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Market Wrap

Just Like Watching Paint Dry

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       2-16-2000           High     Low     Volume Advance Decline
DOW    10561.40 - 156.70 10741.70 10561.40 1,019,616k 1,292  1,722
Nasdaq  4427.65 +   6.88  4477.64  4413.66 1,782,127k 2,046  2,164
S&P-100  754.20 -   8.86   763.78   753.63    Totals  3,338  3,886
S&P-500 1387.67 -  14.38  1404.55  1385.58            46.2%  53.8%
$RUT     547.76 +   7.52   549.68   540.24
$TRAN   2454.79 +   5.89  2479.62  2434.17
VIX       25.10 +   0.49    25.76    24.21
Put/Call Ratio       .49

Just Like Watching Paint Dry

Somebody put me out of my misery. The market was going nowhere, volume was average and stocks are moving like they have cement shoes. Even CNBC has given up and forced us to watch President Clinton's "lively" press conference all afternoon instead of following the markets. When CNBC decides to leave coverage of the markets, you know you are in for breaking news or time to snooze. Today was the latter. But it's not their fault. It falls squarely on the shoulders of us traders. They have nothing to report because we aren't placing the bets. Everyone is waiting to hear what the mighty Greenspan will say at his bi-annual Humphrey-Hawkins testimony tomorrow before the Senate. Not to mention a PPI and CPI due out this week.

These signs of indecision apparently have begun to weigh on the markets as they drifted lower into the close. The scenario is a familiar one too, with the Dow leading the way down. The Nasdaq remained fairly range-bound for most of the day without really breaking one way or the other. You can see this pattern in the chart below. This pattern of indecision has gone on for a week now as we are at the same price on the Nasdaq as we closed on Feb 8th. Today it closed at 4427.65, up 6.80. Volume was just over 1.7 billion shares.

It is the Dow Industrials that are more concerning. It closed at 10561, down 156.68. Volume was just over a billion shares. Check out the inability for the Dow to rally above the 10-day moving average. As one trader said "the Dow should of have taken the eight-count yesterday instead of trying to get back up." Well said. There seems to be an unspoken rule of sell everything not tech-related to generate enough cash to buy the Nasdaq dips. The sectors weighing it down included Retail and Financial stocks. The Financials were down the day before a key interest rate meeting? What a shocker. You get the picture here, same old story. Interest rate fears, lack of buyers, unsustainable stock increases, but yet no one journeying too far from their broker in fear of missing out on the next up move.

The sector of the day was the Biotech group, thanks to HGSI. They received a critical patent on a human gene that produces what is believed to be the entry point to the AIDS virus. If it sounds impressive, wait until you see the stock price. HGSI climbed $33.25 to end at $188. Not to mention it sparked the entire group to big gains. SEPR +11.63, MLNM +42.75, AFFX +6.63, and IMNX +14.81.

Shares of DoubleClick (DCLK) were halted late in today's session as news became available pertaining to a pending investigation by the Federal Trade Commission into the their privacy policies. DCLK has plans to build a huge consumer database which cross-references Internet users surfing habits. DCLK uses what are known in the Internet advertising world as software "cookies". Software cookies basically attach themselves to an Internet users machine when they click on a certain advertisement. When that user goes to another site and clicks on another ad, the cookie is able to recognize the browser and thus track that users online activity. Cookies can even be programmed to go in and retrieve personal information from computers such as the users name, phone number, home and e-mail addresses. You can see where this could raise some concern. For the most part, all of this takes place without the Internet user ever being aware of it. DCLK was trading after-hours down at $93.

Earnings announcements continue to fuel some big moves in the market. On Tuesday following the close of the market, Applied Materials announced earnings 3 cents better than analysts expectations and further sweetened the announcement with a 2:1 stock split to be payable on March 15th. AMAT closed today's session at $173.38, up $6.88.

Shares of Viacom were doing some rollin' following a rockin' earnings announcement, which was bested analysts expectations by five pennies. Viacom owns MTV and VH1 and plans to complete the $37 billion dollar merger with CBS in the near future. VIA closed the session down $3.25.

Shares of HWP closed up nearly five points as investors anticipated the earnings announcement following today's market close. Analysts were expecting earnings of 77 cants a share versus 92 cents one year ago. HWP came in at 80 cents a share.

CheckFree announced plans late Tuesday to purchase their rival, TransPoint. TransPoint is the electronic billing and payment joint venture that was formed by Microsoft, First Data Corporation and Citigroup. The deal is worth an approximate $1.2 billion and will make CheckFree the leading online billing company. Though online billing has been rather slow to catch on up to this point, many see this acquisition offering the potential to change that. Analysts believe that having one common computer platform for consumers to access for online bill payment may prove to be more appealing. Not only was the news welcomed with a few raised price targets, investors seemed very enthusiastic as well. CKFR closed up $32 at $100.25 posting volume near 16 million.

Apparently, Healtheon/WebMD (HLTH) has a healthy appetite for acquisitions. Today, the Internet healthcare company announced that is agreed to purchase OnHealth Networks for an approximate $264 million in stock. OnHealth Networks is and Internet health website. This is the second acquisition announced by Healtheon this week. On Monday, HLTH said that it would be acquiring rival CareInsite in a deal worth about $5.4 billion in stock.

As we all know, breaking up is hard to do. Well today, Microsoft took this sentiment one step further and commented that should the government take the steps to break up the software giant, the move would be considered "extreme and unwarranted...a regulatory death sentence while the high-tech economy whizzes by on Internet time." Being the amicable company that MSFT is, spokesperson Jim Cullinan went on to comment that "We thought it was a good time to let the members of (Congress) know our position exactly...that we've always been interested in coming to a fair and reasonable settlement that addresses the government's concerns." As you may remember, "secret settlement negotiations" began in November and were stalled last month as news of a possible MSFT breakup seeped into the market. Steve Ballmer, MSFT CEO, called the government's inability to control the information reckless and irresponsible.

The market weakness may continue tomorrow with both HWP and DCLK trading down late Wednesday. Expect these two top-tier companies to weigh on both the indices and their sectors. But the real news will be the PPI before market open. The forecast is for an 0.2% rise, with an 0.1% rise in the core rate. A bad report could set the stage for a dark day, which will include testimony from Greenspan at 10am EST. A positive PPI could break the Nasdaq above the 4500 resistance level. It wouldn't surprise me to see the market weakness continue for a little longer. The housing starts report released this morning was stronger than expected and it seems that the Fed's stock pile of ammo to use against the market is growing. High oil prices have yet to come down as some had hoped. This is a major inflationary issue too. Don't get me wrong, if the market wants to head higher or we see evidence of a good bottom, I will be a buyer. I have been profitable this week, but choosing my trades carefully (SEPR today, for example). So until we get closer to April earnings season, use caution. Notice we didn't get much of a anticipation move like we've seen lately before key reports. It could be that traders are willing to become watchers instead of buyers this time around.

Ryan Nelson
Asst. Editor

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