Evidence Of Expansion

April 3, 2002
Daniel Beighley

The major indexes staged a
reversal in the first half-hour of trading, where price action entered a
downtrend that leveled off to sideways movement around 10:30 a.m. ET, then sold
off again after 1:30 p.m. ET, with a small rally into the close. All three
indexes closed in the red. The only sectors in the green today were the Japan
Index and the Morgan Stanley Healthcare Index. Leading the downside action were
gold and silver, Internet, natural gas, and software.

Earnings warnings and
downgrades played into market action today as new economic data suggested further strength. The Institute of Supply Management declined 57.3%
for March, compared to 58.7% in February. The number was slightly ahead of
expectations, with any level over 50 representing expansion.

Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 1.72, and down–volume
over up–volume
by a 3.57 ratio. Nasdaq declining issues over advancing issues came in at 1.56,
and down–volume
clobbered up–volume
by a 2.99 ratio. The
VIX
was up 0.91 at 21.59. The TRIN
was up 0.35 at 2.07.

Below-average volume
sent the Dow down to test its 50-day MA, the S&P 500 closed below its 50-day
MA, and the Nasdaq fell further below its major MAs. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
down 2.22%, closed for the second day in a row below its 20-day MA. The Broker/Dealer
Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 0.58%, closed just above its 50-day MA.Â

Broadcasting and TV company Adelphia
Communications Corp (ADLAC)
fell
6.67% to
11.04 after it was reported that the SEC has begun an investigation into its
accounting practices.

Energy company Dynegy
(
DYN |
Quote |
Chart |
News |
PowerRating), down 4.32% at 28.79, fell after it
was reported that the company devised an accounting practice to smooth out its
cash flow.Â

Chemical company Du Pont
(
DD |
Quote |
Chart |
News |
PowerRating), down 1.43 at 46.67, announced that
their underlying earnings for the first quarter exceeded 51 cents a share,
meeting the high end of expectations from analysts polled by Thompson
Financial/First Call. The company cited lower fixed costs and a boost in its
agricultural products business for the positive earnings news.

Clothing retailer Jones Apparel Group
(
JNY |
Quote |
Chart |
News |
PowerRating), up 1.66% at 34.80, said that it expects its first quarter profits to
exceed its previous expectations.

Communications services company WorldCom
(
WCOM |
Quote |
Chart |
News |
PowerRating), down 3.98 at 6.51, reported that it plans to lay off 10% of its
workforce. The company is being investigated for its accounting practices and
has been downgraded by Lehman Brothers.

The software sector was bruised further as i2
Technologies
(
ITWO |
Quote |
Chart |
News |
PowerRating), down 1.24% at 4.75, announced its first quarter
revenue will lag due to weak market conditions. Interwoven Inc. (IWOV),
down 9.33 at 5.05, reported a first quarter loss of 10 to 12 cents a share, far
worse than the 4 cents anticipated by analysts surveyed by Thompson
Financial/First Call.

Also in the software and programming sector, SmartForce Plc (SMTF),
down 32.24 at 6.87, fell well below earnings targets when it reported a first
quarter loss of 26 to 27 cents a share. The company also announced it will no
longer be buying Centra Software (CTRA),
down 22.83% at 3.65.

Internet infrastructure company Sybase Inc
(SY),
down 3.88% at 16.59, announced first quarter earnings of 21 cents a share, in
line with analysts’ estimates. Sales were $210 million, under the $228 million
expected by analysts.

Semiconductor maker Micron Technology
(
MU |
Quote |
Chart |
News |
PowerRating), down 5.00% at 30.78, was downgraded by Morgan Stanley to an
“underweight” from an “equal weight.”

From TM’s proprietary Implosion
List, Cablevision Systems
(
CVC |
Quote |
Chart |
News |
PowerRating) fell 4.62% to 28.85.

Evidence Of Expansion

BUY THE FEAR, SELL THE GREED

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