Aside from the last hour surge at the end of the day, marking time is exactly what the market was doing today. All eyes are focused on Alan Greenspan's next appearance before Congress tomorrow. The Dow index, after an early morning run couldn't stay above 11,050 and actually drifted sideways in what was almost a 60 point range. 10,950 was our new intraday bottom and optimistic bulls hope this will become a new base for the next run. The Nasdaq came back strong this morning with a technical bounce after yesterday's carnage. Yesterday's low of 2730 (2728) held again today before the bravery of tech investors ignited a buying spree that pulled the rest of the market up with it.
As you can tell, the foreign markets were no help today. Both the East and the West traded lower while playing catch up to our own sell off on Tuesday. London's FTSE 100 fell 63 to 6328 and the German Dax dropped 82 to 5409 while the Japan Nikkei slipped 275 to 18,267 and the Hang Seng slipped 180 points to 13,419.
Volume on the day was average for the NYSE at 786 mln shares traded and above average on the Nasdaq at over 1 bln shares. All in all stocks seem to trade with an upward bias (probably just a bounce) with advancers beating decliners 3,547 to 3,251.
Earnings remain a major focus this week. Three of the Dow 30 components announced today with Kodak beating the street's estimates by a penny. Good Year Tire actually missed earnings by 4 cents and traders sent it lower by 2.88 today. Exxon also announced and met analyst expectations yet still traded lower as well. Most of the oil stocks traded lower in result to the price of oil dropping to $19.66 a barrel. Two factors appeared to be pushing down on oil prices today. Venezuela made comments to OPEC that if the price of crude rose to $22 a bbl then output targets could be raised. Plus, the latest API report noted that crude stockpiles had risen by over 5.5 mln barrels - more than double what had been expected. This was a boon for the airline stocks. While as a group they have been reporting lower revenues, both AMR and UAL did beat analysts estimates.
Surprisingly, the Internet stocks managed a come back today. INKT +9.38, LCOS +5.13, NSOL +7.25, RNWK +10.13, and YHOO +9.75. It appears that investors were willing to bet on strong numbers from both AOL and AMZN today after the bell. Actually, many of the above stocks were right at crucial support levels and if they did not bounce today it would have been an ugly site. As it is, we may have only delayed the inevitable. However, AOL (+1.88 today) did happen to beat estimates when they released their earnings tonight with $0.13. That's 2 cents over estimates. Their conference call was generally optimistic with revenues up 46% to $1.4 bln for FY99 and net income was up 169% to $156 mln. Analysts were positive about the higher non-subscription fee revenues. However, talk of slower growth in Europe while AOL battled against free ISPs could become a sore spot in the future. On the other hand, AMZN (+5.31) only managed to meet the street's expectations with a loss of -$.51. They knew this was going to hurt and offered a 2:1 stock split announcement to soften the blow tomorrow. Market commentators are mixed concerning how investors will interpret the news. Will AMZN pull the entire Internet sector down or will traders distinguish between the good, the bad, and the ugly.
Just in case you needed more evidence that the majority of companies are coming in with better than expected earnings; here is another handful that beat Wall Street's estimates: LSI (beat by $0.08), SGI (smashed it by $0.17), EMC (by $0.03), NITE (higher by $0.08), LLY (edged over by $0.01), HON (slipped ahead by $0.02), OMKT (killed it by $0.06), LGTO (by $0.03), and CMB (crushed it by $0.18).
We have finally reached past the half way point for corporate earnings this quarter and after this week they should start to taper off quickly. Investors are beginning to ask themselves the big question. What do we look for now that the apex of the earnings season is over? First and foremost is going to be Greenspan's Humphrey-Hawkins testimony tomorrow. This is Alan's semiannual trip to Congress where he gives them his state of the economy speech. Many of you will remember that it is this same speech that ignited a 2 1/2 month sell off last July that took the market from 9300 to 7500 near its low. Now most of the OIN veteran readers know that we hate sounding like a bear. However, just as Jim stated yesterday in his commentary and what was heard around wall street today was the nervous question concerning Tuesday's sell off. Is it merely a short sharp bull market correction? or is it the first step in something much more dramatic? With market pundits uttering comments like a "major transition" is coming and "all major indexes could suffer a 10% correction"; all ears will be focused on Alan's every word tomorrow.
Several market watchers and Fed watchers are hoping for what one commentary called a "kindler and gentler" Greenspan. One would hope that a declining PPI and an unchanged CPI would be enough to keep the Fed's rate hikes away. Fortunately for us the recent housing starts report came in lower than expected and it remains one more reason for Greenspan and friends to not raise rates in August at the next FOMC meeting. If we are lucky all we will get is a stern talking to tomorrow and that will be that.
I'm not expecting much ahead of Alan's appearance tomorrow at 10:00 am ET, but if he doesn't drop any word bombs then the market might rally as traders continue to enjoy a robust earnings season.
Be careful, pick your entry point and sell too soon.