The Pause That Refreshes
Stocks took a breather Tuesday after a slightly higher-than-expected Consumer Price Index figure gave traders an
excuse for profit-taking despite the fact that most earnings reports continue to come
in better-than-expected. The Nasdaq took the biggest hit and fell 2.3%, while
the Dow lost 0.6% and the S&P 500 slipped 1.1%. Since the Nasdaq had
advanced 6.2% in four straight winning sessions, the decline was not much of a
surprise.
The June CPI gained 0.6% which was ahead of the anticipated 0.5% increase
while the core CPI came increased at the expected 0.2%. While neither figure
really screams inflation, they provided enough concern to trigger some
profit-taking.
What traders found constructive was the fact the selling took place on volume
that was lighter than Monday. For the day, 909 million shares on the NYSE and
1.49 billion shares changed hands on Nasdaq. Despite the slide, market
participants continue to find positive scenarios for stocks going forward.
"For the first time in four months, all of the major market indices that
we look at, which are the S&P 500, the Nasdaq, the S&P Mid-cap, and the
S&P Small-cap, were all trading above their one-month, three-month, and
six-month moving averages, and we viewed that as being constructive for the
stock market," said Bob Zuccaro, Portfolio Manager, Grand Prix Fund.
"The stock market has given a very good account of itself in the past
year despite six rises in interest rates by the Federal Reserve. In fact, the
market is actually higher than last June before the Fed started to aggressively
raise interest rates," he added.
According to preliminary numbers, the Nasdaq fell 97.50 to 4177.17, the Dow
slid 64.35 to 10,739.92, and the S&P 500 sank 16.75 to 1493.74.
Top sectors were oil services
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up 0.5%, and consumer stocks
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Internets
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semiconductors
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In earnings news after the bell, Microsoft
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44 cents per share, topping analyst estimates of 42 cents per share. After
closing up 1/4 to 78 7/16, Microsoft was trading up to 79 1/4 in after-market
trading.
Dow winners included Caterpillar
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up 3.1%, AT&T
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Losers in the Dow were United Technologies
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Packard
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In other earnings news, Merrill Lynch
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earnings of $2.01 per sharem, trouncing Street estimates of $1.70 per share.
Merrill also announced a 2-for-1 stock split. The stock, however, finished the
day down 3 23/32 to 128 1/4.
Regarding the intermediate-term outlook for stocks, Steve Shobin, Technical
Analyst, Lehman Brothers said, "I don’t think the market is ready to rally
back up to its highs, at least in terms of the Nasdaq Composite, because usually
when you have a bad accident you have to convalesce for a while, and we haven’t
gone through that recuperation period. But the worst is over, and investors and
traders should look to buy on dips."
Looking ahead, June’s housing starts and building permits reports will be
released Thursday at 8:30 AM ET.