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Market Wrap

U.S. Markets Stall

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     09-17-2003            High     Low     Volume Advance/Decline
DJIA     9545.65 - 21.69  9594.43  9536.81 1.63 bln   1299/1507
NASDAQ   1883.10 -  4.15  1894.74  1876.24 1.88 bln   1498/1555
S&P 100   515.43 -  1.93   518.56   514.96   Totals   2797/3062
S&P 500  1025.97 -  3.35  1031.34  1024.53
RUS 2000  515.10 -  0.56   516.71   513.29
DJ TRANS 2761.20 - 12.18  2773.38  2757.84
VIX        19.62 +  0.31    20.14    19.47
VXN        31.75 +  0.09    32.51    31.17
Total Volume 3,867M
Total UpVol  1,798M
Total DnVol  1,962M
52wk Highs     648
52wk Lows       20
TRIN          1.02
PUT/CALL      0.74

U.S. Markets Stall
By James Brown

It was somewhat of a quiet day on Wall Street as U.S. stocks generally slipped lower amid fresh earnings warnings and a frenzy of news coverage over the beleaguered NYSE Chairman Richard Grasso. Investors could be merely pausing to catch their breath after Tuesday's afternoon rally but the general mood was cautious, especially considering profit warnings from Du Pont and the New York Times.

The big story this evening is NYSE Chairman Dick Grasso's resignation. Grasso, 57, ends a 36-year career with the NYSE after disclosure of his $140 million deferred compensation lit a firestorm he and the NYSE board were unable to quench. Jim predicted that his days were numbered yesterday after pension fund managers from California, N. Carolina and New York all stepped forward yesterday calling for his head.

Looking at the market action today the biggest event was the lack of follow through on yesterday's post-FOMC rally. The DJIA traded in a tight 80-point range and lost 21 points after a midday decline towards the 9450 level. The NASDAQ Composite also traded sideways in a 20-point range, failing twice at 1895 overhead before losing 4 points to close at 1883. Overall U.S. equity market losses were mild with Disk Drives, Hardware, Gold and Biotechs managing to close in the green. Meanwhile Asian exchanges added onto yesterday's big gains with another triple- digit rally for the NIKKEI to 10990 and a 68-point move to 11140 for the Hang Seng. European bourses were marginally lower.

Market internals underscored the mellow profit taking with declining stocks outnumbering advancers 1507 to 1299 on the NYSE and 1555 to 1498 on the NASDAQ. Volume numbers were mixed with up volume edging past down volume 991M to 865M on the NASDAQ but losing 775M to 832M on the NYSE.

Chart of the DJIA:

Chart of the NASDAQ:

Profit Warnings

Putting the brakes on the rally were profit warnings from Du Pont, New York Times and Microchip. Last night, Microchip (MCHP) narrowed its Q2 revenue numbers to 2%-5% growth and said earnings would likely come in around 17 cents compared to estimates of 16- 18 cents. While not truly a warning, investors have been selling stocks that don't deliver on the improving outlook their share prices are based on. Shares of MCHP lost 3.3 percent, the second worst performer in the NASDAQ-100 behind Cintas (CTAS), -3.6 percent, who happens to be announcing earnings tomorrow morning before the bell. The New York Times (NYT) lost 3.7 percent and closed below support at $43 after warning Q3 earnings would be less than estimates blaming a weak advertising market. Those not familiar with the NYT may remember the disgrace over its reporter Jayson Blair, who was ousted for his plagiarism and fictional sources. Probably the most notable warning today was Du Pont's (DD). This Dow component lost 3.4 percent after stating that 2003 earnings would be at the low end of previous forecasts. The chemical conglomerate said business had not picked up yet but was hopeful about current signals pointing to a recovery in the fourth quarter.

Tobacco on Fire

Shares of tobacco stocks were hot today with both RJR and MO up double-digit percentage moves. Shares of Altria Group, previously known as Phillip Morris (MO), closed up 10.3% and helped prevent the DJIA's losses from being a lot worse than they could have been. MO gapped higher after the Illinois Surpreme Court decreased a bond set by a lower court from $12 billion to $6 billion. It's a tangled story but MO lost a fight over its "light" cigarettes marketing and a Madison County court levied a $10.1 billion judgment. The judge first told MO that it would have to post a $12 billion bond before it could appeal the judgment, a feat that would likely force MO into bankruptcy. Then after much negotiation the judge lowered the bond to just $6 billion. A higher court said this judge overstepped his bounds by lowered the bond amount and reset it to $12 billion. Thus, the Illinois Supreme Court decision was crucial for Altria Group and essentially gave it a new lease on life sans bankruptcy protection. Meanwhile rival tobacco company R.J.Reynolds (RJR) made big news after announcing it would cut 40 percent of its workforce, some 2600 jobs, to reduce $1 billion in expenses by the end of 2005. RJR also said it would refocus its marketing efforts on two of its four major brands, Camel and Salem, while taking a $340 million charge for the reduction efforts. The stock gapped up at the open and close higher by 13.6% above its simple 200-dma and its best close in over six months.


Investors will have another round of economic reports to digest on Thursday with the weekly unemployment claims and the leading economic indicators. Economists are hoping for a decline in jobless claims from 422,000 to just 410,000. These reports tend to take on more and more meaning as Wall Street and Washington become painfully aware of the weakening labor market. Traders will also have to deal with potential volatility ahead of Friday's triple-witching option expiration. Also worth noting are a few earnings reports. Reporting tomorrow is 3Com, Bear Stearns, Nike, and Jabil Circuit. You may also want to keep an eye on your AOL stock. The AOL Time Warner board meets tomorrow and many on the street expect them to vote off its "AOL" prefix and revert its stock symbol back TWX.

Watch those stop losses.


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