No Gift From The Fed

December 19, 2000
Daniel Beighley

Nasdaq stocks collapsed late in the session Tuesday after the Federal Reserve
announced that it would leave rates unchanged. The selloff took the Nasdaq down
4.3% to a 52-week low, and traders will be watching closely Wednesday to see if
the Nasdaq can hold the 2500 level.

While the selling was concentrated in the Nasdaq, the Dow and S&P 500
also drifted negative by the close, falling 0.6% and 1.3%, respectively.

The Fed said it saw recession as a threat to the economy and lowered its bias
two notches toward easing easing interest rates. Many traders had hoped for a
Fed rate cut, but Greenspan and Co. chose to hold off on that proposition for
now. The next Fed meeting is scheduled for January 31, but the Fed could step in
with an emergency rate cut if need be before then.

Volume picked up by about 15% from Monday’s levels, with 2.30 billion shares
traded on the Nasdaq and 1.30 billion shares changing hands on the NYSE.

“I think the action in the market since October is very much the normal
seasonal pattern. You had institutional tax selling in October, and a majority
of stocks bottomed in October. We had a rebound and then another sell-off prior
to Thanksgiving when you got the public tax selling,” said Phil Roth, Chief Technical Market Analyst, Morgan Stanley Dean
Witter.

“We had a sharp rebound
briefly and then another dip in mid-December. Old economy stocks bottomed in October and tested successfully in
November, and now we are seeing the residual selling going on in the so-called
new economy stocks like tech,” he added.

According to preliminary numbers, the Nasdaq fell 113.38 to 2511.14, the Dow
slid 61.05 to 10,584.37, and the S&P 500 eased 17.22 to 1305.52.

Looking ahead, the November housing starts number will be released on
Thursday at 8:30 AM ET, and analysts expect a figure of 1.54 million units.

No Gift From The Fed

BUY THE FEAR, SELL THE GREED

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