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Market Wrap

What a Relief!!

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       1-31-2000           High     Low     Volume Advance Decline
DOW    10940.50 + 201.60 10956.70 10701.60   993,800k 1,448  1,620
Nasdaq  3940.35 +  53.28  3940.46  3748.03 1,503,633k 1,591  2,595
S&P-100  754.26 +  16.22   754.35   731.43    Totals  3,039  4,215
S&P-500 1394.46 +  34.30  1394.50  1350.05            41.9%  58.1%
$RUT     496.23 -   8.39   504.62   488.53
$TRAN   2571.65 -  10.10  2604.47  2551.02
VIX       26.20 -   2.89    30.06    25.32
Put/Call Ratio       .56

What a Relief!!

It was another volatile day for investors on Wall Street. Another day where traders experienced swings of more than 100 points. The Dow headed lower at the open, when buyers stepped in, focusing on banking, financial and telecom stocks. The blue-chips dipped into negative territory, down just -37.00 points, when the bulls entered the picture, and began to push the 30 Industrials +201.60 higher for the session, to close at 10940.50. Over at the Nasdaq it was a different story. The tech index found itself in the red, to the tune of -139, before buyers began to test the waters. 3748 was the magic number at the Nasdaq, when shortly before noon, traders began to bid the price of some of their recent favorites higher. The Nasdaq clung to the momentum created by the Dow, finishing the day +53.30 at 3940.30. The Nasdaq was at a record high, at just over 4300, one week ago today. This morning analysts confirmed the Nasdaq had "officially" shifted into correction mode, as it had declined over 10% from the high. Just as the dreaded "C" word was being uttered, by analysts on CNBC, the Nasdaq began its stunning reversal. Whether we like it or not, it is beginning to appear, that the volatility experienced recently may become the norm, at least in the near term. With the gains seen in 1999, a 10% correction means very little to some investors.

At the NYSE one of the biggest losers early in the day, ended the session on top. SBC Communications(SBC) jumped 9.2% to close at $42.88, while AT&T picked up +3.88 to finish at $52.75. Honeywell(HON) gained 6.2% after a favorable article in the Wall Street Journal. JPM finished the day +4.88 at 122.94 as the financial sector turned in a stellar performance, adding about 4.0%. Citigroup(C)was up +1.25 to $57.38, while Bank of America(BAC) rose +1.75 to $47.50. Today's bounce was welcomed with open arms and as Jim pointed out Sunday, we were due for a relief rally, as Friday's debacle left the Dow stuck deep in oversold territory. The question remains whether or not the major indices can maintain the momentum.

A glimpse inside the numbers today shows the rally was a relief rally and not necessarily a change of trend. The volume was light, compared to what we seen since the first of the year, with just 972 million shares changing hands. Today was only the second day since Y2K, that the volume at the NYSE has not exceeded 1 billion shares. Up-volume was better than down-volume by a rate of 2-to-1. Declining stocks edged advancing issues by 16 to 14, with only 22 stocks making a new high, while 181 hit a new 52-week low. We aren't complaining, but we'll need to see more follow-through before we are ready to jump on that bandwagon. With the FOMC meeting tomorrow and Wednesday, and the Non-farm payrolls report on Friday, it could be a tough nut to crack.

Stocks at the Nasdaq could no longer resist the blue-chip rally and jumped on board, gaining +53.28 for the day or 1.37 percent. Like we said the after being down -139, to come back and close +53 points to the good, equates to a 192 point run which is definitely impressive. A few stars at the Nasdaq included INTC, QCOM, 3Com. INTC ended the day +4.94 higher at 98.94, after a Credit Suisse First Boston note adding the chip-maker to its Focus One List and forecasting the company will beat its earnings estimates. Investors bid the price of QCOM shares up to $127 on reports they may be close to inking a deal with China Unicom, China's second largest telephone provider. 3Com rose +4.19, to finish the day at $50.75 after the company reported Palm, a subsidiary that makes the popular hand-held Palm Pilot device, has filed with the SEC for an IPO. SG Cowen jumped its rating from a Neutral to a Buy with a $60 price target. IMNX surged +14.63, after a panel of experts for the FDA, approved the chemotherapy drug, Novantrone, for use in the treatment of MS. BGEN fell $6, over concerns the Novantrone approval could hurt future revenues at the biotech company. The Internet index held the Nasdaq back, dropping 2.1%. Free-Markets(FMKT) fell 16.0%, down -42.81 to $229, although its fourth-quarter loss was less than expected.

A peak at the numbers inside the Nasdaq shows declining issues leading advancing stocks by a 25 to 16 margin, on "light" volume of 1.49 billion shares. Up-volume versus down-volume was even, with 113 stocks making a new low, and 71 touching a new high. As we said the 3750 area provided support for the tech index, when buyers decided enough was enough. Note buyers entered the market just below the 3790 area mentioned in Sunday's Market Wrap.

So we've made it through the month of January, with most of the major indices finishing the month lower. The Dow finished down -4.8%, the Nasdaq gave back 3.2% and the S&P 500 lost 5.1% for the month. The one major index that manage to finish the month in the plus column was the Dow Jones Utilities, which added 11.2% for the month. Investors and analysts that follow the January Effect, will say it could be a tough year for equities, with the S&P showing a loss at the end of January. Our question is, was this really a "January Effect" or a "Greenspan Effect".

Equity and bond traders paid little attention to this morning's Chicago Purchasing Managers Index numbers. The January Chicago PMI came in at 55.6 with the prices paid component at a reading of 67.8. Both numbers were in-line with economists estimates. Bonds did decline a bit today dropping -13/32, with the yield sitting at 6.48%. The National Association of Purchasing Managers index numbers come out in the tomorrow morning, while Alan Greenspan and his partners will begin their two day meeting. Most traders are expecting a hike of 25 basis points will be announced Wednesday afternoon. Once the Fed decision is out of the way, providing there are no surprises, we could see the rally continue at least for one day, until the Non-farm payroll report is released Friday. Aggressive traders may choose to target shoot any dips on their favorite plays, while conservative traders may choose to wait for the Fed. There will be good plays available, but you will want to select your stocks and entry point carefully.

Be patient, trade smart and be prepared to sell too soon.

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