What Caused The Market’s Breakdown

September 19, 2002
Daniel Beighley

The major indexes gapped lower
at the open and entered a choppy range that lasted until around 1:30 p.m. ET,
where selling brought prices further down.

Today’s weakness was largely
attributed to a horrifying profit warning from EDS
(
EDS |
Quote |
Chart |
News |
PowerRating), -52.82% at
17.20, as they claimed spending on services has virtually stopped.

The Semiconductor Index
(
$SOX |
Quote |
Chart |
News |
PowerRating), -3.93% at 252.46, made a new four-year low, and the Broker
Dealer Index
(
$XBD |
Quote |
Chart |
News |
PowerRating), -5.58% at 368.73, broke key support of 380 on its
daily chart. Both sectors closed at the bottom of their ranges, indicating
likely continued momentum at tomorrow’s open, which will be a Triple Witching
session.

The only positive sector at the
close was gold and silver
(
$XAU |
Quote |
Chart |
News |
PowerRating), +2.72%.

U.S. Treasury Bonds
closed up ’10 at 114 ’08.

In economic news, jobless
claims fell 9,000 to 424,000 for a four-month high, while analysts were
looking for 415,000 claims. Housing starts were reported at 1.609 million
vs. an expectation of 1.645. Also, the Philadelphia Fed came in at 2.3
vs. an expectation of 2.0.

Volume was better than
average at 1,449,597,000
on the NYSE, and 1,506,212,000
on the Nasdaq.

Market breadth was negative,
with NYSE declining issues over advancing issues by a ratio of 3.33, and down
volume over up volume by a 6.82 ratio. Nasdaq declining issues over advancing
issues came in at 2.41, and down volume beat up volume by a 13.35 ratio.

The
VIX
was +5.27 at 46.16. The TRIN
was +0.74 at 2.13.

The only Dow stock to go
positive today was Allied Capital
(
ALD |
Quote |
Chart |
News |
PowerRating), +0.92% at 20.80.

Stocks in the news:

Shipping
company Federal Express
(
FDX |
Quote |
Chart |
News |
PowerRating), +11.58% at 47.76, beat its first quarter earnings expectations by
$0.03 with profits of $0.52 per share.

Data storage company EMC
(
EMC |
Quote |
Chart |
News |
PowerRating), -0.74% at 5.36, was upgraded by First Albany to “strong
buy” from “buy” based on valuation, strong products, and an
expectation to meet third quarter projections.

Financial services company Morgan
Stanley
(
MWD |
Quote |
Chart |
News |
PowerRating), -11.02% at 33.90, missed its third quarter earnings
estimates by $0.12 with profits of $0.55 per share.

Also in the financial services
sector, AG
Edwards
(
AGE |
Quote |
Chart |
News |
PowerRating), -7.62% at 33.06, missed its second quarter estimates by
$0.12 with profits of $0.33 a share.

Insurance
company MetLife
(
MET |
Quote |
Chart |
News |
PowerRating), +1.77% at 23.53, received an upgrade from Banc
of America Securities to a “strong buy” from a “buy” due to
valuation.

Defense
sector stock Raytheon
(
RTN |
Quote |
Chart |
News |
PowerRating), -5.15% at 33.50, was downgraded by SG
Cowen to “market perform” from “outperform” due to perceived
below-average growth prospects for the company.

What Caused The Market’s Breakdown

BUY THE FEAR, SELL THE GREED

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