Jury Still Out On Tech

A late session slide in technology issues stole most of the Nasdaq’s early
thunder Friday, but the average did manage to hang on to a 1.8% gain by the
close. The Dow slipped 0.4% while the S&P 500 rose a quarter of a point.

Nasdaq volume eased by about 22% from Thursday’s second heaviest trading day
ever, as a still respectable 2.2 billion shares changed hands. NYSE volume fell
by 20%, as 1.2 billion shares traded.

A weaker-than-expected purchasing managers report helped further the case
that the economy is indeed slowing, and the recent rise in intermediate-term
bonds suggests that the Fed may be making some downside moves with rates sooner
rather than later.

Analysts noted that the big market pullback of late remains firmly centered
in technology stocks. Many noted that despite the November technology pummeling,
economically sensitive areas like financials have held up extremely well.

“We’re getting a sort of reflex bounce or oversold
rally. The real question now is tech. I think tech is the real driver of the
stock market and the reason why we’re departing from the seasonal rally scenario
that we had going from the October low into the Nov. 6 high,” said Robert Robbins, Market Strategist, The
Robinson Humphrey Co.

“If you look
at the magnitude of the tech decline since the Nov. 6, you see that tech went down 25% in terms
of the Morgan Stanley tech index. Since that tech index is a third of the market, you take a third of 25% and you get about 8%, and that’s what the S&P decline was. So looking forward, the big question now is tech,”
he added.

According to preliminary numbers, the Nasdaq gained 47.36 to 2645.29, the Dow
fell 40.95 to 10,373.54, and the S&P 500 added .23 to 1315.18.

Top sectors included oil services
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, up 3.8%, forest and paper
products
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, up 3.7%, and biotechnology
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, up 3.0%.

Weak sectors were consumer stocks
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, down 1.1%, health care
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,
down 2.3%, and drugs
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, down 2.6%.

Intel
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was whacked when First Boston lowered its future earnings
estimates on the chip giant. Intel fell 3 15/16 to 34 1/8 but did manage to hold
above its October 19, 1999 low of 32 1/2. Next week it will be important for
Intel to find support at that level.

Dow winners were International Paper
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, up 7.1%, Disney
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, up
3.6%, Caterpillar
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, up 3.5%, and market bellwether GE
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, up 2.9%.
Intel was the big dog in the Dow.

Looking ahead, October new home sales and the Index of Leading Economic
Indicators will be released Monday at 10:00 AM ET. Analysts expect 900,000 home
sales and a decrease of 0.2% in the Index.