Naz Dogs Roll Over
Nasdaq 100 futures made it five-for-six–losers that
is–as another day of earnings disappointments from brand name techs
extended the loss from the July 17 high to 10%. No.2 phone co.WorldCom
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announced second-quarter earnings of 46 cents per share which matched analyst
expectations. But revenues came in on the low end of forecasts and traders
punished WorldCom for not exceeding earnings expectations for the first time.
WCOM, a stock which comprises 5% of the Nasdaq 100 Index
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largest percentage drop in more than five years and weighed heavily on the
futures which closed below their 50-day moving average for the first time in six
weeks. Missed earning, and slower revenue growth from Amazon
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earnings warnings from Nokia
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ripple effect through Net and chip stocks.Â
The Nazdogs hit limit-down “trading curb”
levels within the first hour, halting trading below 3773 for the mandatory 10
minutes before finding support near a round figure, 3700. In action strikingly
similar to Wednesday, the early downside momentum in the futures provided
classical pullback from low entries. The Sep Naz 100
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lower at 3706.00, establishing the low print in the final minutes of the
session.Â
Anticipated economic data had the opposite effect on blue
chip stock index futures. The quarterly employment cost index (ECI) from the Labor
Department came in as expected, up 1%, despite the inclusion for the first time
of bonuses and hiring costs (but not stock options). The ECI implied that low
unemployment is not yet driving wages up excessively nor contributing unduly to
inflation. A10% jump in monthly durable goods orders–the largest in nine
years–depicted tepid inflation amid signs of a still-humming US economic engine
which helped financials, pharmaceuticals and cyclicals to boost
Dow futures
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PowerRating) to a 56.0 gain to close at 10,689.0. S&P futures
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green.Â
The strong durable goods report took the
bond market by surprise, causing a sharp, 1/2-point sell off, before rebounding
forcibly into positive territory. There is a strategy
called the Opening News Reversals that takes advantage of reactions and
overreactions to such news surprises, keying entries off the previous day’s low
or high. September T-bonds
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Commenting on what could be construed as excessive
strength in the durable goods report–and a potential harbinger of inflation,
bond analyst Tony Crescenzi in his Crescenzi
On Bonds pointed out that “The crucial detail
within the durables report was the non-defense goods ex-aircraft component.
It rose 8.0% in June and now stand 30.1% above year ago levels. This gauge
is important because it reflects upon the pace of capital spending–a key engine
of economic growth that has been responsible for about 1/4 of all U.S. growth
over the past four years. But this growth needn’t be inflationary; it is
the so-called ‘good growth’ because it is mostly the productivity
enhancing kind. This helps explain the bond market’s shrug at the
strength.”