2 Million and Counting
That's right. 2 million trades were counted at the Nasdaq today. It's official...we've done it. I would like to thank all traders everywhere for helping make this a reality. As individuals we are small but united we are "Modern Capitalist Mavericks". (We like to contribute often to the 2 million trade record here at the office). That is the first time that landmark has been hit and it is no surprise that is was done on the day the Nasdaq set another record volume day. There were over 1.6 billion shares traded today. This is great to see as it reaffirms the increasing interest and sentiment to the stock market. It will probably not be long before we hit the 2 billion shares mark and who knows after that.
Unfortunately, it was on a down day but it's hard to complain after the string of record days the Nasdaq has given us recently. In fact, a breather is healthy. The market was probably a little over-bought yesterday relative to the movement in the bond market. The 30-year was yielding around 6.01% at the time of the Fed announcement before falling close near 6.06%. The stock market ignored this and closed near the highs for the day. On Wednesday, the bond continued its slide to highs on the yield at 6.13%. The markets can't ignore this action forever and sold off some today. Some analysts are now expecting rates to trend a little higher in the short-term, not by much though. And it is the bond that held the banks and brokers back today to weigh on the indices. MER -2.75, JPM -2.50, BAC -0.94, and MWD -5.81. In truth though, this sector held up pretty well, teetering on breakout mode.
The Dow was fairly calm today after yesterday's excitement. It traded mostly range-bound between 10,937 and 10,879 but it did close down near the day-low at 10,883, down 49.24. Volume was also strong, trading over 938 million shares. Decliners beat advancers 3-to-2. The other indices finished lower as well. The S&P 500 was down 9.38 to 1410.69 and the Nasdaq closed at 3271.40, -24.12. And to make us feel that not every index went lower, we can take comfort in the Russell 2000 and it's gain of 0.19 to 457.07. Wow, I feel better now.
You can put a lot of blame to today's downside in two sectors. The Financials we mentioned above giving back some of their recent gains thanks to the bond market. But the other one was the Oil sector. Tuesday evening is the release of the weekly American Petroleum Institute's inventory report. This week it showed inventories below normal for the first time in awhile and sparked crude prices to jump, finishing over $26 a barrel. That is a 3-year high but, more importantly, could it trigger higher prices and thus more inflation? I hate to bring this up one day after the announcement that was supposed to bring rate relief for the next couple months but that is what traders are talking about. Still, one day does not make a trend and we mention the oil patch here only in the fact that it caused the Transports to fall. It is tough to rally the indices on a day the Financials and Transports are sinking.
How about the Oracle? After positive remarks from company executives at the Oracle Open World Conference in Los Angeles on Tuesday, Merrill Lynch raised their price target to $80. This stock has been on fire since late October when it traded in the mid-$40s. The company is reaping the benefits of the e-commerce explosion. ORCL closed at $71, up $6.50.
If you have been to the web site or found an e-mail in your inbox today, you know how we feel about QCOM. Jim got real excited when he saw QCOM heading towards the 10-dma at $328, which corresponded with where QCOM broke out at the close last Thursday, making for a double dose of support. We got out a trading alert as fast as possible but needless to say, today's range on QCOM makes it possible to institute many different strategies for our high-risk players. It had entry point written all over it. If you got in at the right time, you had an opportunity to profit. QCOM opened above $360, dropped to $328, rebounded to $352, fell back to $335 and closed at $342.88. Today's actions pretty much explain the premiums that go along with this stock. See our write up under the call plays section for more insight. (Otherwise I could write a whole wrap on trading QCOM.) Also check out Jim's plays this weekend for further insight.
HWP is the earnings stock of the day. They reported $0.73 after the close, in line with First Call. The outlook was painted as mixed with no quick fix answers but expectations of mid-teen growth next year still in tact. HWP closed at $77.44, up $1.31 in the regular session and up $2.50 after- hours. HWP will also be spinning off Agilent Technologies in an IPO on Thursday. But they weren't the only one turning in a scorecard today with AMAT also reporting. They earned $0.77 which is above even revised upward numbers. The most recent First Call number was $0.69. AMAT closed at $110 and was trading down $2.50 after-hours but still way above their mid- October prices in the $70s.
In merger news, Kimberly-Clark (KMB) announced after the close they would be acquiring Safeskin (SFSK). It is a stock deal worth about $13.30 based on KMB's close and SFSK is at $12.75 already after-hours.
The CPI came out this morning as a non-event. It was at 0.2% with a core rate of 0.2%. This was in line with expectations and failed to really move the markets. Hopefully, traders and the Fed are content with the interest rate environment as it currently stands and won't feel the need to over analyze what was a routine number. The big movers in the market today seemed to be news-related, not economy-driven. CHINA down $22.88 after a meteoric rise, PCLN up $8.13 after signing 3 new airlines to its Internet ticket service, CMGI up $20.88 after a Goldman Sachs upgrade, FATB up $7.50 after saying they will beat estimates for Q3 revenues and PHCM down $8.25 after news of increasing their 'Kiss of Death' secondary offering. So it appears that we are somewhat back to playing the stock and not the market.
If you are looking to IPOs to determine investor sentiment, then it is safe to say that sentiment is still strong. There were 4 IPOs today and all of them garnered at least a double in their share price. TRRA went to $38.25 from a $13.41 offering price. RMKR closed at $18.50 from $8, VRTA ended at $26.56 from $14 (not quite a double) and IMAN finished at $24.63 from an offering of $11.
Looking ahead is always tricky but there is one thing you can expect, more volume. It is no coincidence that the 5 biggest volume days have come in the past three weeks. Some traders were concerned that today's record volume came on a down day, signaling a reversal. It is not that simple and I wouldn't lose a lot of sleep over it. Tomorrow will be an interesting day to see if the market rebounds. The bond has dropped a little, the market has dropped a little and we've come a long way in the Nasdaq. But this may just be a breather on the road to higher prices. We would like to see a rebound in the Financials, Transports and Bonds. If you get those ingredients then we should be moving higher on what is likely strong volume. That is a fairly standard recipe for success. On the other hand, if we see these sectors worsen or begin to act in odd fashion, then it may be time to start lightening up some positions. The market doesn't usually fall out of bed without something starting to taste funny. With that said, let's continue to monitor the market, while placing smart trades at smart entry points. This will help maximize the upside and limit the downside.