Brigitte
10.12.2000, 12:07
* * * *
12/9/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Friday gave us confirmation, but with the courts' rulings, we are not
sure of what.
- Job's numbers about as expected ahead of another busy economic week.
- Subscriber Questions
- Team Trades
We have confirmation of a Nasdaq rally, but after hours told a different
story.
It was a very good day Friday. The unemployment numbers were palatable,
and stocks were ready to continue the upward momentum we had seen
building. The Nasdaq gave us the big move on strong volume, and along
with the S&P 500, confirmed last Friday's reversal. The holiday rally was
in gear and rolling. Then Florida's so-called gang of seven muddied the
water once again, casting doubt on whether this move will continue in the
near future. The uncertainty is back in the picture for now, and that
puts Friday's move in jeopardy. After hours stocks were decidedly weaker
as investors 'voiced' their dismay with many good moves sliced by
two-thirds, three-quarters and more. For example, JNPR closed at 166.13,
and traded as low as 154 after hours before closing out the week at 156.
This weekend is bringing a lot of action on different fronts, but the one
certainty is that this election is not over, and now more than at any
other time during this spectacle we are in danger of a real crisis as
different governmental branches vie for supremacy. What looked certain
with respect to the markets on Friday now is in doubt. Here we go again.
This weekend we have seen dramatic changes in the election outlook. The
scattered Florida recounts have been stopped but we will still have legal
wrangling and worry over the outcome of Florida's electors. The way the
markets have responded in the past, we would have to expect stocks to
start giving up some of Friday's gains as investors grope for guidance.
We are noting support levels and where stocks were after hours on Friday
to help give some indication of what we might expect on Monday.
The market had just finally hit the point where it was absorbing the
earnings warnings and related bad news now that it could focus on a future
where the Fed was friendlier and an administration that was not afraid to
use tax cuts to spur the economy if needed. Now the market will be in the
situation of waiting and wondering again. We will see just how strong
this move is at this juncture. Our hope is that at worst it moves
sideways and allows some of the leading stocks to complete their bases for
a move up when the election is resolved. That has to be done in any
event. Still, we would have preferred to have this obstacle out of the
way during that time.
We also have to be ready in the event support levels do not hold and the
indexes decide to sell back down until resolution is reached. That will
put the defensive plays back into the picture for now, though it may be
more of a short-term play this time around. The reason we say that is due
to the change in the Fed's position on interest rates. We have to
emphasize the importance of that change. Now at least investors know the
Fed is going to take its foot off of the market's neck. There is a light
at the end of the tunnel, and if action is taken in time it most likely is
not an oncoming train. To us that means any selling we see this week
won't be as damaging as what we experienced right after the election. The
market wants to rally now, and if it is given positive news we think it
will do so.
THE ECONOMY
This week we have another full slate of economic news of the type that the
Fed will be watching for its December 19 meeting. The Fed is on a
week-by-week basis at this point, and continued declining economic reports
add further fuel to a December quarter point rate cut. The television
analysts keep saying the Fed will not cut rates because things are not as
bad as 1998. What they forget that is in 1998 the Fed took drastic
rate-cutting action, dropping rates by three-quarters of a point on the
first cut, and then by one-half point the last two cuts. The Fed can and
should act in December with a quarter point cut to help offset the
remaining 75 basis point increase that has yet to hit the economy. Just
because the current crisis is not as bad as 1998, that does not prevent
the Fed from taking a less drastic step with a quarter point rate cut to
insure the 'soft landing.'
Retail sales are out Wednesday, PPI on Thursday, and the CPI on Friday.
Flagging retail sales and continued lack of inflationary pressure on the
PPI and CPI front will be more good news for a potential rate cut. Retail
sales are expected to rise 0.2% overall. This is the holiday shopping
season, but retail sales are not jumping as one would expect. We have
talked with many retailers and shoppers this past week. On Friday several
retailers that heretofore had not put many items on sale were doing so. A
sign of weaker consumer spending in the busiest shopping season of the
year.
Friday's unemployment figures were mixed as to expectations. November
non-farm payrolls grew by 94,000 jobs (1.6%) versus the expected 150,000.
