On Egg Shells, But Looking For More Solid Footing
Stocks opened lower as the dollar weakened
against the euro and yen
Wednesday after the IMF said the dollar could face a steep devaluation due to
the large current-account deficit.
The U.S. dollar fell to its May lows. Traders were
apprehensive to enter the market even after some positive earnings reports from
BEA Systems
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Traders were wary primarily because of how the dollar has performed over the
past couple of months. Traders feel that the weak dollar could be showing some
signs of a major correction in the making. Why? Foreign monies have purchased
quite a bit of newly issued corporate bonds in the last year. Dumping the bonds
would be detrimental to the markets. Is this scenario likely to happen? Probably
not because the U.S. is not experiencing a major recession in the economy.
With the weakening dollar, the Argentinian
crisis, and other factors affecting the economy arising ahead of the next FOMC
meeting, it puts the Fed on some “egg shells.” If the Fed cuts
rates by 50 or more basis points, it could indicate the market’s worst fears that
the economy is doing worse, but if the Fed lowers rates by 25 basis points, it
could just be what the market needs, showing that Greenspan and his gang have
everything under control.
Breadth for the NYSE was positive with
advancers leading decliners 1599 to 1488. As for breadth on the Nasdaq, decliners
led advancers by a ratio of 13 to 18. With the Nasdaq closing below its support
of 1935, traders are concerned that we will test the lows made in April.
The CBOE Volatility Index
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closed up 3.3%. The Nasdaq 100 Volatility Index
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3.3%.
The Nasdaq Composite closed off 2.3%,
while the Dow Jones Industrials were lower by 0.6%.
Sectors moving higher were the Oil
Services Index
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after making a new low on August 9.
The Oil Index
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1.8% clearing its 50-day moving average handedly.
Also gaining was the Gold and Silver Index
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bottom.
Falling in the session was the GSTI
Internet Index
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The Interactive Week Internet Index
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fell 4.2%.
And the Semiconductor Index
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after testing its 50-day average bounced lower 3.5%.
Looking at individual stock leaders,
Centurytel
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CTL |
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AT |
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unsolicited bid for the company of $9 billion, or $43 a share.
Too Inc
(
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the news that the retailer’s Q2 profits increased by 53% with earnings of 9
cents a share, beating analysts’ consensus of 7 cents a share according to a poll
conducted by Thomson Financial/First Call.
Oil services company BJ Services
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gained 11.3%.
Retailer Abercrombie & Fitch’s
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shares were lifted 7.1% after Bear Stearns upgraded it Attractive from
Neutral.
On the Nasdaq, Tellium
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shot higher 18.3%.
Surebeam
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whisked higher 10.3%.
And XCare Net
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10.7% after the company reporting record Q2 results.
Losing ground in the session was
Eneron
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ENE |
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personal issues. The stock lost 6.2%.
The Shaw Group
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Continued uncertainty of the
Argentinian bailout packaged loomed heavily on shares of Embraer Empresa
Brasileira De Aeronautic
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Biopure
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plummeted 11.3% after TheStreet.com said that the biotech
company withheld clinical results on the company’s Hemopure blood substitute
which showed that substitute is unsafe.
And Checkfree
(
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after it was downgraded by Merrill Lynch from Near Term Accumulate/Long Term Buy
to Near Term Neutral/Long Term Buy, ABN Amro from Buy to Hold and Robertson
Stephens to Buy from Strong Buy. CKFR lost 11.3%.
SBA Communications
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lower 14.4%.