Why Market Defies Skeptics
Taking a cue from a strong construction spending report, stocks launched into
a broad-based rally Tuesday that was ignited by blue chips and followed late in
the day by a surge in the Nasdaq. All three major averages ended near their
highs of the day, with the Dow up 1.5%, the Nasdaq up 2.5%, and the S&P 500
up 1.4%. The Dow notched its highest close in 10 weeks.
March construction spending increased by 1.3% which soundly topped the
expected 0.2% increase that analysts expected. This strong figure may have
helped fire up stocks since it suggests that the economy remains robust.
Volume remained moderate, with 1.16 billion shares trading on the NYSE and
1.90 billion shares changing hands on the Nasdaq. Traders would have liked to
see heavier confirming volume to the upside, but most were nonetheless impressed
with the day’s strong close among the averages.
Some analysts have noted that the recent resilience in the market outside of
tech is unprecedented, and unlike most scenarios stocks have seen in the past.
“Throughout history, whenever a major speculative bubble has burst, the
effects have generally been universal; all stocks on all exchanges have tended
to be dragged down into a prolonged bear market. But, that is not what has
happened here,” said Paul Desmond, President, Lowry’s Research.
“The bear market was not even universal to the Nasdaq market. During the
same time that the dot.coms and the high-tech stocks on the Nasdaq were
collapsing, the Nasdaq Financial 100 Index, the Nasdaq Banks Index and the
Nasdaq Insurance index were, and still are, in relatively well-defined bull
market patterns,” he added.
According to preliminary numbers, the Dow rose 163.37 to 10,898.34, the
Nasdaq added 52.03 to 2168.27, and the S&P 500 lifted 16.99 to 1266.45.
Top sectors included Internets
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up 3.3%, and gold and silver
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On the downside were oil services
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transportation
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One big tech winner was 3-D chip maker NVIDIA
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to 91.08 on nearly double average volume. NVDA’s close put it at an all-time
high.
Tech gainers also included Mercury Interactive
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up 11%, Qualcomm
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Top gainers in the “back-from-the-dead” Goldman Sachs Internet
index were CMGI
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up 11%, and Amazon
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Dow winners were Procter & Gamble
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up 4.5%, and Philip Morris
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which fell 1.2%.
Looking ahead, the next big economic report due out is the April employment
report on Friday. Analysts expect 27,000 new jobs to have been created and also
see unemployment holding at 4.4%.