The Prospects Of A Double-Bottom…
The major averages opened
sharply down, then pushed higher by noon ET, then down again to form double
bottoms by 2:30 p.m. before staging impressive rallies into the close. The top
gainers were pharmaceuticals, healthcare, and computer technology; telecoms,
networking, Internet, airlines, and foreign stocks took the biggest losses.
The day’s top story and market
breaker was Worldcom
(
WCOM |
Quote |
Chart |
News |
PowerRating), which was halted all day, as it
disclosed a massive accounting fraud in which it revealed $30 billion in debt.
This scandal is expected to be larger than that of Enron’s. On a positive note,
the markets were able to regain much of the ground lost on the open, showing
resilience in the face of horrid news. At this juncture the prospects of a
double bottom on the S&P 500 and Nasdaq are under speculation, and will be
become more clear in upcoming trading.
The
Dow Jones Industrial Average
(
$INDU |
Quote |
Chart |
News |
PowerRating) closed down 0.07% at 9120.11. The
S&P 500
(
$SPX |
Quote |
Chart |
News |
PowerRating) closed down 0.26% at 973.52. The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) closed up 0.38% at
1429.42.
U.S. Treasury Bonds were
up 0.99 at 104 ’07.
In economic news, the Federal Reserve said that they
will leave interest rates unchanged at 1.75%, which is a 40-year low. Durable
goods orders rose 0.6% in May, indicating factories are on the road to
recovery. Also, new home sales rose to 1,028,000, beating expectations of
920,000.
Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 1.45, and down–volume
over up–volume
by a 2.77 ratio. Nasdaq declining issues over advancing issues came in at 1.47,
and down–volume
beat up–volume
by a 1.29 ratio. The
VIX
was up 0.86 at 32.33. The TRIN
was down 0.77 at 1.53.
Heavy volume on the NYSE and
above-average volume on the Nasdaq moved the Dow, the S&P 500 and the
Nasdaq to close at the top of their daily ranges. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
up 1.66%, closed at the top of its daily range. The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 1.43%, closed in the upper half of its daily range.
The top sectors of the
day were the
Pharmaceutical Index
(
$DRG.X |
Quote |
Chart |
News |
PowerRating),
up 2.49% at 307.99, and the Disk Drive Index
(
$DDX.X |
Quote |
Chart |
News |
PowerRating), up 1.98% at
64.75.
Losing
sectors of the day were the North American Telecom Index
(
$XTC.X |
Quote |
Chart |
News |
PowerRating), down 6.86% at
378.45, and the Mexico
Index [$MXT.X|$MXT.X],
down 6.86% at 378.45.
Communications services company Qwest
Communications
(
Q |
Quote |
Chart |
News |
PowerRating), down 57.27% at 1.79, was reported by the Wall
Street Journal to be taking a tough stance from the SEC on how the company
accounted for $1.4 billion in sales of fiber optics.
Also being investigated by the SEC for complex
financing are Citigroup
(
C |
Quote |
Chart |
News |
PowerRating), down 5.41% at 37.00, and JP Morgan
Chase
(
JPM |
Quote |
Chart |
News |
PowerRating), down 4.37% at 31.49, as they face accusations of helping
energy companies fraudulently represent their financial statements.
Software and programming company Internet
Security Systems
(
ISSX |
Quote |
Chart |
News |
PowerRating), down 0.08% at 11.64, has had its 2002-03
earnings estimates cut by Bear Stearns based on a continued weak macroeconomic
outlook, and the belief that management may lower guidance.
Semiconductor company Micron Technology
(
MU |
Quote |
Chart |
News |
PowerRating), down 3.79% at 19.00, reported a net loss of 4 cents a share for its
third quarter vs. expected earnings of 6 cents a share.
Also in the chip sector, Xilinx Inc.
(
XLNX |
Quote |
Chart |
News |
PowerRating), up 4.40% at 24.19, has been downgraded by Prudential to
"hold" from "buy" in order to remain consistent with its
favor of cyclical semiconductor companies and the belief that the second half of
the year may be weaker due to the telecom slowdown.
Media company Martha Stewart Living
Omnimedia’s
(
MSO |
Quote |
Chart |
News |
PowerRating), down 23.52% at 10.40, CEO, Martha Stewart, is
reported by the Wall Street Journal as facing potential charges beyond
insider trading, including obstruction of justice and making false statements.
Personal product maker Avon Products
(
AVP |
Quote |
Chart |
News |
PowerRating), up 6.59%, announced that it expects to meet or beat its
earnings estimates for the second quarter as it benefits from stronger foreign
currencies and hedging strategies. The stock is a member of TM’s Momentum
List.
Auto maker Visteon Corp.
(
VC |
Quote |
Chart |
News |
PowerRating), down
1.49% at 14.48, has raised its earnings outlook for the rest of 2002, citing
stronger operating performance and a better market environment.
Healthcare facilities company Health
Management Associates
(
HMA |
Quote |
Chart |
News |
PowerRating), up 1.63% at 20.53, said that it expects its
third quarter earnings to beat Thomson First Call’s estimates of 25 cents a
share. The company cites strong growth and a faster acquisition pace.
Also from TM’s proprietary Momentum
List, doughnut retailer Krispy Kreme Doughnuts
(
KKD |
Quote |
Chart |
News |
PowerRating) rose 5.83%
at 32.28.