Tag, you are it!
The Nasdaq reached through the market ropes and tagged the Dow just before being knocked out of the ring by the bears. After diverging for over a week the Dow and Nasdaq switched roles and the Dow rallied into upside trading curbs for the first time since early January. Posting a strong +198 point gain the Dow was successful in dragging the Nasdaq back into positive territory late in the afternoon. After trading as low as 4291 around 11:00 the Nasdaq started slowly recovering on the Dow's strength. The Dow's strong performance was due to bargain hunting in the beaten down financial and materials sectors as well as strength in the Dow techs. American Express (AXP) added +5.13, JPM +3.88, UTX +2.13, MMM +6.25, PG +3.88, HWP +3.25, GE +3.13, INTC +2.13.
The were several catalysts for today's blue chip rally. A Fed governor said the Fed was not going to tie rate increases to stock prices, industrial productivity soared +.1% for January and Abbey Joseph Cohen maintained her bullish outlook for 2000. The biggest factor here is the claim that the Fed would not raise rates based on stock prices. The opposite had been hinted since the Dow was at 7900. Mr. Greenspan has repeatedly cautioned that the market was creating wealth at a rate that could not be absorbed by the economy and the speculative bubble was unhealthy. If his view of the markets and the productivity of the economy have changed then there is a sale on snowballs in hell tonight. While the markets celebrated the statement today it may be soon to party. Greenspan himself will testify on his view of the economy on Thursday and it is entirely possible he may voice a different view of the subject.
Abbey Joseph Cohen tried her best to put a positive spin on her "good but not great" forecast for the rest of this year. Her S&P forecast for year end 2000 is 1525 which is only about six good days gains from our close of 1402 today. Her forecast is for the S&P companies to increase earnings by only +8% for the year. This is only about half what other analysts are expecting. She expects the Fed to raise another +.75% which will put a collar on this rally for good. She is recommending investors only allocate 35% of their portfolios to tech stocks which she says are now "fairly valued" but if you read between her lines she is trying to say don't buy these high priced stocks. She recommended buying the neglected and unloved sectors.
After her speech the bargain hunters came out in force and focused on the recent losers instead of the recent high flyers. PG, at a 52 week low, added +3.88, JNJ and UTX also at 52 week lows each posted +2.13 gains while other name brands like MSFT, CSCO, ORCL, QCOM, AMZN, WCOM, CMGI, JDSU, VIGN, AOL all lost ground. Even with the Dow rally the advance/decline line was only barely positive on the NYSE with 1538:1471 and negative across all markets with 3578: 4097. The new highs lost to new lows 413:502.
Those annoying oil spots on your driveway may be valuable soon. With the price of oil now over $30 a bbl, a nine year high, and with some analysts predicting $35 soon, you may be able to sell drilling rights depending on the size of your driveway spots. The market may be able to digest $30 but for every dollar over $30 the cost of the thousands of products, which depend on oil in some way, will start climbing and could eventually impact our inflation rate. Higher oil prices may be good for oil stocks but that is the only sector that would benefit. The transport sector is getting killed by these higher prices. The cost of home heating oil in the northeast has skyrocketed from $.76 to almost $2.00 since early January. Airlines have passed on the increase in the form of a fuel surcharge but not every business can do this easily. Some truckers in the NE have parked their rigs instead of paying $300-$400 more for every tank of gas. If you only make $1500-2000 for a multi-state run and it takes several tanks of gas then you are better off staying home. Watch oil. If it continues up it will bite everyone eventually.
Did you catch the about face from Dell today? In a report from Reuters Michael Dell is quoted as saying he expected adoption Of Windows 2000 software to be "strong," thereby distancing Himself from a previous quote suggesting slow acceptance. Dell Said his previous comments on the subject may have been misinterpreted. He said, "The adoption rate of Windows 2000 will not be determined by my speeches, it will be determined by customer acceptance of the product itself." "We see a lot of interest in Windows 2000 and our Dell technical consulting practice has seen a lot of demand." What's wrong Michael? Did they cancel your invitation to the big house in Redmond? Mr. Dell even mentioned that he had installed 2000 on his own Personal laptop and it "worked great" (until it crashed!! Jim)
If you heeded my instructions from Sunday, "buy a Nasdaq dip under 4300" you should be profitable tonight. The Nasdaq dropped sharply at the open today but skidded to a stop at 4291 and performed a miraculous recovery from -127 to +2 at the close. Could it be possible that both major indexes are actually going to be moving in the same direction at the same time? Don't get your hopes up yet. Economic reports for Wednesday include the Import/Export prices and Housing Starts but Thursday is the key. With Greenspan and PPI on Thursday and CPI on Friday the odds for a strong rally to continue are slim. We are likely to be range bound until we see the PPI on Thursday morning. Expect more volatility and wide price swings. The only major earnings report tomorrow is HWP and the short term future of the PC stocks depend their outlook.
Good Luck, Sell too Soon