Priced for Suspension: Markets Sit Still Waiting for the Greenspan Word

SAN FRANCISCO -- If you didn't know any better, you'd think market participants were waiting for some big news announcement, as major market averages barely budged today. The Dow Jones Industrial Average fell 2.84, or 0.03%, the S&P 500 rose 3.90, or 0.3%, and the Nasdaq Composite added 18.76, or 0.7%.

Of course, market participants were "very much waiting for Alan Greenspan to say something" during tomorrow's testimony before the Senate Budget Committee, said Bob Basel, director of listed trading at Salomon Smith Barney. "One way or the other, the [market's] next move is going to be dictated by what's said about interest rates. Earnings are still important, but are more stock-specific than for the [broader] marketplace."

Related Stories

Greenspan Gives Tax Cuts, Reducing Federal Debt a Nod in Senate Address

Labor Costs Rose Less Than Expected in Fourth Quarter

Don't Start the Party Just Yet

It's of course unknowable what, if anything, the chairman will say tomorrow about possible rate cuts when the Fed meets next week, and "the official translation [of his testimony] could take as long as the interpretations of centuries-old cave drawings," according to Charles Payne, top quipster and chief analyst at Wall Street Strategies.

Actually, the interpretation attempts will be pretty instantaneous, but neither Payne nor Basel deigned to forecast what Greenspan will say tomorrow or what the FOMC will do. But Basel did dismiss the notion market players will be disappointed at anything less than 50 basis points of easing.

"Unless there's a pretty good rally into that day, then the market rallies [after the Fed meets]," the trader said. "The only way it wouldn't is if there's huge anticipation of [more easing] and it gets built into" the market.

With the Nasdaq now up 15.7% in 2001 and up nearly 27% since its intraday low Jan. 3, some observers believe that "huge anticipation" has very much occurred. Basel agreed many tech favorites have had phenomenal runs, but declared "there's still more [optimism] to be built in" for the market in general.

In a similar vein, Jay Meagrow, vice president of trading at McDonald in Cleveland, was encouraged by gains registered by Lucent LU, which rose 4.3%, and Compaq CPQ, up 9%.

Even though both tech giants have fallen on tough times and were cautious about prospects going forward, investors believe they've been "so punished" that "at least another quarter or two of difficult results" is already priced into the stocks, he said.

The trader also noted that even though today was relatively quiet, the market made a "late-day push" and trading volume remained solid, with 1.3 billion shares on the Big Board and 2.5 billion in over-the-counter activity.

Actually, major averages rose from about 1:50 p.m. EST to about 3:15, then faded before rising again in the final 30 minutes of regular hours trading. Also, the averages peaked around 11:30 a.m. and didn't revisit their respective intraday highs for the remainder of the session.

"There was a little less conviction today," Meagrow conceded, but that was probably due more to the awaiting-Greenspan factor than any other.

Things That Make You Go, Hmm...

Last night I noted that many of the views expressed by would-be guru Howard Rosencrans of HD Brous were out of step with current market developments. Particularly glaring was his recommendation to short some of the big financial names on a day when Merrill Lynch MER hit a new 52-week high. Today, Merrill slid 4.5% but the Philadelphia Stock Exchange/KBW Bank Index rose 1.3% and the Amex Broker/Dealer Index gained 2.2%. Also, Lehman Brothers LEH was among the 127 companies on the NYSE to set a new high vs. just five new lows. (New 52-week highs bested new lows 91 to 11 in Nasdaq trading.)

Rosencrans wouldn't make specific short recommendations in the financial group. But Alan Newman, editor of HD Brous' CrossCurrents, did. In the Jan. 22 issue of the newsletter, Newman recommended shorting Morgan Stanley Dean Witter MWD because of technical considerations: "We expect this head-and-shoulders pattern to break in short order," he wrote. "We can make a case for a test of major support at the November $60 level if we are right. We would stop out over $90."

Morgan Stanley Dean Witter fell nearly 3% to $84.25 today in apparent reaction to news that president and CEO John Mack is resigning, effective March 21.

There was a lot of back and forth in RealMoney.com's Columnist Conversation today about the significance of Mack's departure and the stock's subsequent decline. As the battle lines are drawn -- with the shorts getting bolder and the longs more steadfast -- all that's certain is somebody is going get hurt. Bad.

House Cleaning

Finally, several readers have chimed in recently asking for the "latest" on Don Hays, of Hays Advisory Group.

Well, the latest is the same as we last reported (if it changes, we'll surely let you know): Hays believes what's transpired lately is an "interlude rally" that will be followed by the gruesome "third phase" of the bear market, which he sees beginning sometime between April and June. Earlier this week, the strategist predicted the rally could take the Nasdaq to a range of 3000 to 3240 before peaking, but reiterated that such targets are the least precise aspect of his work.