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Market Wrap

NASDAQ +20, What A Rebound!

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       4-05-2000           High     Low     Volume Advance Decline
DOW    11033.90 - 130.90 11218.20 11002.60 1,120,836k 1,658  1,305
Nasdaq 4,169.22 +  20.33  4286.88  4009.09 1,878,160k 2,269  1,973
S&P-100  806.29 -   9.33   817.63   801.18    Totals  3,927  4,583
S&P-500 1487.37 -  11.24  1506.55  1478.05            46.1%  53.9%
$RUT     518.04 +  11.92   526.13   494.03
$TRAN   2824.28 +  99.33  2835.95  2720.76
VIX       30.59 +   2.69    65.45    29.11
Put/Call Ratio       .55

NASDAQ +20, What A Rebound!

The markets were poised for a bounce, right? Well, they gave it a shot despite a gap down opening that saw the Nasdaq give up another +100 points. That was short-lived though and buyers quickly emerged, pushing the Nasdaq to an intraday high of 4286 before the slow retracement began around 3pm EST. It bled off most of the gains before jumping back to positive territory in the final few minutes. But it was nothing to write home about, that is for sure. But many traders were relieved to see at least a calming to the volatility that rocked Wall Street yesterday. The intraday swing for the Nasdaq was ONLY 277 points. A week ago we would have considered that violent. So chalk up a minimal gain for the Nasdaq, but don't rest too easy because the legs behind this rally were noticeably shaky.

The DJIA and S&P 500 were no help either as both markets decided to give up more ground. Don't look now, but the DJIA closed back below 11,100 and was seriously making a case for below 11,000 close. When the dust cleared, the DJIA posted a close of 11033.92, down 130.92. The S&P finished down 6.93 to 1487.80 and below the key 1500 level. That level acted as resistance all day too. Volume was steady on the DJIA with over 1.1 billion, while the Nasdaq turned in 1.9 billion. The technical picture doesn't look great for either market. You can see on the DJIA chart the big drop and subsequent recovery, but is this another rollover we are seeing? The only hope is that the Industrials have been stuck in this congestion around 11,000 for so long that it may continue to hold on. The Nasdaq chart is longer-term to show that today may be the top of the range in this recent trend. You have to wonder with the kind of damage that was done on Tuesday if this market can really come back right away.

Today's selloff came in the face of some key figures trying to calm the markets to some degree. Abby Joseph Cohen, chief investment strategist at Goldman Sachs and the one who many peg as the catalyst for the recent decline, came out more up beat today at a conference at the White House. She said that she is still optimistic for stock prices this year. "For the past decade, we have been enthusiastic about the outlook for U.S. stock prices in the United States, and we remain so." were her exact words. Alan Greenspan also spoke today in Washington and also had a similar calming tone to his speak. Although he did little to tip his hand to the future direction of interest rates. He gave credit to the "extraordinary surge in technological innovation" for America's current record- breaking economy.

Strength could be found in certain sectors with Airlines, Biotechs, Semiconductors and Utilities moving higher. On the downside were Oil, Drugs, Retail and Telecom. There were a lot of stocks posting big intraday gains too before selling off near the close. AFFX was +28 before closing +22, VIGN was +31 before ending +15, INKT was +16 before closing up +2 and VRSN was up +20 before ending up only +10. That sums up the Nasdaq action pretty well. Stocks tried to rebound, but were met with heavy selling in the final hour.

By the looks of things today, enthusiasm for YHOO's earnings seemed non-existent. The typical pre-earnings run-up in YHOO didn't happen as YHOO had trouble holding $165. After the close, YHOO reported 1st quarter earnings of $0.10 per diluted share, beating the Street consensus of $0.09 and meeting the whisper number. At first, YHOO shot up to $171 in after-hours trading, only to sell-off in typical fashion. It traded as low as $158. Independent of the stock move, YHOO's numbers looked good. Their revenues were up 13% from last quarter. Evidence of their global expansion is that 14% of revenues were international. Also, page views per day reached 625 mln in March versus only 465 mln in December.

The Biotechs finally got some relief today after having a rocky ride throughout March. They have been on an accelerated slide ever since President Clinton and Prime Minister Tony Blair declared that advances in human genome research should be made publicly available. Today, at a White House press conference on the New Economy, President Clinton joked that he did not mean to move the markets in mid-March with his comments pointed at gene research. He said researchers who discover commercial applications for genetic information should have the right to patent their discoveries. However, Clinton added that genetic information that is discovered as part of the Human Genome Project should be made public. The Biotech Index($BTK) rose 26.50 points to 500, a 5.6% advance. Leading the sector was INCY, up 18%, HGSI and CYTO surged 19%, and BGEN edged up 10%.

In a victory for the "old economy" stocks, Sears Roebuck(S) preannounced today that it expects first quarter earnings to come in between $0.62 and $0.67 per share. Quite an impressive gain compared with last year's first quarter earnings of only $0.38 per share. These current figures will be record earnings for the "old economy" behemoth. Both their domestic store sales and revenues surged in the first three months of 2000. Contributing to the bottomline for Sears was strong retail demand, continuing strength in its credit service business, and their stock buy back program resulting in fewer outstanding shares. This positive news should carry on throughout the year as Sears expects a full-year earnings per share growth rate between 13% and 17%, higher than previous estimates of 11%. Sears rose sharply on the news, closing up $7 at $37.50. The bottom line? They sold an extra washer and few more shirts than expected.

The trick here is to try and figure how traders will react to the employment report due out Friday morning. Does anyone care what the numbers are as long as they aren't really out of line? It seems to me that traders are busy trying to determine market sentiment and how quickly institutions will return to the previously coveted tech stocks. A relief rally for the Nasdaq is in order, but I am afraid we may have seen it today. YHOO posting an average earnings number after the close didn't help any. If the selling in the Internets that we typically see post-Yahoo earnings begins tomorrow, it could quickly get out of hand again. It is hard to make the case that valuations are now in line and don't deserve another sell-off when you still have high relative prices vs. even a year ago. So the employment report could be on the back burner tomorrow.

With that said, the volatility did decrease today and volume wasn't beserk with individuals selling. If the market can stabilize and investors slowly get the nerve to begin placing some more bids, we may have seen the worst. A little more consolidation may be just what the doctor ordered before seeing the Nasdaq return to higher levels. Remember, the Nasdaq was at 4600 just last Thursday. Although a sustained rally may be too much to ask for. A continuation of the recovery to the 4450 level is what some traders are looking for. That was the level that provided good support in March and will now turn into resistance.

Due to the recent volatility, I have been keeping my trades to the intraday kind, not feeling brave enough to hold overnight. The wild swings have actually made for some good trading conditions too, when my broker can get a fast execution, that is. I look to do more of the same; quick, fast trades headed where ever the trend is going that hour. Look for more of the same and...when in doubt, get out. Save yourself from the headache of trying to implement a disaster recovery strategy on something you should have bailed out of sooner.

Ryan Nelson
Asst. Editor

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