) for the second day in a row, the tech heavy index promptly fell. Robertson Stephens analyst, Dan Niles, took the opportunity to pull the rug out from under Intel and sent the stock negative again with some less than desirable comments. As Jim explained yesterday, Intel told analysts that next quarter's sales were looking flat to down (which is pretty common as big companies like to talk down the next quarter's results) but it appears the public is listening this time.

While the market managed to overcome CPQ's earnings warning on Monday with a tidal wave of liquidity, some are guessing that with tax day tomorrow, a lot of that money might be drying up (since last minute IRA contributions need to be postmarked by tomorrow). However, we really can't blame Intel for the sell-off in the Nasdaq today. Everyone can agree that -76 points looks pretty steep (only the equivalent of -380 Dow points and really it was a drop of 122 points from our high of +45) but Intel was just the catalyst to prompt some much needed profit taking after the incredible run ups we have seen in the tech sector.

The damage seemed to be focused on large caps and the internets. The Nasdaq big five all suffered substantial losses as MSFT lost -4.25, CSCO -3.38, DELL fell -2.31, WCOM dropped -3.31, and INTC closed the day -3.50. However, the internets took the worst beating. Billionaire Warren Buffet let it be known that he (and Berkshire Hathaway) had no interest in buying the internets. His rule to only invest in what you understood led to his comment, "I'm not smart enough to be in that particular game". While we doubt this was the true cause of the sell off, it did add a little punch to the downdraft. Many of the recent high flyers look a little bloodied and bruised after today's action.

Of the injured, Netb@nk suffered the worst with a $63 loss one day after announcing a 3:1 stock split and an $80 gain. Other Internet fatalities were ATHM who lost $22.94 while only meeting the street's earnings estimates. AOL fell -8.44, AMZN -10.38, BCST -8.13, YHOO -12.00, while some of the other portals fell even worse: SEEK -19.13 after reporting earnings yesterday. Salomon Smith Barney cut their estimates for SEEK while BT Alex Brown downgraded the stock. XCIT fell -19.38. ISP stocks took a hit as well with ELNK -9.38 and MSPG -14.31. Our "teach you to put in stop losses" losers today were RNWK -39.50 and CMGI -42.69. Yes, those are tremendous losses, but when you see a stock double and triple in a matter of weeks, you had better expect to see some kind of consolidation. It has been said that the net stocks are the first to go in a pullback but the first to rise in a recovery.

Profit taking in the tech world was not the only news of the day. While the Nasdaq sank, the Dow was setting new highs. Why? Cyclicals appeared to be the word of the day. There is a growing belief that the world economy is on the mend and the beaten and out of favor cyclical stocks may be back in vogue. Some pundits claim it was merely a sector rotation from big tech into other areas, but with IP beating estimates by $.03 today, many of the economically-sensitive stocks are suddenly very appealing to traders. The Dow transport stocks were certainly hot today as the transport index gained a hefty 3.6%. Trucking company J.B. Hunt lead the way beating estimates by a penny. The index was also boosted by a strong performance by the airlines as news of an unexpected 1.04 mln barrel rise in U.S. crude stock piles sent oil prices dropping.

"Dropping" could also have been the word of the day. As several stocks dived before their earnings announcements. Ameritrade (AMTD) fell over $25 before their earnings report this afternoon. The online broker turned in $.14 vs. estimates of $.07. Tellabs (TLAB) also fell (-4.56) before their earnings report. TLAB beat estimates of $.49 with $.52, yet no split was announced. They might be waiting for their upcoming shareholder's meeting. VISX was also sharply negative in anticipation of its earnings report. VISX fell over 15 points before announcing that they beat estimates of $.54 by 4 cents. They also announced a 2:1 stock split to occur near May 12th. The beleaguered AMD was only down .25 point as they finally reported their earnings with a 20% drop in revenue from their Q4 levels. Their CEO W.J. Sanders said,"The best thing that can be said about the first quarter is that it's over."

Of course it is not over for the rest of us. With another host of earnings tomorrow, the tug of war will continue. Investors will have to juggle how to interpret the strongly positive numbers we received today while keeping an eye on the likes of SUNW, XCIT, and INKT who are all expected to report tomorrow. We can get an early start with GM and F who both report tomorrow before the bell. Estimates for GM are $2.89 and for Ford are $1.39. Analysts are expecting strong numbers for both due to the extremely strong truck and S.U.V. sales that have been occurring at near record paces. If both of them beat the estimates tomorrow, it could set a positive tone for the trading day.

Tomorrow might not look as bleak as it did at 3:55 pm ET this afternoon. The strong earnings numbers from AMTD, TLAB, VISX, AAPL, JPM, IP should fire up the rest of their respective sectors (while they themselves might suffer from a little buy the rumor sell the news). The Dow did manage to hold 10,400 and we are liable to get a technical bounce from such a sharp drop on the Nasdaq anyway. We may get a sharp rise in the morning as bulls step in to buy the dip and snatch up several of the big name stocks in their current weakness.

The key will be to see if we can keep any new gains under our belt. Be aware that sometimes the first week of earnings can be down (this week) only to rally in the second week if we get a strong super Tuesday.

The game will continue to be played between investor confidence steered by corporate earnings. Earnings are everything for the next two weeks and if they are good traders will continue to ignore the negative market signals and if they are bad then look out below!

Just as we warned yesterday, the word is "caution". The Nasdaq was down big today on record volume of 1.4 billion shares (the seventh day in a row the Nasdaq has traded over 1 bln shares). Plus, the crisis in Kosovo could blow up at any time.

By the way, if it makes you feel better, blame Intel anyway.

Sell too soon.

asst. editor

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