No Surprises
As expected, the Federal Reserve left rates unchanged and commented that it
remains concerned about impending inflation, and that gave stocks the green
light to move higher Wednesday. The Nasdaq held on to hefty gains for most of
the day but selling pressure in the final half-hour kicked in to hold the Nasdaq
gains to 2.1%. The Dow and S&P 500 each closed roughly 0.2% higher.
With a long holiday weekend ahead, traders commented that many market
participants were reluctant to establish many new positions. Despite those
concerns, Wednesday’s volume picked up by about 10% from Tuesday’s level, with
1.63 billion shares trading on the Nasdaq. NYSE volume of 1.05 billion shares
was about even with Wednesday’s total.
In other economic news, durable goods orders for May showed a 6% increase, which was greater than
the 2.8% increase analysts expected. The May figure follows an April drop of 6.5% and suggests the economy remains strong.
"The thought that our problems will be solved as soon as the Fed meeting
is over is unlikely. I think investors are befuddled because the economy has
started to slow, but at this point it’s not clear how much or how rapid it’s
going to slow and whether or not that’s going to have bearish implications for
earnings," said Phil Roth, Chief Technical Market Analyst, Morgan Stanley
Dean Witter.
"At the same time we’ve had soaring natural gas and crude prices which
is potentially inflationary. In this confusion about the economic environment, I
think we will make some progress into July and then come down again. I think the
odds favor a better low in the Fall than we had in the Spring," he added.
According to preliminary numbers, the Nasdaq rose 81.38 to 3940.34, the Dow
added 23.33 to 10,527.79, and the S&P tacked on 4.27 to 1454.82.
Top sectors were biotechs
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up 3.6%, transportations
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up 2.1%.
On the downside were forest and paper products
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oil services
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Networking-related stocks were one of the hottest groups of the day, with big
gains from Juniper Networks
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8%, and Brocade
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Genomic-related winners included Millennium Pharmaceuticals
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14%, Incyte
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up 9%, and Human Genome Sciences
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Among standouts in the biotech index were Organogenisis
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Protein Design Labs
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Sciences
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Looking ahead, the first quarter GDP number will be released Thursday at 8:30
AM ET and the May new home sales will be released at 10:00 AM ET. Analysts look
for a 5.4% GDP and 900,000 new home sales.