Piecing Together The Clues

May 10, 2002
Daniel Beighley

The major indexes had little in
the way of bullishness today as the S&P 500 and Nasdaq closed out with steep
losses, while the Dow was modestly negative. Oil services, gold and silver, and
energy represented the only positive sectors of the day, with airline, Internet,
semiconductors and telecoms beaten down the hardest. Traders
will be working hard this weekend to
piece together clues from the past three days in order to formulate
next week’s plan of attack.

U.S. Treasury Bonds were
up 17 at 102 ’02.

Negative news from the tech sector appeared to dominate the
mood on Wall Street as positive news from the economy was shrugged off. The
producer price index fell 0.2% in April as the core index fell 0.1%.
Economists were looking for a 0.4% increase after March’s 1.1% gain.

Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 1.79, and down–volume
over up–volume
by a 4.91 ratio. Nasdaq declining issues over advancing issues came in at 1.75,
and down–volume
beat up–volume
by a 7.45 ratio. The
VIX
was unchanged at 25.04. The TRIN
was up 1.28 at 2.73.

Below average volume on the
NYSE and average volume on the Nasdaq had the Dow close just above its 200-day
MA,Â as the S&P 500 and Nasdaq took back most of the gains made from
last Wednesday’s powerful rally. The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating),
down 4.47%, took back most of its gains made Wednesday. The
Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), down 2.27%, closed halfway down
yesterday’s bullish bar on its daily chart.

Software company
Electronic Arts (ERTS),
up 0.25% at 59.10, beat earnings expectations as it posted a profit
for its fiscal fourth quarter
vs. a year–ago
loss. The company says it has benefited from a new growth cycle in the video
game industry.

Chip maker Micron Technology (MU),
down 1.66% at 22.47, has had its estimates cut by Merrill Lynch who claims
the company is experiencing a decline in shipments as the DRAM market looks
weak.

Telecom company WorldCom
(
WCOM |
Quote |
Chart |
News |
PowerRating), down 20.39% at 1.60, was hit by
a credit downgrade by Moody’s to “junk” status as Goldman Sachs
downgraded the company to “market underperformer” from “market
performer.”

Computer hardware maker International Business
Machines (IBM),
down 0.31% at 79.68, announced that it plans to cut as much as 3%
of its workforce to combat a slow down in sales.

Software maker BEA Systems (BEAS),
down 7.10% at 9.29, has had its earnings estimates cut by Bear Stearns based on
a weak market for spending.

Video retailer Movi Gallery (MOVI),
down 5.66% at 20.00, beat earnings expectations by posting profits of 35 cents a
share compared to the Multex consensus of 5 cents a share.

Biotechnology company Protein Design Labs
(PDLI),
down 3.25% at 11.90, said that it expects revenue for 2002 to come in 10%
to 15%
below last year’s number.

Software maker Verisign (VRSN),
up 2.23% at 10.07, has had its price target cut by Credit Suisse First Boston to
$17 per share as the company faces near-term difficulties, especially for its
domain name business.

Piecing Together The Clues

BUY THE FEAR, SELL THE GREED

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