What’s Good About This Pullback?
Lowered earnings estimates of Sun Microsystems and EMC by Goldman Sachs
weighed on techs Tuesday as stocks began the holiday-shortened week mixed on
extremely light volume. The Nasdaq pulled back 3.3% and the S&P 500 eased
0.8% while the Dow held its ground with a 0.3% gain.
Traders were pleased to see the tech pullback on volume of just 1.6 billion
shares on the Nasdaq since it still needed more time to consolidate its recent
run. Likewise, NYSE volume was also scant, with just 1.0 billion shares changing
hands.
Consumer confidence rose in May to 115.5 which topped analyst expectations of
112.4 and suggested that the Fed might hold off on additional rate cuts at its
meeting on June 27.
In other economic news, personal income came in at a 0.3% increase, and
personal savings came in at a 0.4% increase. Both figures were in line with
expectations.
Given the bounce back from their early April lows, stocks had been showing
signs of a pullback going into the long holiday weekend.
“A conventional short-term sell signal for the NYSE was registered at
the close Friday when the Short Term Index dropped 6 points from its recent
high. This sell signal should have come at no surprise,” said Paul Desmond,
President, Lowry’s Reports, Inc.
“The gains in many stocks during April and May were too steep to be
sustained without some kind of correction. Our short-term indicators were at
very overbought levels in recent weeks, making a correction more likely,”
he added.
According to preliminary numbers, the Nasdaq fell 75.46 to 2175.57, the Dow
rose 33.25 to 11,038.62, and the S&P 500 slipped 9.95 to 1267.94.
Top sectors of the day were pharmaceuticals
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care
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Under pressure were computer technology
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semiconductors
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6.0%.
Sun Microsystems
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respectively, thanks primarily to the negative comments from Goldman Sachs.
Top Dow performers were Eastman Kodak
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up 3.0%, and Merck
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Joining Merck as the leading drug stocks were Pfizer
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Eli Lily
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Insurance stocks did relatively well, and one standout in that group since
early April has been Hartford Financial
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uptrend above its 200-day moving average. Hartford added 2.13 to 69.10 on
heavier-than-average volume.
Dow dogs were Intel
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AT&T
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Looking ahead, the Chicago Purchasing Managers Index will be released
Thursday at 10:00 AM ET, and analysts expect a reading of 38.9. On Friday, the
much anticipated employment report will be out at 8:30 AM ET.