Post-Fed Profit-Taking
Just when the market was prepared for devastating economic numbers and a string
of interest rate cuts, along came a mixed January employment report that rattled
traders into a round of profit-taking. For the day, the Nasdaq fell 4.4%, leaving the average down about 4.2% for the week. The Dow and S&P 500 lost 1.1%
and 1.7%, respectively.
Unemployment rose to 4.2%, which was a tad higher than the 4.1% analysts expected, and average hourly earnings remained flat, which was significantly
lower than the 0.3% increase analysts had expected.
What did surprise traders, however, was the fact that 268,000 new jobs were
created in January, which was much greater than the anticipated 78,000. The
strong figure raised the possibility that the Fed could hold off on any more
rate cuts until its March meeting.
Volume was roughly flat with Thursday’s levels, as 1.70 billion shares traded
on the Nasdaq and 1.04 billion shares changed hands on the NYSE.
“It looks like we are continuing a little bit of the profit-taking after the Federal Reserve cut interest rates. The market had
gotten a little ahead of itself, particularly the Dow, and we are still seeing a
little of the disillusionment with the technology stocks. I guess some worries are surfacing now about the second and third quarters and what that
holds,” Richard Dickson, Chief Technical Analyst, Scott & Stringfellow
“It actually looks like it’s healthy because intermediate term the market still is in good shape.
It’s just that short term, maybe we got a little ahead of ourselves in terms of the
positive impact of the Fed rate cut. By and large, I see this pullback as healthy, and it’s probably serving to prolong the rally rather than end the
rally that started in January,” he added.
According to preliminary numbers, the Nasdaq fell 122.29 to 2660.50, the Dow
slipped 119.53 to 10,864.10, and the S&P 500 fell 24.00 to 1349.47.
Big-cap techs taking a hit included Oracle
(
ORCL |
Quote |
Chart |
News |
PowerRating), down 7.7%, Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating),
down 7.2%, Sun Microsystems
(
SUNW |
Quote |
Chart |
News |
PowerRating), down 6.2%, and Intel
(
INTC |
Quote |
Chart |
News |
PowerRating), down
5.6%.
Avoiding the selloff was wireless giant Qualcomm
(
QCOM |
Quote |
Chart |
News |
PowerRating), which gained 1
9/16 or 1.8% to 86 13/16 as it held firmly above its 50-day moving average.
Looking ahead, next week is fairly light in terms of economic news, but
traders will be watching for the fourth quarter productivity numbers due out on
Wednesday at 8:30 AM ET.