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Market Wrap

Stocks End Losing Streak

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     11-19-2003            High     Low     Volume Advance/Decline
DJIA     9690.46 + 66.30  9707.64  9614.24 1.62 bln   1712/1105
NASDAQ   1899.65 + 17.90  1903.43  1880.31 1.78 bln   1805/1269
S&P 100   516.82 +  4.60   517.57   512.22   Totals   3517/2374
S&P 500  1042.44 +  8.29  1043.95  1034.15
RUS 2000  525.62 +  3.94   527.15   519.84
DJ TRANS 2866.87 -  0.08  2878.21  2843.77
VIX        18.80 -  0.31    19.51    18.65
VXO        19.45 -  0.45    20.41    19.35
VXN        29.96 +  0.31    30.40    29.15
Total Volume 3,832M
Total UpVol  1,288M
Total DnVol  2,486M
52wk Highs     302
52wk Lows       47
TRIN          0.81
PUT/CALL      0.87

Stocks End Losing Streak
By James Brown

U.S. stock market averages ended a four-day losing streak as Jim's mysterious buyers* arrived on time to buy the dip (*see yesterday's wrap). Strong housing data and a round of positive corporate news ushered in a wide rally. Only airlines and oil service stocks seemed to attract any heavy selling while buyers concentrated on technology with Internets, semiconductors, networking and biotech lead the way. Rumors were circling that the Bank of Japan intervened last night to lift the dollar off its five-year lows against the yen near 107.55. The greenback also bounced back from its all-time lows against the euro.

Foreign exchanges were not so lucky. The Japanese NIKKEI index fell 282 points to close at 9614. This comes on the heels of Monday's 380-point loss. The Hang Seng dropped another 154 points to follow up on its 200-point drop from Monday. The drop was likely fueled by the new import caps on Chinese textiles announced yesterday. The Hang Seng closed at 11,872. European stocks were mostly lower following the weakness from their Asian counterparts.

The broad-based rally here at home lifted 25 out of 30 Dow components and the majority of sector indices closed green. Advancing stocks ran past decliners 17 to 11 on the NYSE and 18 to 12 on the NASDAQ. Up volume was about twice down volume on both exchanges. The 66-point bounce in the DJIA lifted the index back towards the 9700 level but it failed to close above it. Likewise the 17.9-point rally in the NASDAQ took it right to the 1900 mark but failed to close above it. That doesn't sound very convincing if you're looking for new bullish positions. Yet looking at the rising trend from March you'll notice that most of the short-term lows took a good three or four days to consolidate before the next rebound truly appeared.

Chart of the DJIA:

Chart of the NASDAQ:

The economic news of the day was the U.S. housing starts for October. The Commerce Department reported that the number of new homes started in October jumped 2.9%. This pushed the rate to an adjusted rate of 1.96 million homes a year. This was the highest level since 1986 and well above analyst estimates of 1.85 million. The report also said that new starts for single-family homes jumped 5.7% to a rate of 1.62 million - another record level not seen since the mid-1980s. While the homebuilders failed to rally on the report it is good news. High home starts and sales promote strong consumer spending, which will continue to give the economy an underlying strength.

Thank goodness for a resilient retail investor because the feds are busy on Wall Street again. In addition to the growing mutual fund scandal the FBI busted 37 brokers and charged 10 more in a currency trading scam. The bust came last night and authorities arrested traders from J.P.Morgan UBS Warburg, even a former employee of the Federal Reserve. Thankfully, the markets appeared to ignore the news and shares of JPM lost a mere 13 cents.

There were plenty of stocks making headlines today but none bigger than General Electric (GE). GE offered strong earnings guidance for 2005 but said 2004 would likely be flat as it adjusted its "portfolio" into a position to generate double-digit growth again. The company did raise its dividend by 5 percent and said it would split off part of its mortgage and life insurance business. The IPO, expected to launch next year, is called Genworth Financial and said to be worth as much as $10 billion. GE plans to initially spin off 30% of the company before slowly divesting themselves fully of the business. GE's stock was the most active on the Big Board today and closed up 3.6%.

Discount broker Charles Schwab (SCH) also made news when they announced a $321 million acquisition of SoundView Technology (SNDV). This values SNDV at $15.50 and equals a 17 percent premium above SNDV's stock price from yesterday. SCH claims SNDV will be a good addition to their own research operations. Shares of SCH dropped 8 cents to $11.34 and SNDV jumped 16% to $15.41.

Internet stocks made some gains today after a Smith Barney analyst, Lanny Baker, said online advertising revenues should jump 20 percent in 2004 and remain strong throughout 2005. Yahoo! Inc. (YHOO) saw its price target raised $3 to $46 while DoubleClick (DCLK) had its price target lifted $3 to $12 after Lanny upgraded DCLK from a "sell" to a "buy". The INX internet index rose 2.54% after three days of heavy losses.

It was interesting to note the UTY utility index bounced 1.4% after a government report came out today fingering Ohio's FirstEnergy Corp as the culprit for the nation's largest blackout. FirstEnergy denies the claim but the report said FirstEnergy failed to monitor its electrical transmission systems. The August 14th blackout spread to eight states and took out 263 power plants.

Investors welcomed positive news from Analog Devices (ADI), Big Lots (BLI) and United Health (UNH) as all three raised their earnings guidance. The ADI and UNH news helped fuel strong gains in the SOX semiconductor index and the HMO healthcare index. Wall Street received even more good news after the close with earnings reports from retailer Hot Topic (HOTT) and Hewlett- Packard (HPQ). HOTT reported Q3 earnings of 31 cents a share, which beat estimates by 3 cents. Sales jumped 32 percent with same-store sales climbing 10.8 percent. Meanwhile Dow component HPQ beat estimates by a penny, with 36 cents a share sans one- time items. HPQ's Q4 net profit came in at $862 million, which was twice its year-ago numbers. The company gave credit to strong sales of technology services and PC's.

Tomorrow is up for grabs in my book. Bulls would like to see some follow through on today's bounce but as I mentioned earlier previous lows all took three or four days to consolidate before buyers could initiate the next rebound. The markets continue to receive positive economic and corporate earnings news but the urge to harvest gains appears to be growing as we approach the end of the year. This belief that investors are comfortable with their year-to-date gains and therefore less likely to chase stocks higher could lead to a range bound market. Overall the mutual fund scandal and rising geo-political tensions are psychological hurdles that could put the brakes on this traditionally bullish season. As Jim mentioned in his wrap yesterday the situation regarding Syria is heating up and I read a newsflash today stating the U.S. had just doubled the number of troops on the Iraq-Syrian border.

Thursday will bring a number of earnings announcements from the retail sector. Announcing are: American Eagle Outfitters (AEOS), Barnes & Noble (BKS), Borders Group (BGP), Claire's Stores (CLE), The Gap (GPS), Foot Locker (FL), and Limited Brands (LTD). Also announcing is Dow component Disney (DIS).


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