Look Who’s Making New Highs…

September 2, 2003
Brice Wightman

Stocks
rallied Tuesday. According
to the Stock Trader’s Almanac, September has historically been the worst
month for both the Dow Jones Industrials and the S&P 500. Despite this, the
major indices staged a solid rally, as more economic reports
continued to support a recovering economy. Manufacturing grew for a second straight
month as the Institute of Supply Management’s factory index in August grew at
the fastest pace in eight months. Separately, a report from Challenger, Gray &
Christmas showed a drop in lay-offs.

The market sold off early with
the ISM number release, but drifted upward on light volume before a sharp rally
on better volume began at 2:00 PM. September has historically been a weak month,
at least recently, with the Nasdaq declining 13% September 200, down 17%
September 2001, and 10% September 2002. Today however, one-third of the Nasdaq
100 made 90-day highs, with the index at near 17-month highs. Treasury Secretary
Snow is in the Far East — Japanese and Chinese performed well today. Several
sectors made 52-week highs today, including Airlines, Brokers, Chemicals,
Cyclicals and REITs.

Goldman Sachs upgraded the
enterprise hardware sector from “cautious” to “neutral.” It also upgraded the
software sector from “neutral” to “attractive” in anticipation of strong
fourth-quarter performance. First Albany was optimistic on technology, advising
“overweight” tech issues. The Semiconductor Industry Association reported a
10.5% jump in worldwide chip sales in July. However, semiconductor issues barely
participated in today’s rally, with the SOX up only 0.24. Bonds fell by over a
point as more data suggest an economic recovery.

In economic news, the ISM
Manufacturing Index rose to a reading of 54.7 from 51.8 in August. This
surpassed economists’ expectations of a reading of 53.5. A report from
Challenger, Gray & Christmas showed a 6% drop in layoffs in July.

The 10-year U.S. Note
was -108 at 110 090.

The dollar was +1.05 at
99.05

Gold was -7.00 at
372.30.

Crude Oil was -2.07 at
29.41.

Volume was
1,443,343,000 on
the NYSE, and 1,764,283,000 on the Nasdaq.

Market breadth was positive,
with NYSE advancing issues over declining issues by 2.56, and up over down
volume by 5.23; Nasdaq advancing issues over declining issues by 2.25, and up
volume over down volume by 3.62.

Top Dow stocks were:

Stocks in the news:

Women’s apparel and accessories
retailer BeBe
(
BEBE |
Quote |
Chart |
News |
PowerRating) gained 11% after J.P. Morgan upgraded
the stock from “Neutral” to “Overweight”. Morgan told its clients that “much of
the production and inventory issues are now behind the company” and that they
believe that earnings are bound to gain momentum over the next 12 months.

Computer giant Dell
Computers
(
DELL |
Quote |
Chart |
News |
PowerRating) was higher by 3% after Goldman Sachs raised the
company’s rating from “In line” to “Outperform”. Goldman based the upgrade on
valuation and growth prospects. The firm also expects a 15% increase in Dell
stock over the next 12 months. In addition, Goldman upgraded the enterprise
hardware sector from “Cautious” to “Neutral” .

Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating)
and Fannie Mae were higher after Merrill
Lynch upgraded the mortgage companies from “Neutral” to “Buy”. Merrill based the
pair of upgrades on the belief that both stocks have made bottoms. According to
Merrill, “we are encouraged to see both stocks trading better, even on the bad
news that Freddie Mac CEO Greg Parseghian will be forced to resign from the
company. This type of trading is usually consistent with bottoms in stocks.”

Consumer products giant
Gillette
(
G |
Quote |
Chart |
News |
PowerRating) filed a motion for a preliminary injunction against Energizer
Holdings
(
ENR |
Quote |
Chart |
News |
PowerRating), alleging patent infringement. Gillette is also seeking to
prevent the sale of Energizer’s “Schick Quattro” razor. Shares of Gillette are
fractionally higher ,while shares of Energizer are higher by more than 2.5%.

Teen specialty retailer Hot
Topic
(
HOTT |
Quote |
Chart |
News |
PowerRating) rose slightly J.P. Morgan downgraded the company
to “Neutral” from “Overweight”. Morgan based the upgrade on valuation but thinks
that the stock could be a “long-term winner”.

Research in Motion
(
RIMM |
Quote |
Chart |
News |
PowerRating)
fell 4% after a Barron’s article raised concerns about the
company’s outlook. Barron’s highlighted the company’s legal battles with
Good Technology and NTP. RIMM’s valuation was also a concern.

If you have any comments or
questions, please feel free to email me.

Brice
Wightman

bricew@tradingmarkets.com

Look Who’s Making New Highs…

BUY THE FEAR, SELL THE GREED

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