Looking For Some Support
Tuesday stocks opened up higher
after
Q2 GDP numbers were revised up 0.2% — when analysts were expecting a flat or no
revision to this number.
Unfortunately the markets sold
off and remained negative throughout the trading session. The revision was
unexpected but unfortunately the numbers were considered stale, or as they say, in
the rear view mirror. Something positive did come out of the GDP numbers, as
earnings before interest, taxes and depreciation (EBITD) in the non-financial
sector only fell fractionally in Q2. If we look at the 2000 Q4 decline of 17%
and 7.5% drop in Q1, this is showing that
companies have been aggressive in curbing the decrease in margins.
The nail which sealed the fate of this
session was the negative news out of Japan when the Nikkei closed below its
11,000 level for the first time since October 1984 on news that outstanding
balances on bad loans at major banks would remain at the current level into
2003.
All eyes are on the European Central
Banks meeting tomorrow. The question is: Will the ECB cut interest rates or not?
As we have said in this column before, speculation is that the ECB will be accommodating
and cut rates by 25 basis points. It is known that we need some monetary
stimulus to give this market some support and to move it into recovery
mode. So let’s keep an eye on the ECB, just as we do the Fed.
Breadth for the session was negative
with NYSE advancers falling behind decliners 1362 to 1760. On the Nasdaq,
advancers were outpaced by decliners 1786 to 1305.
The CBOE Volatility Index
(
$VIX.X |
Quote |
Chart |
News |
PowerRating)
closed up 7.1% and the Nasdaq 100 Volatility Index
(
$QQV.X |
Quote |
Chart |
News |
PowerRating) gained 1.9%.
The broader markets fell in unison.
The Nasdaq Composite closed lower by 1.1% while the Dow Jones Industrial Average
fell
1.2%. Volume was light as we gear down to the long weekend.
Sectors in the green were rare in the
session. The Forest and Paper Index
(
$FPP.X |
Quote |
Chart |
News |
PowerRating) gained 0.6% as it scales
higher on the right side of an ascending triangle.
The Oil Index
(
$XOI.X |
Quote |
Chart |
News |
PowerRating) moved
higher fractionally, 0.4% as it appears to be basing just above its 50 day
moving average.
And the Insurance Index
(
$IUX.X |
Quote |
Chart |
News |
PowerRating)
gained 0.3% on an outside bar.
The Semiconductor Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating)
met resistance at its 200-day moving average.
Also treading lower was the GSTI
Internet Index
(
$GIN.X |
Quote |
Chart |
News |
PowerRating) which fell 3.5%.
Not faring any better was the
Interactive Week Internet Index
(
$IIX.X |
Quote |
Chart |
News |
PowerRating) losing 2.2%.
Individual stocks in the plus column
were Westvaco
(
W |
Quote |
Chart |
News |
PowerRating) which gained 7.5% after the Wall Street Journal reported
that Mead
(
MEA |
Quote |
Chart |
News |
PowerRating) (moving higher 6.5%) has agreed to merge for a $3 billion
stock swap.
Valero Energy
(
VLO |
Quote |
Chart |
News |
PowerRating) moved up 5.8%
on the Lehman Brothers’ upgrade of a number of stocks in the group to Strong Buy
from Market Perform.
Energy company Tesoro Petroleum
(
TSO |
Quote |
Chart |
News |
PowerRating)
tacked on 10.0% after Lehman Brothers upgraded the stock from
Market Perform to Strong Buy.
Alternative fuel company Fuel Cell
Energy
(
FCEL |
Quote |
Chart |
News |
PowerRating) scooted higher 12.6% after reporting Q3 results with a less-than-expected
loss.
Global Sports
(
GSPT |
Quote |
Chart |
News |
PowerRating) shares
climbed 13.3%.
Sliding in the session was Cryolife
(
CRY |
Quote |
Chart |
News |
PowerRating)
as its shares fell 8.4%.
Ulticom
(
ULCM |
Quote |
Chart |
News |
PowerRating) slid 10.9%.
And Tellium
(
TELM |
Quote |
Chart |
News |
PowerRating) lost 13.0%.
NCI Building Systems
(
NCS |
Quote |
Chart |
News |
PowerRating) closed
lower 8.3% after reporting Q3 earnings during the trading session.