Greenie Snubs Stocks
The Federal Reserve gave stocks the cold shoulder Tuesday with a 50 basis
point rate cut that triggered a broad-based selloff into the close which
left the Nasdaq down 4.8% and the Dow and S&P 500 down 2.4% each. Greenspan
apparently wanted to show that the Fed would not cave in to critics who continue
to say the Fed is way behind the curve.
With Tuesday’s plunge, the Nasdaq and S&P 500 hit their lowest levels
since early Nov. 1998, and the Dow slid to its lowest level since last Oct.
2000.
While the mood was discouraging, traders continue to see few signs of
outright panic, as was evident in the VIX which finished the day up 1.69 to
35.04.
Volume picked up from Monday’s light levels but remained fairly light, with
2.0 billion shares trading on the Nasdaq and 1.3 billion shares trading on the
NYSE.
“The general market should begin looking across the
earnings valley to a recovery in 2002. However,
a problem still exists for technology. Consensus
earnings estimates are falling rapidly for 2002 in this sector.
Investors who are hoping for a ‘V’-shaped technology bottom are likely to
be very disappointed,” said Paul Rabbitt, President, RabbittAnalytics.com.
“We remain
under-weighted in technology. Technology
issues are more likely to go through an extended period of basing in an ‘L’
shaped bottom that could stretch into next year. We
are, however, particularly positive on energy, finance, and utilities,” he
added.
According to preliminary numbers, the Nasdaq sank 93.77 to 1857.41, the Dow
fell 238.35 to 9720.76, and the S&P 500 slid 28.19 to 1142.62.
Top sectors were forest and paper products
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services
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Weakest sectors were Internets
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down 6.2%, and biotechnology
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Techs under pressure were JDS Uniphase
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down 9%, Sun Microsystems
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Avoiding the selloff again was Adobe Systems
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to 32 13/16 on heavier-than-average volume.
Weighing on the Dow in addition to Intel were J.P. Morgan
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5.7%, SBC Communications
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IBM
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was International Paper
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Looking ahead, the February Consumer Price Index is due out Wednesday at 8:30
AM ET, and analysts expect it to show a 0.2% increase in prices.