Post-Holiday Sales Continue

January 5, 2001
Daniel Beighley

Lingering worries over the Fed’s rationale for Wednesday’s emergency rate cut
combined with a mixed employment report Friday to set in motion a barrage of
selling that took the Nasdaq down 6.2%. The Dow and S&P 500 were also under
pressure as concerns surfaced about possible troubles in the banking sector. For
the day, the Dow and S&P 500 lost 2.3% and 2.6%, respectively.

Manufacturing jobs fell by 62,000 which was significantly more than the 13,000 decline analysts had expected, and that seems to indicate that the
manufacturing segment of the economy is trailing off rapidly. Overall, 105,000 new jobs were created, which was fewer than the expected
118,000.

On a less positive note for stocks, unemployment remained at 4.0%, which was lower than the 4.1%
level the Street expected, and average hourly wages actually increased by 0.4%, which was
higher than the 0.3% increase analysts expected.

Following Thursday’s record 2.1 billion share volume, the NYSE took a
breather, with volume pulling back to 1.4 billion shares. Nasdaq volume also
slowed, with just over 2 billion shares changing hands.

With techs withering and giving back more than half of Wednesday’s gains on
the Nasdaq, frustrated bulls are beginning to realize that this market certainly
doesn’t resemble anything close to the good old days of “V” bottom
snapbacks.Â

Said Ralph Bloch, Chief Market Analyst, Raymond James & Associates,
“My basic theme since the October lows has been that this time it’s
different. To that extent I mean that this time it’s going to take a lengthy
period of base building. Newer investors and brokers got used to those
straight-down, straight-up bottoms in a Pavlovian sort of way. You know, every
time the market would drop 8% or 10% you just buy the dip and you would get
rewarded.”Â

“That had been the case, but now it’s obviously drastically different.
History strongly suggests that if you get a crack like we’ve just had in Nasdaq,
with it 54% down from its absolute high to absolute low, then the odds are
really very high that there is going to be a lengthy period of base
building,” he added.

According to preliminary numbers, the Nasdaq sank 158.83 to 2408.00, the Dow
lost 250.40 to 10,6625.01, and the S&P 500 slid 34.89 to 1298.45.

Microsoft, however, avoided the tech wreck and actually ended the day up 9/16
to 49. As for the reason for the software giant’s strength, it could be that
given the recent resurgence of “value” investing, Microsoft is finally
catching the eye of the value crowd. At a PE of 27, Microsoft seems more comparable to a
Procter & Gamble (PE 29) or a Merck (PE 30) than it does to a Cisco (PE 102) or a Juniper (PE 432).

Looking ahead, next week is fairly light in terms of economic news, but
traders will be watching earnings reports start to trickle in, with Vitesse
Semiconductor
(
VTSS |
Quote |
Chart |
News |
PowerRating) set to report on Monday. Analysts expect the chip
maker to post earnings of 24 cents per share.

Post-Holiday Sales Continue

BUY THE FEAR, SELL THE GREED

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