Aaron Task
SAN FRANCISCO -- "It could have been worse" was about the only solace those long could take from market action both Friday and for the entire week, which saw the Dow Jones Industrial Average fall 2.6%, the S&P 500 decline 4.2% and the Nasdaq Composite lose 9%.
(MSFT Quote - Cramer on MSFT - Stock Picks), which fell 11.3% after issuing a profit warning late Thursday. A midafternoon push ran out of steam and the Dow closed at its lows, down 2.3% to 10,434.96, but broader-market averages closed off their worst levels of the session. The S&P ended Friday off 2.1% at 1312.33 vs. a low of 1305.38, while the Comp ended down 2.7% at 2654.42 vs. a nadir of 2596.03. Bleier suggested that Microsoft made a successful "retest" of its recent lows today and that the Nasdaq did the same, even if the index didn't trek all the way down to its Nov. 30 low of 2523. The strategist cautioned that he's not looking for a V- or even a U-shaped bottom for the Comp, but believes the index has established a new trading range between 2500 and 3500. "I don't think we'll have the capitulation bottom to Nasdaq 2000 [or lower] some are suggesting," he said. "I'm not saying the world is the greatest place, but the successful-test theory is a good theory for the year-end. There are some cross-currents of tax selling [but], I'm sorry, I'm optimistic." To some, a Wall Street strategist feeling the need to apologize for being optimistic might indicate sentiment has gotten sufficiently negative that a true bottom is at hand. But not according to Michael Driscoll, director of listed trading at Credit Suisse First Boston. "The election is out of the way but you got the economy, earnings and the political situation -- it's an awful lot on people's plates and very disconcerting," Driscoll said. "The market is in for a bit of rough sledding. I don't think we're anywhere close to capitulation but I see a gradual erosion, a melting away" of major averages, along with people's confidence.'W' for 'Victory' and 'Warning'
Traders were confident heading into the week after the prior week's gains, and expectations that both triple-witching expiration and resolution of the presidential election would encourage buyers. Such sentiment helped major proxies close uniformly higher Monday, with the Comp's 3.4% gain leading the way. But cautious comments from Pfizer (PFE Quote - Cramer on PFE - Stock Picks) and earnings warnings by Advanced Micro Devices (AMD Quote - Cramer on AMD - Stock Picks) and Lowe's (LOW Quote - Cramer on LOW - Stock Picks) presaged a slew of similar announcements to come. Eastman Kodak (EK Quote - Cramer on EK - Stock Picks) warned Tuesday but closed higher, further encouraging optimists, even as major proxies ended mixed. Compaq Computer (CPQ Quote - Cramer on CPQ - Stock Picks) raised the red flag after the close but many observers said that was not shocking, given prior warnings in the PC space. Additionally, rally hopes were raised by the Supreme Court's decision Tuesday evening that effectively ended Al Gore's challenge of election results, clearing the way for George W. Bush to be declared president-elect. But election resolution only seemed to heighten the earnings uncertainty, exacerbated Wednesday by warnings from Whirlpool (WHR Quote - Cramer on WHR - Stock Picks) and Illinois Tool Works (ITW Quote - Cramer on ITW - Stock Picks). Compaq's warning weighed on a host of PC names, while storage stocks such as Sun Microsystems (SUNW Quote - Cramer on SUNW - Stock Picks) and Veritas (VRTS Quote - Cramer on VRTS - Stock Picks) also declined, sending the Comp down 3.7% and the S&P off 0.8%. The Dow managed to rise 0.2%, behind strength in tobacco, pharmaceutical and drug stocks. But Gore's concession Wednesday evening was overshadowed Thursday by profit warnings from merger partners J.P. Morgan (JPM Quote - Cramer on JPM - Stock Picks) and Chase Manhattan (CMB Quote - Cramer on CMB - Stock Picks), which eliminated financials as a safe haven for investors. Separate warnings from overnight delivery giants FedEx (FDX Quote - Cramer on FDX - Stock Picks) and United Parcel Service (UPS Quote - Cramer on UPS - Stock Picks), as well as Maytag (MYG Quote - Cramer on MYG - Stock Picks) further pressured stock proxies, which fell across the board, led by the Comp's 3.3% decline. Shortfalls after the bell Thursday by Microsoft and Clorox (CLX Quote - Cramer on CLX - Stock Picks) and Black & Decker's (BDK Quote - Cramer on BDK - Stock Picks) red flag Friday morning capped a week of such announcements, which fostered growing concerns about the state of the economy. "Red flags on earnings are not just from 'New Economy' stocks; it's pretty much across the board," observed Tony Cecin, manager of Nasdaq trading at U.S. Bancorp Piper Jaffray in Minneapolis. "Every time it looked like [the market] was getting some positive momentum [this week], someone else preannounced. I think the mood [among traders] is more frustration than anything else" as the weekend beckons. Cecin was encouraged by Federal Reserve
chairman Alan Greenspan's acknowledgement of the slowdown in a
speech Dec. 5. But unlike others, the trader does not expect the Fed to do anything more than change its bias when it meets next Tuesday. "There's no question [the economy] is slowing and has been slowing. The question is how far, how fast," the trader mused. A Fed ease next week "would be a clear sign they'd ramped up rates a little too far, but it's too early to make a real good judgment and ascertain beyond a shadow of a doubt." Given market action this week, the risk may be less that it's too soon to judge the economy but more that it's possibly too late for even Fed action to improve its short-term health.
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