Charts don’t lie
Stocks appeared poised to open lower
Tuesday morning with the March S&P futures contract trading about 2.70
points below fair value. Prior session trading action continued the theme of
resurgent strength in U.S. tech leaders. Foreign markets were mixed, as Asian
trade rallied while European bourses pulled back.
On Monday, the Nasdaq Composite
Index ascended 167.05 points, or 4.3 percent, to 4,049.67. The Dow Jones
Industrial Average tacked on 49.64 points, or 0.4%, to 11,572.20, its second
straight closing high.Â
Market pros noted the heartening
improvement in breadth. On the Nasdaq Stock Market, advances swamped declines
2,586 to 1,607. Big cap techs,
however, have continued to lead. At Monday’s close, the Nasdaq 100 ended with a
5.3% advance for the day.
Overnight news
Bank One [one>one] slipped 1 to 29
1/4 in light, European trading, according to market makers at Madoff Investment
Securities. That would mark a new 52-week low. Early Tuesday morning, the No 4
U.S. bank holding company said warned 2000 earnings would come in well below
Wall Street estimates.
Compuware Corp. [cpwr>cpwr] rose 5
11/16 to 29 in after-hours Instinet trading, or 24 percent above Monday’s close.
After the close, the software company said it expects third-quarter diluted
earnings before items to match or beat Wall Street expectations of 33 cents a
share.
An analyst consensus pegged Compuware’s
third-quarter earnings at 33 cents a share, according to First Call, which
tracks such data. A year ago Compuware earned 25 cents a share.
Chip-gear manufacturer Semitool Inc.
[smtl>smtl] said late Monday it expects to report Dec. 31 first-quarter
earnings of at least 23 cents per diluted share. That compares to a loss of 8
cents a share in the 1999 first quarter and a consensus analyst estimate of 7
cents a share, according to First Call/Thomson Financial.
Pacific Bank [pbsf>pbsf] on Monday
that it had overstated trust fee income and was restating some earnings to
reflect operational losses in that division. The bank said net income for the
nine months ended Sept. 30, 1999 was reduced by $67,000 and by $430,000, or 7
cents per diluted share, for all of 1998. Pacific Bank is being bought by City
National Corp. [cyn>cyn]for $29 a share in a deal worth about $153
million.
The CEO of Guidant Corp. [gdt>gdt]
said he expects the medical device maker to increase its share of the market for
angioplasty stents this year following the launch of its Tristar stent late last
year.
Overseas markets
Asian stocks charged ahead, inspired by
the Nasdaq’s record rise on Monday. Market pros said news of the behemoth merger
of Time Warner and AOL had bolstered outlook for the region’s tech
sector.
In Hong Kong, the benchmark Hang Seng
Index racked up 316.63 points, or 2.0 percent, at 16,164.78 within the first
minute of trade.
Tokyo’s Nikkei 225 gained 657.51 points,
or 3.6 percent, at 18,850.92. Hong Kong’s Hang Seng tried to follow suit, rising
a 2.0 percent within the first minute of trade. But the index slipped back below
the 16,000 to end the session up just 13.95 points, or 0.09 percent, to
15,862.19.
Korea’s Kosdaq, Seoul’s Nasdaq
equivalent, closed 4.9 percent higher at 242.39, while Singapore’s Electronics
Index improved 1.6 percent to 195.92.
European markets slipped after a
positive start. Media issues added to gains made in the wake of the AOL-Time
Warner announcement. But selling in telecom and financial stocks got the upper
hand. London’s FTSE and Frankfurt’s DAX index were trading off more than 1
percent as of 9 a.m. EST. Â
Direction and sentiment
The TRADEHARD.COM Momentum Indicator
shifted from Friday’s negative reading into positive territory after Monday’s
strong showing. The TMI uses a proprietary formula to create an unweighted
basket of the strongest stocks. These stocks tend to lead the general market, to
the upside and to the downside.Â
Other direction and sentiment indicators
show extreme levels of bullishness associated with corrections. The McClellan
Oscillator is deep in overbought territory. The Chicago Board Options Exchange
put-call ratio stands at a very optimistic 0.4.Â
But these signals are to be expected
during very powerful rallies. The leading stocks continue to show strength, as
signaled by the TMI. And so far, institutional appetite for equities has
remained very strong, as evidenced by the extremely strong volume that
accompanied Monday’s gains. Nasdaq trading volume rose 6% to 1.7 million shares,
the third heaviest day in history. Up volume tripled down volume.
Today’s face=”arial, helvetica” size=2>releases
The market will get several pieces of
second-tier economic data today, including two weekly reports on chain and
department store sales.
The Federal Reserve Bank of Richmond
will release its December manufacturing and services indices at 10 a.m. EST.
While the Fed Bank of Chicago will release its November Midwest Manufacturing
Index at noon. Government data on December import and export prices, is due at
8:30 a.m.