Encouraging
An earnings warning from Dell and more signs of a weakening economy kept
stocks in a subdued mode Monday, as the Nasdaq slipped .04% and the Dow and
S&P 500 ended essentially flat. Apparently the market has already discounted
so much bad news that new negatives lack the punch they would have had a few
months ago. Despite Dell’s warning, the stock lost only 1/8 to 25 1/2.
In economic news, the December’s Index of Leading Economic Indicators
fell 0.6%, which was a bigger decline than the 0.4% drop that analysts expected.
This served as yet more proof of a weakening economy that seems to be screaming
for a half-point Fed rate cut.
Volume contracted by about 25% from Friday’s
level, as just 2.0 billion shares traded on the Nasdaq and just 1.1 billion
shares changed hands on the NYSE. With a big week for earnings and economic
numbers, traders and money managers chose to keep some of their powder dry.
“The
Fed watch will continue to dominate investor attention this week. Thursday will
be the day to watch economic events.
In the morning, the closely watched Q4 Employment Cost Index will be
reported. Rising
wage costs could derail the expected Fed rate cut at the meeting January 30-31,”
said Paul Rabbitt, President, RabbittAnalytics.com.
“Also
Thursday, December Durable Goods orders are reported, and they are expected to
be weak. Finally,
Fed Chairman Alan Greenspan testifies before the Senate Budget Committee. Watch
his testimony for hints about rate changes at the FOMC meeting next week.”
he added.
According
to preliminary numbers, the Nasdaq slipped 12.47 to 2757.91, the Dow fell 9.35
to 10,578.24, and the S&P 500 added less than a point to 1342.90. On the
encouraging side, the Nasdaq and S&P 500 did manage to hold above their
respective 50-day moving averages.
Top
sectors were gold and silver
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up 4.5%, and retailers
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On the
weaker side were computer technology
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One of
the big tech winners of the day was wireless giant Qualcomm
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rose 5 1/16 to 75 7/16 to finish near its high of the day on
heavier-than-average volume. Qualcomm has earnings due out on Thursday after the
bell.
Another
tech jumper was storage-related switch and software maker McDATA
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which jumped 9 1/8 to 65 9/16 after really turning on the juice in the final two
hours of trading. McDATA’s close puts it back above its 50-day moving average
for the first time since mid-December.
Dow
winners were Home Depot
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International Paper
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weakest Dow component was American Express
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Looking ahead, the Employment Cost Index for the
fourth quarter will be released on Thursday at 8:30 AM ET and analysts expect an
increase of 1.1%.