The Guns Of August
Tame economic numbers sparked a broad rally Thursday that took the Nasdaq up
2.5% and the Dow and S&P 500 up about 1% for the day. Despite the light
summer volume throughout August, the Nasdaq did manage to gain about 440 points
or nearly 12% for the month, while the S&P’s monthly tally was an impressive
6%.
Thursday’s volume, however, spiked up compared to the rest of the month, as 1.88 billion shares traded on the Nasdaq and 1.06 billion shares changed hands on the NYSE.
In economic news, new factory orders for July fell 7.5%, which was a larger
decline than the 6.8% decline analysts expected, and the Chicago Purchasing
Managers Index came in at 46.5, which was down from the previous month’s 52.0
reading. Both numbers reinforced the perception that the economy continues to
cool.
“I think today’s economic numbers indicate a slower economy, and right now, the knee-jerk reaction for
this market is that a slower economy means less chance for interest rate increases in the future. But the flip-side of that coin is that the slower
and the more rapid the economic slowdown, the more abrupt the slowdown in earnings
is going to be," said Ricky Harrington, Senior Vice President and Technical Analyst, Wachovia Securities.
“But for now, you’ve still got money coming into mutual funds, and nothing has really happened to change that equation. That’s the most important thing, that money is continuing to flow into the equity markets. That
explains why we’ve had a roughly 25-day rally now," he added.
According to preliminary numbers, the Nasdaq soared 101.79 to 4205.60, the
Dow gained 112.09 to 11,215.10, and the S&P 500 added 14.98 to 1517.57.
Top sectors included biotechs
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up 3.1%, semiconductors
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up 2.8%. Harrington commented that the rise in gold despite the slowing economic
news could possibly suggest a scenario of stagflation.
Weaker sectors were consumer stocks
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down 0.6%, and retailers
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Giant-cap techs leading the Nasdaq charge included Intel
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3/8 to 74 7/8, JDS Uniphase
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up 1 15/16 to 68 1/2, Dell
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up 2 11/16 to an all-time high 90 15/16.
Also working their way to all-time highs were Ciena
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to 221 11/16 and Juniper Networks
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Leading the banks higher were J.P. Morgan
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4.7%.
Looking to Friday, all eyes will be on the 8:30 AM ET release of the
employment report, and Street estimates look for unemployment to hold steady at
4.0%, for 160,000 new jobs to have been created, and the average hourly wage to
have increased 0.4%.