What a Week: Little Comfort for the Bulls

Wall Street remained unable to shake its monthlong malady this week as September culminated with yet more frustration (bordering on torture) for those long.

The action was consistent with recent trends; that is, it offered little solace for those with a bullish bent. For the week, the Dow Jones Industrial Average fell 1.8%, the S&P 500 lost 0.8%, the Nasdaq Composite declined 3.4%, while the Russell 2000 gained 0.5%. In September, the averages fell 5%, 5.3%, 12.7%, and 3.1%, respectively.

Another batch of earning warnings from high-profile companies and failed rally attempts stymied investors this week. Expectations that so-called window dressing at the end of the quarter would spur buying were confounded Friday, when major averages suffered their worst losses of the week and selling accelerated into the close.

Rather than buying to show they were fully invested, many mutual funds chose to take losses for tax purposes as the quarter ended, traders said. The third quarter, it seems, just wasn't worth salvaging.

For the quarter, the Dow rose 1.9% and the Russell 2000 gained 0.8%, but the S&P slid 1.2% and the Comp lost 7.4%.

Somebody Get Me a Doctor

The week began with traders still grappling with the significance of Sept. 22 -- specifically, whether central bank intervention to support the euro and President Clinton's decision to release 30 million barrels of oil from the strategic reserve had helped stock proxies establish a meaningful bottom. Or whether it would have been "better" for the profit warning by Intel (INTC) to have prompted a selling crescendo, which it might have done if not for the developments in the currency and crude markets.

The market's inability to sustain Monday morning's gains cast serious doubt on the "meaningful bottom" thesis. Major stock proxies closed uniformly lower while Cell Pathways (CLPA) slumped 67% after the Food and Drug Administration rejected the company's top drug, Aptosyn.

The theme of staggering losses by individual stocks -- including several household names -- was evident throughout the week, as myriad profit warnings weighed heavily on Wall Street's psyche

"I think you still haven't seen the final preannouncements, and with the change in SEC regulations [regarding disclosure], you're probably going to have that fear in people [that] you could see continued blowups," Rob Cohen, co-head of listed trading at Credit Suisse First Boston said Friday afternoon.

On Tuesday, Eastman Kodak (EK) shed 25% while Lexmark (LXK) lost 29% after each warned about disappointing profits. Major proxies sagged as the warnings overshadowed a positive session for Microsoft (MSFT), which rose after the Supreme Court declined to hear an expedited appeal in the company's antitrust case.

priceline.com (PCLN) was the poster child for disappointment Wednesday, falling more than 40% after revealing third-quarter revenue will not meet expectations. Still, major proxies ended with only modest losses, suggesting to some a bounce was in the offing.

A sharp rebound is precisely what occurred Thursday, when major averages each rose at least 2% amid favorable market internals. A combination of factors spurred the advance, including another dip in oil prices, positive (or not as negative as feared) comments from Procter & Gamble (PG), and a sense many big-cap technology stocks had reached levels to quicken the pulse of bargain hunters. The ability of Nortel (NT) and Cisco (CSCO) to rise despite a downgrade by Sanford Bernstein evinced the market's recuperative spirit.

Somebody Get Me a Shot

But any hopes the action Thursday would spur additional buying was short-lived. After the close of trading, Apple (AAPL) issued a profit warning, effectively halting whatever momentum had been built during the regular hours session.

On Friday, Apple's stock finished down a shocking 52% from where it closed the previous day, while major averages regurgitated much of Thursday's advance.

"I can't believe Apple is a bellwether for the technology sector, but [the market's reaction] shows any news seen as negative is an opportunity to sell," Cohen said. "The market is getting very close to a level that's decent support, but I don't think we've found it yet."

One of the most vexing aspects of the market is its refusal to provide clarity to investors spoiled in recent years by sharp, definitive moves and clear signs. It appears those looking for similarly obvious pivot points will remain frustrated.

John Bollinger, president of EquityTrader.com in Manhattan Beach, Calif., foresees the Nasdaq Comp staying mainly in the lower half of a trading range between 3200 and 5100 for the remainder of the year, with the S&P closer to the top half of its range of 1350 to 1550. Bollinger remains most bullish on prospects for mid-cap stocks, which continue to outperform; the S&P 400 rose 11.8% in the third-quarter.

Bollinger recalled the Nasdaq suffered a classic bear-market decline last spring in terms of the extent of its losses, but not in the duration. As a result, he said investors are now akin to a family having to cope with the sudden death of a beloved: Life goes on, but there needs to be a prolonged period of mourning before anything resembling normalcy returns.

Judging by the week and month just past, it appears the grieving process continues.

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