Gloom Descends
Following a very upbeat day on Thursday, stocks turned gloomy Friday after
several earnings warnings teamed up with a weakened chip sector to depress the
averages. The Nasdaq fell 2.2% while the Dow and S&P 500 each sank about 1%.
Volume eased from Thursday’s levels, but still registered fairly hefty
numbers considering it was a Friday in July. NYSE volume totaled 967 million
shares, and Nasdaq volume was 1.54 billion shares. Analysts generally felt the
Nasdaq remains in its uptrend, but that more upside may be limited because of
the time of year.
“I would say that the summer rally
has reached my 10% objective. My best estimate was that it would go a little
higher. Historically, summer rallies, as measured from the April/May low to the
June/July/August high have gone up about 10.4% on average for the past several
decades,” said Robert Robbins, Chief Investment
Strategist, The Robinson-Humphrey Co.
“Of course, there are still another five
or six weeks left in what’s typically the summer rally time frame, so we could
still move higher, although we’re well into the period where you’ve got to watch out
for a top,” he added.
According to preliminary numbers, the Nasdaq lost 90.74 to 4093.82, the Dow
fell 110.31 to 10,733.56, and the S&P eased 15.36 to 1480.11.
Top sectors included forest and paper products
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2.7%, biotechnology
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up 1.3%.Â
Under pressure were Internets
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down 4.0%, and semiconductors
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Sun Microsystems
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to 104 after posting earnings of 39 cents per share, well ahead of the expected
33 cents per share.
Also strong again was optical networker JDS Uniphase
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PowerRating), which added
6 5/8 to 134 3/4. JDS Uniphase is scheduled to be added to the S&P 500 on
July 26.
Asked what he thought was ahead for stocks, Robin Griffiths, Chief Technical Analyst,
HSBC said, “I think what will happen next is that we’ll be dullish for a month, and then
when people come back from holiday, we’ll run up to and through the presidential
election.
“The likely outcome of the election is basically bullish because of the four
possible outcomes, only a Democratic President plus a Democratic Congress would
be a bearish outcome for the stock market. Any other combination of Democratic
and Republican outcomes are neutral to bullish.”
Looking to next week, the July consumer confidence numbers and the June
existing home sales will both be released on Tuesday at 10:00 AM ET.