Do You Believe In The January Effect?

January 31, 2003
Daniel Beighley

The markets ended the day mixed
after a lower open on the heels of an earnings warning from chip equipment maker
Applied Materials had the indexes clawing their way north for the day. This
being the last day of the month, speculation of window-dressing-creating buying
pressure weighed in against negative sentiment brought on by a disappointing
earnings season and geopolitical tension. The “January Effect” was another topic
under fire, which historically indicates that the net gain or loss of the
markets for the month predicts the year-end results. January was a losing month
for the markets, but as Kevin Haggerty will tell you, always trade “what is” and
not “what should be.”

In economic news, personal
income came in at 0.4% vs. an expected 0.2%, personal spending was at
0.9% vs. an expected 0.7%, Michigan Sentiment was at 82.4 vs. an expected
83.5, and Chicago PMI was at 56.0 vs. an expected 53.0.

The Ten Year Note
(
TYH3 |
Quote |
Chart |
News |
PowerRating) was +030 at 114 045.

The US Dollar
(
DXH3 |
Quote |
Chart |
News |
PowerRating) wasÂ +0.39 at 100.14.

Volume was slightly
above average, with the NYSE coming in at 1,476,853,000
and the Nasdaq at 1,562,455,000.

Market breadth was mostly
positive, with NYSE advancing issues over declining issues by a ratio of
2.52, and up volume over down volume by a 2.89 ratio. Nasdaq advancing issues
over declining issues came in at 1.35, and down volume beat up volume by a 1.54
ratio.

The

VIX was -0.59 at 35.78. The

TRIN was -1.21 at 0.87.

Leading the Dow higher were:

Stocks in the news:

Oil & gas company Anadarko Petroleum
(
APC |
Quote |
Chart |
News |
PowerRating), +1.90% at 46.11, beat its fourth-quarter earnings expectations by
$0.15 with profits of $1.21 per share, tripling its performance from a year
ago.Â The company said higher commodity prices and oil sales offset natural gas
sales.

Household goods maker Newell Rubbermaid
(
NWL |
Quote |
Chart |
News |
PowerRating), +0.07% at 27.85, was upgraded by Bank of America to “buy” from
“neutral.”

In the biotech sector, Biogen
(
BGEN |
Quote |
Chart |
News |
PowerRating), +0.68% at
38.25, announced it had received approval from the FDA to market a treatment for
the skin disease psoriasis.

In the aerospace and defense sector, Honeywell
International
(
HON |
Quote |
Chart |
News |
PowerRating), +4.00% at 24.44, posted earnings in line with
expectations with profits of $0.50 per share, which was down from a year ago.

Restaurant company and Dow component McDonalds
(
MCD |
Quote |
Chart |
News |
PowerRating), -1.52% at 14.24, sold off after the credit rating firm Fitch lowered
its grade on the company to “A-” from “A”.

In the personal computer industry, Dell Computer
(
DELL |
Quote |
Chart |
News |
PowerRating),-1.32% at 23.86, was said by Lehman Brothers to be in good shape to
meet fiscal fourth-quarter expectations, though they are cautious on the
first-quarter outlook due to weak demand and geopolitical issues.

Electric utilities company Constellation Energy
(
CEG |
Quote |
Chart |
News |
PowerRating), +2.40% at 27.65, beat its fourth-quarter earnings estimates by
$0.04 with profits of $0.41 per share.

Insurance company Aetna
(
AET |
Quote |
Chart |
News |
PowerRating), -0.39% at 43.49,
was downgraded by Salomon Smith Barney to “underperform” from “in-line.”

In the chip business, Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating),
-7.56% at 11.97, issued a profit warning for its first quarter “due to ongoing
economic weakness, geopolitical uncertainties and customers’ deferred capital
expenditures causing a larger order shortfall than expected.”

Oil company ChevronTexaco
(
CVX |
Quote |
Chart |
News |
PowerRating), +0.31% at
64.40, missed its earnings expectations for the fourth-quarter by $0.29 with
profits of $1.29 per share.

Entertainment company America Online
(
AOL |
Quote |
Chart |
News |
PowerRating),
-2.83% at 11.66, was back in the news again as it announced that it might sell
its Warner Music Group.

Also in the entertainment business, Walt Disney Co.
(
DIS |
Quote |
Chart |
News |
PowerRating), +7.03% at 17.50, beat its first-quarter profit expectations by $0.02
with profits of $0.17 per share.

Online travel company Hotels.com
(
ROOM |
Quote |
Chart |
News |
PowerRating), +0.14%
at 40.14, was upgraded by Salomon Smith Barney to “outperform” from “in-line.”

danielb@tradingmarkets.com

Do You Believe In The January Effect?

BUY THE FEAR, SELL THE GREED

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