No Jawboning
Fed Chairman Alan Greenspan kept his usually hawkish tone toward inflation
quiet Thursday as he addressed lawmakers regarding Fed policy and the economy.
Greenspan commented on how productivity gains are continuing to allow faster
inflation-free growth than had previously been thought possible. That was all
stocks needed to hear before launching into a broad rally fueled by Internets,
big-cap techs, financials, and biotechs.
Earnings reports remain for the most part better than expected, with IBM
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Check Point Software
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estimates and setting the constructive tone for the day. IBM gained 8 5/16 to
117 1/16 to lead the Dow, which jumped 1.4% for the day and closed at its
highest level since May 17.
Traders particularly enjoyed seeing the volume spike up from the past couple
days of lighter trade. NYSE volume rose to 1.06 billion shares while Nasdaq
volume surged to 1.7 billion shares which was 14% above Wednesday’s level. The
consensus was basically that earnings continue to be solid and that the health
of the market remains intact.
“You’ve got your disasters out there, but they’re few and far between.
The overall tone is excellent. Here’s the problem. You’re in earnings season.
The earnings are great, but if you even sneeze about the next quarter or two
being even close to maybe flat, look out below,” said Brien Finnerty,
Managing Director, C.E. Unterberg, Towbin.
“What happens is that the market labels these guys; you’re either
momentum or you’re not. Overall, though, the tone is great, and the earnings are
just killer, killer, killer. This market looks good,” he added.
According to preliminary numbers, the Nasdaq tacked on 128.93 or 3.2% to 4184.56, the Dow added 147.79 to 10,843.87, and the S&P 500 rose 13.51 to
1495.47.
Top sectors were Internets
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up 3.6%, technology
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and broker/dealers
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Weaker sectors included gold and silver
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Powering the Nasdaq engine were the old, familiar giant-cap tech names, with
Oracle
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up 4.0%, Intel
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up 2.3%.
Sun Micro closed up 4 1/8 to 98 1/16 and after the bell announced earnings
that beat Street estimates. Sun Micro was last trading up to 103 3/4 in
after-market trading.
Optical networker JDS Uniphase
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Wednesday’s announcement that the company would be added to the S&P 500 on
July 26. JDSU is also scheduled to announce earnings on that same day.
Joining IBM at the top of the Dow were Disney
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up 3.8%, American Express
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The most down on the Dow was Honeywell
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Looking forward for the market’s prospects, Peter Eliades, Editor and
Publisher, Stock Market Cycles said “My overall view of the market is
influenced by a statistic I put in my newsletter recently, and that is that
since about about 1910, anytime the discount rate has reached the 6% level, it
has been unhealthy for the stock market. There are no exceptions.”
“Of course, in May of this year we reached the 6% level in the discount
rate, so that’s kind of the background of everything I’m looking at right now.
So obviously we can have rallies and there can be periods of strength, but I
think the overwhelming fact is that this discount rate of 6% is really standing
in the way of the stock market making significant progress,” he added.