October's number was originally reported at 137,000 new jobs, but was
revised downward to 77,000. Unemployment was up 0.1% to 4.0%. Average
hourly wages rose 0.4% (6 cents) versus the 0.3% expected. That gives
some pause, but with productivity holding up well and the economy slowing,
there will be higher unemployment and less pressure on wages. Moreover,
wages have been rising in a range of 3.2% to 4% over the last three years,
and this report shows that wages are staying within that range.
Another interesting measure came out Friday. Credit card write-offs rose
to 5.39% over October 1999. This is the first rise since February 1998.
Household and business borrowing fell to a 4.2% annual rate, the slowest
in six years and down from the 5.4% rate in the first to quarters of 2000.
THE MARKETS
What a day. A strong confirmation of last Friday's reversal on the Nasdaq
and the S&P 500. Tech stocks and about everything else moved up on strong
volume. The stage is set for a rally to the end of the year, possibly
beyond if we can get the election put to rest early this week. Monday
morning the U.S. Supreme Court is to hear oral arguments on the Bush
appeal of the Florida Supreme Court's most recent ruling. It is a close
issue among the justices, so an opinion most likely will not be out until
Tuesday. This ruling could end the election. If it does, the market will
continue the rally.
Overall market stats:
VIX: 2.13; -2.85. Volatility always takes a back seat when the market
puts its head down and rallies. After weeks of 30+ readings, the market
looks ready to move up.
Put/Call ratio: 0.59; -0.19. The put buyers and short interests were
pretty much flushed out in Tuesday's rally. Accordingly, put buyers were
down sharply Friday. There are still short interests that are looking at
the 3000 level as an exit point. If the market looks to close over that
level on any particular day, there will be a rush of short covering. That
will spurt the market up even higher.
NASDAQ: We did get that confirmation move that we have talked a lot
about. That is the stage-setter for further rallying; it does not
guarantee it, but all major rallies have a confirmation day. The index
was down after hours on the Florida court's ruling, but the U.S. Supreme
Court's stay will act as a counterbalance to that news. Uncertainty
still, but still the possibility of a quicker resolution.
Stats: Up 164.77 points (6.0%) to close at 2917.43.
Volume: 2.327 billion shares (+33%). Heavy, above average volume on the
confirmation move is what we look for and what we got. Up volume was
1.892 billion shares versus 344 million shares to the do
12/9/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Friday gave us confirmation, but with the courts' rulings, we are not
sure of what.
- Job's numbers about as expected ahead of another busy economic week.
- Subscriber Questions
- Team Trades
We have confirmation of a Nasdaq rally, but after hours told a different
story.
It was a very good day Friday. The unemployment numbers were palatable,
and stocks were ready to continue the upward momentum we had seen
building. The Nasdaq gave us the big move on strong volume, and along
with the S&P 500, confirmed last Friday's reversal. The holiday rally was
in gear and rolling. Then Florida's so-called gang of seven muddied the
water once again, casting doubt on whether this move will continue in the
near future. The uncertainty is back in the picture for now, and that
puts Friday's move in jeopardy. After hours stocks were decidedly weaker
as investors 'voiced' their dismay with many good moves sliced by
two-thirds, three-quarters and more. For example, JNPR closed at 166.13,
and traded as low as 154 after hours before closing out the week at 156.
This weekend is bringing a lot of action on different fronts, but the one
certainty is that this election is not over, and now more than at any
other time during this spectacle we are in danger of a real crisis as
different governmental branches vie for supremacy. What looked certain
with respect to the markets on Friday now is in doubt. Here we go again.
This weekend we have seen dramatic changes in the election outlook. The
scattered Florida recounts have been stopped but we will still have legal
wrangling and worry over the outcome of Florida's electors. The way the
markets have responded in the past, we would have to expect stocks to
start giving up some of Friday's gains as investors grope for guidance.
We are noting support levels and where stocks were after hours on Friday
to help give some indication of what we might expect on Monday.
The market had just finally hit the point where it was absorbing the
earnings warnings and related bad news now that it could focus on a future
where the Fed was friendlier and an administration that was not afraid to
use tax cuts to spur the economy if needed. Now the market will be in the
situation of waiting and wondering again. We will see just how strong
this move is at this juncture. Our hope is that at worst it moves
sideways and allows some of the leading stocks to complete their bases for
a move up when the election is resolved. That has to be done in any
event. Still, we would have preferred to have this obstacle out of the
way during that time.
