Waiting On The Fed
Worries about Tuesday’s much-anticipated Federal Reserve meeting combined with
profit-taking to drive the Nasdaq 2.3% lower Friday for its second-straight day
of losses. Internets and software took the brunt of the selling which put the
Nasdaq’s two-day decline at about 5.5%. Despite the decline, the Nasdaq still
remains comfortably above its 50- and 200-day moving averages.
Strength in retailers and drugs were enough to help the Dow finish positive,
with a slight 0.3% gain, while the S&P 500 finished down 0.7% for the day.
The S&P 500’s close leaves it about 4 points above its 50-day moving average
and about 36 points above its 200-day moving average.
Volume eased about 15% from Thursday’s levels as 1.36 billion shares traded
on the Nasdaq and 850 million shares traded on the NYSE. Once again, volume
remains as one of the main concerns among analysts.
"The problem with the market right now relates to volume, and it’s not
so much the lack of volume in strength, as it is too much volume in
weakness," said Frank Gretz, Market Analyst, Shields & Co.
"With the Nasdaq, there have been three bad days out of the last five,
and that is three days when volume expanded into weakness. Meanwhile, it has
been six days since volume has expanded into strength, which is one wants to see
in a healthy market," he added.
According to preliminary numbers, the Nasdaq slid 91.23 to 3845.61, the Dow
added 28.63 to 10,404.75, and the S&P 500 eased 10.64 to 1441.54.
Top performing sectors included insurance
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up 0.5%.
Weaker sectors included gold and silver
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Amazon
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questioned the credit quality of the online retailer. Amazon’s dismal day helped
drag down the rest of the Net sector, with big losses in the Goldman Sachs
Internet index hitting AtHome
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7.4%, AOL
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In the chip realm, Micron
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announcing earnings of 47 cents per share that beat analyst estimates of 34
cents per share. Solid performance in related semis included Rambus
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up 17 9/16 to 114 11/16 and LSI Logic
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Winning Dow components that helped keep the average positive included Alcoa
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McDonalds
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laggards were Disney
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PowerRating), with each down more than
4.5%.
Regarding next week’s Federal Reserve meeting, Edward Wedbush, President,
Wedbush Morgan Securities said, "The Nasdaq’s recent bounce back is
sustainable only if the Federal Reserve changes its bias going forward.
"My opinion is that if the bias remains up on rates, then I would say
that there’s a pretty good chance that the composite index for the Nasdaq has
run its course. If the Fed turns to a neutral bias, then I would expect the
Nasdaq would do even better than it has done," he added.
Looking ahead, the May existing home sales will be released Monday at 10:00
AM ET. Street estimates look for a figure of 4.83 million.