Nasdaq Gets Clobbered as Words Prove to Actually Have Meaning
SAN FRANCISCO -- The law of unintended consequences reared its ugly head today.
| |||||||||||||||||||||||||||||||||||||||||||||
Feeling a Change in the Wind
The action this week -- indeed the action since mid-March -- has some market players hopeful the long-awaited, long-anticipated revival of blue-chip stocks at the expense of technology issues is at hand. Stanley Nabi, chief investment officer at DLJ Investment Management, admitted having expected such a shift previously, only to have been proven wrong. "But there is some accumulation of factors here that show there may be a better balance developing between the Old Economy and the New Economy," Nabi said. The veteran strategist noted 18 months ago (or so) areas such as pharmaceuticals were trading with price-to-earnings ratios of 35 to 40 times, thus making the choice to pay higher P/Es for technology stocks easier to digest. But currently, many of those non-tech industries have "reached levels of valuation reminiscent of the recession" in the early 1990s, while tech names are trading at higher P/Es still. "The disparity of valuation has become so wide it's become noticeable even to those who don't notice" valuation, he said. Other factors include the increasing supply of high-tech stocks, either via the end of lock-ups on IPOs even as the same -- and other -- companies attempt to sell secondary offerings. Additionaly, the rotation into different "subsegments" within technology by speculators has become so quick and intense, there may not be any sectors left for the momentum players to get into, he said. Finally, there are "seasonal factors," such as the end of the quarter. While so-called window dressing is usually thought of as a time when fund managers buy winners, Nabi noted many also "take profits" to "average down" exposure to names that have become outsized parts of portfolios. "A combination of these things is going to slow the demand for these high P/E tech stocks," he said. "I'm not going to pound the table to say it's happening now and we see the turn. But it has to happen sometime in the short-term." But another market player dismissed talk of a shift. "I'm sticking with the scenario rates are going higher, the Fed will slow the consumer and stocks like Home Depot (HD) that are up sharply today probably have more downside than upside right now," he said. "I'd lean more toward the New Economy than the Old for the shorter run. They're less affected by the rate scenario than the old-line stocks we've seen rally today." Among other indices, the Dow Jones Transportation Average rose 9.27, or 0.4%, to 2690.24; the Dow Jones Utility Average rose 6.42, or 2.3%, to 290.77; and the American Stock Exchange Composite Index shed 15.61, or 1.5%, to 1000.90. Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately.>To order reprints of this article, click here: ReprintsTheStreet Premium Services For Personal Service: 877-471-2967
Jim Cramer's Action Alerts PLUS:
Trade right alongside a Wall Street pro — enjoy access to his Charitable Trust portfolio and be sent trade alerts BEFORE he makes a move. Learn MoreETF Profits:
Get money-making ideas from the hottest investment vehicle on the planet. Our experts show you how to play various ETF sectors to help pump-up your portfolio. Learn MoreOptionsProfits:
Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn MoreReal Money:
Our team of professional Wall Street Pros — including Jim Cramer, Doug Kass, and Nicholas Vardy — delivers intelligent analysis, timely trade ideas, and colorful commentary. Learn MoreStocks Under $10:
Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn MoreTo begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
blog comments powered by Disqus
| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 12,890.46 | 1,351.95 | 2,927.23 | 20.47 |
Oil *
118.75
|
|
UP
6.51 |
UP
1.99 |
UP
11.37 |
UP
0.72 |
10 Yr
2.05%
SPDR Gold
168.02
|
|
+0.05%
|
+0.15%
|
+0.39%
|
+3.65%
|
Data delayed 20 minutes |

Connect with TheStreet