We also have to be ready in the event support levels do not hold and the
indexes decide to sell back down until resolution is reached. That will
put the defensive plays back into the picture for now, though it may be
more of a short-term play this time around. The reason we say that is due
to the change in the Fed's position on interest rates. We have to
emphasize the importance of that change. Now at least investors know the
Fed is going to take its foot off of the market's neck. There is a light
at the end of the tunnel, and if action is taken in time it most likely is
not an oncoming train. To us that means any selling we see this week
won't be as damaging as what we experienced right after the election. The
market wants to rally now, and if it is given positive news we think it
will do so.
THE ECONOMY
This week we have another full slate of economic news of the type that the
Fed will be watching for its December 19 meeting. The Fed is on a
week-by-week basis at this point, and continued declining economic reports
add further fuel to a December quarter point rate cut. The television
analysts keep saying the Fed will not cut rates because things are not as
bad as 1998. What they forget that is in 1998 the Fed took drastic
rate-cutting action, dropping rates by three-quarters of a point on the
first cut, and then by one-half point the last two cuts. The Fed can and
should act in December with a quarter point cut to help offset the
remaining 75 basis point increase that has yet to hit the economy. Just
because the current crisis is not as bad as 1998, that does not prevent
the Fed from taking a less drastic step with a quarter point rate cut to
insure the 'soft landing.'
Retail sales are out Wednesday, PPI on Thursday, and the CPI on Friday.
Flagging retail sales and continued lack of inflationary pressure on the
PPI and CPI front will be more good news for a potential rate cut. Retail
sales are expected to rise 0.2% overall. This is the holiday shopping
season, but retail sales are not jumping as one would expect. We have
talked with many retailers and shoppers this past week. On Friday several
retailers that heretofore had not put many items on sale were doing so. A
sign of weaker consumer spending in the busiest shopping season of the
year.
Friday's unemployment figures were mixed as to expectations. November
non-farm payrolls grew by 94,000 jobs (1.6%) versus the expected 150,000.
October's number was originally reported at 137,000 new jobs, but was
revised downward to 77,000. Unemployment was up 0.1% to 4.0%. Average
hourly wages rose 0.4% (6 cents) versus the 0.3% expected. That gives
some pause, but with productivity holding up well and the economy slowing,
there will be higher unemployment and less pressure on wages. Moreover,
wages have been rising in a range of 3.2% to 4% over the last three years,
and this report shows that wages are staying within that range.
Another interesting measure came out Friday. Credit card write-offs rose
to 5.39% over October 1999. This is the first rise since February 1998.
Household and business borrowing fell to a 4.2% annual rate, the slowest
in six years and down from the 5.4% rate in the first to quarters of 2000.
THE MARKETS
What a day. A strong confirmation of last Friday's reversal on the Nasdaq
and the S&P 500. Tech stocks and about everything else moved up on strong
volume. The stage is set for a rally to the end of the year, possibly
beyond if we can get the election put to rest early this week. Monday
morning the U.S. Supreme Court is to hear oral arguments on the Bush
appeal of the Florida Supreme Court's most recent ruling. It is a close
issue among the justices, so an opinion most likely will not be out until
Tuesday. This ruling could end the election. If it does, the market will
continue the rally.
Overall market stats:
VIX: 2.13; -2.85. Volatility always takes a back seat when the market
puts its head down and rallies. After weeks of 30+ readings, the market
looks ready to move up.
Put/Call ratio: 0.59; -0.19. The put buyers and short interests were
pretty much flushed out in Tuesday's rally. Accordingly, put buyers were
down sharply Friday. There are still short interests that are looking at
the 3000 level as an exit point. If the market looks to close over that
level on any particular day, there will be a rush of short covering. That
will spurt the market up even higher.
NASDAQ: We did get that confirmation move that we have talked a lot
about. That is the stage-setter for further rallying; it does not
guarantee it, but all major rallies have a confirmation day. The index
was down after hours on the Florida court's ruling, but the U.S. Supreme
Court's stay will act as a counterbalance to that news. Uncertainty
still, but still the possibility of a quicker resolution.
Stats: Up 164.77 points (6.0%) to close at 2917.43.
Volume: 2.327 billion shares (+33%). Heavy, above average volume on the
confirmation move is what we look for and what we got. Up volume was
1.892 billion shares versus 344 million shares to the do