Fiery Finale
Someone lit a fire under the Nasdaq in the final hour of trading Monday as
the average cut a 4.5% drubbing to a mere 0.5% loss by the close. Semiconductors
were the main driver of the late-session surge which allowed the SOX
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to reclaim its 50-day moving average. The Dow and S&P 500 also turned up the
volume at the close and finished off just 0.4% and 0.2%, respectively.
Volume remained light throughout the day before picking up substantially in
the final hour of trading. Nasdaq volume increased by about 28% above Friday’s
level with 1.83 billion shares trading, and NYSE volume eased to 1.10 billion
shares following Friday’s 1.40 billion shares.
Traders attributed the early morning swoon in technology stocks to a lack of
buyers, as most market participants with cash remained firmly on the sidelines.
The final hour surge was welcomed by many analysts who believe some sort of
rally is due.
“This is now the fifth month that the Nasdaq has been under pressure.
We’re down about 46% from that Labor Day peak, and from any estimation of
overbought/oversold indicators, we should be very close to a technical
rally,” said Ricky Harrington, Senior Vice
President and Technical Analyst.
“We’re entering earnings season, and what we really need to have happen
is for one or two key companies to report earnings and have the market’s
response to those earnings be positive. For example, Motorola and Yahoo! report
in the middle of this week, and if the market reaction to them is positive, then
that would indicate the market has reached an oversold condition strong enough
to support some kind of technical rally,” he added.
According to preliminary numbers, the Nasdaq lost just 11.52 to 2396.13, the
Dow eased 40.66 to 10,621.35, and the S&P 500 fell just 2.44 to 1295.91.
Top sectors of the day included semiconductors
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consumer stocks
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1.1%.
On the downside were broker/dealers
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down 3.2%, and biotechs
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In the red-hot semis, the leader board showed big gains by KLA-Tencor
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up 8.7%, Teradyne
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Materials
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Fallen angels showing strong closes were JDS Uniphase
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Broadcom
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up 5%.
Dow winners were Philip Morris
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up 2.4%, and Procter & Gamble
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down 4.3%, and American Express
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Looking ahead, traders will be waiting for December’s PPI and retail sales
numbers which are due out Friday. Analysts expect a 0.3% increase in the PPI and
a 0.5% decline in retail sales.