Looking For Support At The 50-Day
An earnings warning from tech bellwether Sun Microsystems sank technology
stocks Wednesday as concerns mounted that the economic slowdown might be longer
and deeper than many analysts have been expecting. The Nasdaq sank into the
close and booked its third straight losing session with a 4.3% decline.
Blue chips were unable to avoid the sour mood the techs created, and
cyclicals, oil services, and telecom dragged the Dow and the S&P 500 down
more than 1.5% each.Â
Volume jumped from Tuesday’s post-holiday levels, although it did remain fairly tame, as 1.9 billion shares traded on the Nasdaq and 1.1 billion shares
changed hands on the NYSE.
The Nasdaq has now pulled back more than 10% from its May 22 intraday high,
and it now will likely look for support at the 2050 level. The big test for the
Nasdaq will be whether it can hold above its 50-day moving average, which is
currently about 50 points below the Nasdaq’s Wednesday close.
While most stocks on the NYSE had been moving up in unison, that has not been
the case on the Nasdaq. The Nasdaq Computer Index has made only nominal gains
since mid-April and should continue to under-perform,” said Paul Desmond,
President, Lowry’s Research.
“Trading volume has been fading during May, reflecting a loss of demand
that could lead to a market correction,” he added.
According to preliminary numbers, the Nasdaq sank 91.04 to 2084.50, the Dow
lost 166.50 to 10,872.64, and the S&P 500 fell 19.85 to 1248.08.
Sectors taking the biggest hits included semiconductors
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6.2%, Internets
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down 3.7%, and biotechnology
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The SOX closed below its 50-day moving average for the first time in six
weeks, so if the Nasdaq is going to bounce, it will certainly need the help of
the chip sector in the coming days.
Big-cap techs getting whacked included Sun
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Uniphase
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Avoiding the selling pressure was interest rate sensitive Fannie Mae
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which gained 1.70 to 82.20 on heavier-than-average volume to finish at the high
end of its five-month trading range.
Also turning in a positive performance was Genome Therapeutics
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which gained .66 or 5% to 13.70 on heavier-than-average volume.
Only two Dow stocks were positive, and those were Exxon Mobil
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1.2%, and WalMart
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Dow losers included Caterpillar
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4.4%, and Hewlett Packard
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Looking ahead, the Chicago Purchasing Managers Index will be released Thursday at 10:00 AM ET, and analysts expect a reading of 38.9. On Friday, the
much anticipated employment report will be out at 8:30 AM ET.