Two Stocks To Time The Market
Stocks managed to rally back from early morning declines Thursday and finish
with all three major averages in the green. Biotechs and select technology
issues paced the Nasdaq to a 1.7% gain while the Dow and S&P 500 added 0.2%
and 0.3%, respectively.
While not massive, volume did at least equal Wednesday’s levels, as 1.8
billion shares traded on the Nasdaq and 1.1 billion shares changed hands on the
NYSE. Bulls were encouraged by the fact that stocks finished near their highs of
the day.
In economic news, new home sales fell 9.5% to 894,000, which was
significantly below the 978,000 that analysts had expected and the biggest
monthly decline since 1997.
The figure supported the case for continued Fed interest rate easings, and
that likely motivated some of the buyers Thursday.
In order to gauge the future of the blue-chips, one analyst is keeping an eye
on General Electric, the huge conglomerate that so often serves as proxy for the
broader market.
“Look, we could be dead wrong, but we still firmly believe that GE is
the overall market’s bellwether. Not to get too technical, but consider that
over the last five years GE is 94% correlated with the S&P 500 and 92%
correlated with the Dow,” said John Roque, Vice President, Arnhold and S.
Bleichroeder.
“GE lost 40% from 8/28/00 to 3/22/01 and has since rallied back about
41% and retraced 62% of its decline. The stock is into a lot of resistance in
the 50 to 55 area, so we’re a seller on a rally near or above 55 after which we
expect it to work to 47 1/2,” he added.
According to preliminary numbers, the Nasdaq rose 38.27 to 2281.75, the Dow
added 16.91 to 11,122.42, and the S&P 500 gained 4.08 to 1293.13.
Top sectors were biotechnology
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up 2.5%, and computer technology
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Under pressure were forest and paper products
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gold and silver
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2.7%.
Pacing the Nasdaq run was Microsoft
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3% to 71.72 and was the top performer in the Dow. Microsoft is perched above
both its 50- and 200-day moving averages and is within striking distance of a
6-month high.
Top Dow components joining Mr. Softie included General Motors
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2.5%, IBM
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Dow dogs included Alcoa
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Leading the biotech index were MedImmune
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Labs
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up 5%.
Internets showing some strength included Inktomi
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Looking ahead, the April existing home sales report is due out at 10:00 AM ET
on Friday, and analysts expect a figure of 5.25 million.