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Reversing their recent trends, technology stocks slumped and defensive and
cyclical stocks rose Thursday following Alan Greenspan’s appearance before the
Senate Budget Committee where he commented on the notable weakness in the
economy. Greenspan also indicated that he supports the Bush tax cut plan which
Greenspan feels would be a responsible component of fiscal policy.
For the day, the Nasdaq lost 3.7%, the Dow gained 0.8%, and the S&P 500
slipped 0.5%.
Stocks took the tax cut support with mixed emotions, with the thought being
that if Greenie wants tax cuts, then maybe the Fed would be less inclined to cut
rates by 50 points next week. Regardless of the reason for the Nasdaq decline,
traders generally agreed that some sort of pullback was overdue given the big
year-to-date run.
“The S&P Tech sector was up more than 21% year-to-date, had risen
more than 8% in the last five days, and had posted gains in 10 out of the last
16 days for a win rate of 63%,” said John Roque, Vice President, Arnhold
and S. Bleichroeder.
“Adding up the year-to-date numbers, we guess it’s a good idea to expect
a pullback now. Nothing big, but a pullback to the 2700 level for Nasdaq and
2585 for the NDX,” he added.
Volume levels fell by about 5% from Wednesday as 2.2 billion shares traded on
the Nasdaq and 1.2 billion shares changed hands on the NYSE.Â
In economic news, the fourth quarter employment cost index came in with a 0.8% increase, which was lower than the 1.1% increase analysts had expected.
Also, existing home sales came in at 4.87 million units which was lower than the
5.05 million the Street had expected.
According to preliminary numbers, the Dow gained 82.55 to 10,729.52, the
Nasdaq fell 104.82 to 2754.33, and the S&P 500 eased 6.79 to 1357.51.
Top sectors were oil services
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up 2.8%, forest and paper products
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Weak sectors were computer technology
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semiconductors
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5.4%.
Optical networkers were hit hard following a downgrade of Corning
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by Merrill Lynch. Corning fell 13 5/8 to 56 9/16 as the pain in the group also
hit JDSU
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to 199. Solid earnings news from JDSU after the bell, however, had the company
trading back up to 56 in after hours action.
Dow winners were International Paper
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3.7%, United Technologies
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BA |
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biggest Dow losers were McDonald’s
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down more than 4%.
Looking ahead, the December durable goods orders report will be released
Friday at 8:30 AM ET, and analysts expect to see a decrease of 1.4%. Again, the
weaker the economy looks, the more likely the 50 basis point rate cut will
likely be next Wednesday.