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Investors Begin Filling Their Stockings.....

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        12-22-99           High     Low       Volume  Advance Decline
DOW    11203.60 +   3.10 11260.20 11181.90   852,865k  1,417   1,692
Nasdaq  3937.30 +  26.15  3948.48  3878.06 1,465,279k  1,914   2,254
S&P-100  781.92 +   3.06   784.39   776.71    Totals   3,331   3,946
S&P-500 1435.99 +   2.56  1440.02  1429.05             45.7%   54.3%
$RUT     478.51 +   2.72   478.51   474.14
$TRAN   2848.42 +  11.92  2848.42  2819.94
VIX       23.12 -   0.32    24.31    22.53
Put/Call Ratio       .48

Investors Begin Filling Their Stockings.....

Investors began their last minute shopping this afternoon, filling their Christmas stockings with an unusual group of items. Today it was stocks in the drug, biotechnology, and healthcare sectors. The Nasdaq finished +37 points for the session and is now just 63 points shy of 4000. Will we see Nasdaq 4000 before year 2000? Many of the analysts think so. Several market pundits today called for the major indices to rally into the first week of the new year, followed by a 15 to 20 percent correction. As we've said the rally at the Nasdaq has been a narrow technology rally.

The bulls have been looking for quite some time for anything else to energize the markets. They believe that for the bull to continue we will need to see a widening in the breadth. Today it was an odd assortment of issues that led the way. Aetna(AET) gained +3.56 to close at $54.69, Kroger(KR)added +0.94 to $17.63, Newell Rubbermaid picked up +1.75 to finish at $30.56, Bristol Myers(BMY)jumped +3.06 to $63.19, while Goodyear Tire & Rubber increased +1.69 to $27.19 and TJX moved +1.25 for a 7 percent gain to close at $18.63. All of these stocks added 5 percent or better for the session. Investors seem to be bottom fishing, looking for stocks that have been beaten up and show some promise. Granted this is only one day but if it continues this could be the start of a widening in breadth, which would be a welcome sight.

The Dow gave back most of its earlier gains but did manage to keep its nose in positive territory. The 30 industrials ended the +3.06 to finish the day at 11203.60. Up volume outpaced down volume, but the breadth was negative with declining issues ahead of advancers by a 17 to 14 margin. Yesterday's whipping boy Eastman Kodak(EK) turned in an impressive performance rising over 8 percent to close at $62.06, on the news that a new CFO would join the team. Investors showed their support for Procter & Gamble(PG) after yesterday's court victory concerning false advertising. Shares of PG gained +4.50 to $109.00. Drug maker Merck(MRK) put the brakes on its recent decline with a bounce up to $67.19 gaining +1.12 for the session. Lucent Technologies(LU) showed up as the most heavily traded issue today, losing -3.25 to $76.25 on volume of 24.8 million. Lucent reported a sharp decline in back-logged orders. Investors seemed concerned that sales may be slowing. All in all, a relatively quiet day at the NYSE.

The Nasdaq recovered from a rough morning after Corel(CORL) fell out of bed. The software maker warned it will likely post a bigger loss in the 4th quarter than Wall Street was expecting. Corel fell 29 percent to $13.19. Red Hat, the Linux darling sank -20.19 to $236.88 in sympathy. 3Com(COMS) was the drag at the Nasdaq today. The network equipment company lost almost 9 percent to close at $48.44 after it warned that a seasonal downturn and worries about Y2K might hurt 3rd quarter profits. Some of the Internet and software stocks helped pull the Nasdaq out of the hole and push it to a new record. Oracle(ORCL) jumped +7.38 despite a downgrade from Edward Jones on valuation concerns. Yahoo(YHOO) continued its climb, adding +13.75, Broadcom(BRCM) picked up +24.13 to $254, Redback Networks(RBAK) gained over 17 percent to $162 after analysts at Raymond James initiated coverage of the company with a Buy rating, and Tuesday's momentum in Commerce One carried over into today with (CMRC) gaining +70.00 to close at $550. Overall the breadth at the Nasdaq was negative with the number of declining stocks leading the advancing issues at a rate of 22 to 19. The negative breadth continues to be of little concern to traders as it's some of the high-flying issues that continue to carry the Nasdaq to new high closes. Volume continued to be fairly strong for a holiday week with 1.4 billion exchanging hands as the Nasdaq closed +26.15 at 3937.30.

After the closing bell Microsoft(MSFT) announced Greg Maffei, the company's CFO was leaving in early January to run a Canadian Telecom company. Shares of MSFT were down $3 in after hours trading. Communications equipment company Qualcomm saw the price of their stock fall another $2 in the after hours market, after announcing the sale of its CDMA consumer phone business to Kyocera Corp, a Japanese company. QCOM ended the day session -11.50 at $485.44. Investors bid the price of Gemstar International(GMST) over $9 higher in the after-market when the technology company announced it will join the Nasdaq 100 index January 3rd. Gemstar will replace Qwest Communications.

The economic data released this morning reinforced the most recent report on third quarter gross domestic product. GDP rose at a 5.7 percent rate according to the third and final estimate by the Commerce Department. The figure was revised upward from its previous reading of 5.5 percent. Most analysts had expected the GDP to remain unchanged. Inflation remained tame according to today's report. The GDP price deflator, a measure of price increases followed by many traders, grew at a 1.1 percent annual rate in the third quarter, the same as previously reported. That number is lower than the increases of 1.4 percent in the second quarter and 2 percent in the first. Consumers continue to spend. Consumer spending which accounts for two-thirds of overall economic activity, rose at a 4.9 percent annual rate in the third quarter. A figure of 4.6 percent had been previously reported. The 30-year bond finished a quiet day with a gain of +6/32 to yield 6.44 percent.

After the FOMC meeting yesterday, the Fed all but guaranteed a rate increase in the coming weeks. Greenspan's decision to leave rates alone and not adjust the bias going into Y2k, will give the markets the go ahead to end the year on a positive note and even begin the year on the upside. Remember we are not quite out of warnings season yet and there may be a few surprises around the bend, as today with Corel and 3Coms. Tomorrow should be a quiet day, with most traders squaring positions going in to the holidays. After the close of business tomorrow, spend time with your family and friends. The markets will be there Monday and for a long time to come.

Randy Frey
Research Analyst

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