Green Light For Big Rate Cut
Blue chips and techs threw in the towel Friday despite a batch of encouraging
economic numbers that some analysts feel gives the Fed the green light to cut
rates next week by 75 or even 100 basis points.
The Nasdaq lost 2.6% and the S&P 500 lost 2.0% as each index sank to
their lowest levels since early November 1998. The Dow sank 2.0% as it fell to
its lowest level since October 2000.
The Feb. PPI showed an as-expected increase of 0.1%, but the core rate fell
by 0.3% which was below the anticipated 0.1% increase. The number clearly showed
that inflation is nowhere to be found and that the Fed should really focus on
the fact consumer confidence needs a boost.
Volume remained moderate again as 1.97 billion shares traded on the Nasdaq
and 1.45 billion shares traded on the NYSE. Since it was an option expiration
day, that accounted for a slug of the volume.
The VIX moved as high as 35.65 before finishing the day up 2.66 to 35.29. The
lack of a higher VIX keeps market strategists saying that we still may not have
bottomed.
“People are looking for capitulation here, and almost everybody that
comes on CNBC is talking about capitulation. Capitulation is really two things
and not one thing. What they’re looking for is a heavy selloff as an indication
of capitulation. But past bear markets have shown that that’s only half of the
picture,” said Paul Desmond, President, Lowrey’s Research.
“The sellers have to panic and knock prices down to bargain levels, but
the second half is that the buyers have to come in and grab up those bargains
with enthusiasm and sustained demand. You’ve got to have those buyers come back
in and until then, we could move substantially lower,” he added.
According to preliminary numbers, the Dow fell 207.87 to 49.65, the Nasdaq
lost 49.65 to 1891.04, and the S&P 500 sank 23.00 to 1150.56.
Nearly all sectors were in the red, but one standout that avoided the
meltdown was forest and paper products
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Sectors under pressure were semiconductors
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Internets
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6.9%.
One winner that avoided trouble Friday was Adobe Systems
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gained 3 5/8 to 28 9/16 after announcing better-than-expected earnings of 33
cents per share. The Street was expecting 28 cents.
Also posting modest gains were Microsoft
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Sun Micro
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In addition to Microsoft, Dow winners were Philip Morris
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Coke
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dogs were IBM
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The disaster of the day was Rambus
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an unfavorable court ruling.
Looking ahead, the Fed meeting and interest rate announcement will take place
on Tuesday, and traders will hear word on rates at 2:15 PM ET.