Greenspan On Deck
Plunging consumer confidence likely sealed the deal for a 50-basis point rate
cut by the Fed, and stocks responded with a broad, blue-chip rally Tuesday that
lifted the Dow 1.7% to its highest level since Jan. 5. The S&P 500 joined
the Dow to the upside with a 0.7% gain while the Nasdaq chose to wait this one
out, as it finished flat for the session.
January’s Consumer Confidence Report fell sharply to its lowest level in four
years, leading economists to comment that the decline now puts the report at
"pre-recession" levels. Analysts had expected the report to show a
decline from last month’s 128.6 to a 125.4 reading, but the surprising figure of
114.4 shows that consumers have become quite rattled. It also all but guarantees
a 50-basis point rate cut by the Fed.
Volume was slightly above Monday’s levels but still remained fairly light,
with 2.05 billion shares trading on the Nasdaq and 1.14 billion shares changing
hands on the NYSE. Traders commented that a lot of tech dollars remained
sidelined as money flowed into the blue-chips.
"There was a lot more trepidation in the
volatile stocks which could probably pull back a bunch if something we’re to go
wrong with the conclusion of Wednesday’s FOMC meeting. Of course, in the Dow,
Procter & Gamble
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Payne, President, Wall Street Strategies.
"At the
same time, there is a whole group of people who have been successfully trading
this market this year that want to be long a stock or a couple of stocks when
this number comes out. Even the bears will concede that maybe we’ll get some
type of short-term pop. My work tells me 3050 to 3100 is the key resistance on
the Nasdaq," he added.
According to preliminary numbers, the Dow jumped
179.01 to 10,881.20, the Nasdaq eased by less than a point to 2838.30, and the
S&P 500 gained 9.55 to 1373.72.
Top sectors were chemicals
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4.4%, forest and paper products
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up 2.1%, and cyclicals
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Weakest sectors were Internets
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down 1.0% and biotechnology
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Cisco
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worries and bounced back 3/4 or 2% to 38 and was one of the few tech winners of
the day.
Software maker Citrix Systems
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recent breakout from an eight-month base and gained 2 7/16 to 36 9/16 on nearly
double average volume.
Semis leading the SOX
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were Applied Materials
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up 4.4%.
Dow winners included Procter & Gamble
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up 6.3%, DuPont
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General Electric
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Looking ahead to Wednesday, the fourth quarter
GDP number will be released at 8:30 AM ET, and analysts expect it to show a 2.1%
growth rate. In addition, the Fed announcement on rates is due at 2:15 PM ET.