Sir Isaac Newton taught us the following: What goes up must come down.
When it comes to the
Nasdaq, the question on everybody's mind is
down. At the end of the day, the tech index was off about 29 to 2706, while the
Dow Jones Industrial Average posted a pretty nice day for itself.
This morning, news that the economy is slowing hit the Street. The third-quarter preliminary
gross domestic product data showed the estimated GDP growth rate at 2.4%, the slowest since the third quarter of 1996, but above the expected 2.2%. The
initial estimate, on Oct. 27, of third-quarter GDP growth was 2.7%.
Today's report encouraged Old Economy investors, who picked up shares of retail, drug, and financial stocks. But it did little to convince tech buyers, who got rid of chip and PC stocks this afternoon.
According to a report released this morning by
analyst Don Kapetanakis, the short-term outlook for the Nasdaq does not look good. "We are beginning to see an increase in breadth on the downside. While we see the short-term as negative, the intermediate term appears oversold."
Over the past few weeks, analysts have debated the bottoming process. Kapetanakis believes that a bottom is starting to form. "We have seen a downside thrust, which started to maximize in mid-October and since then, it has dissipated, despite the fact that the indices have moved lower."
Still, investors wonder how low the tech-laden Nasdaq will go. "For the Nasdaq, after moving through support level of 3000, and secondary support level of 2800, we see the next viable support level of 2600," the Merrill report said.
The investment house cited large-cap tech stocks
, up 1.7% to $42.75;
, off 2.9% to $65.13; and
, lower by 3.6% to $39.13, as the most stable. The analysts believe those tech stocks are carving out a bottom.
In a separate report today, Merrill Lynch addressed concerns that have flagged the semiconductor stocks with cautious optimism this week. Merrill analyst Joe Osha wrote: "The argument for a sustained downturn in the semiconductor business remains questionable. We think shorter-term catalysts are absent, but longer-term investors should continue to be comfortable owning high-quality communications names in our sector."
In the wake of communications chipmaker
tumble this week,
Morgan Stanley Dean Witter
upgraded the stock to a strong buy from outperform. In recent action, Broadcom bounced back 11.7%.
Philadelphia Stock Exchange Semiconductor Index
was off slightly.
Philadelphia Stock Exchange Computer Box Maker Index
, which tracks PC-makers, was also down, lower by 0.4%. This morning, Merrill Lynch lowered sales estimates for component
, which fell 4.8%.
Anchoring the Dow in late-day trading were
, up 5.9% to $51.88,
, ahead 2.4% to $94.88, and
, higher by 3.3% to $56.94. The Dow got the most negative pull -- 25 points -- from
, which was downgraded this morning by
Back to top
Nasdaq Biotechnology Index
, which dropped 5.7% yesterday ended down another 0.4%. Some market observers say the biotechs are ready for a bounce, though.
this morning initiated coverage of six therapeutic biotechnology companies with buy or strong buy ratings.
Oil-related stocks were suffering today. The
American Stock Exchange Natural Gas Index
was down 5% and the
American Stock Exchange Oil & Gas Index
was 3.2% lower. Crude oil prices lately were down from yesterday's close. The price of oil has been under pressure a bit lately after climbing in the past few months.
Back to top
Treasuries were higher following the downward revision to third-quarter economic growth, even though the revised growth rate was higher than expected. The downturn in stock prices was helping boost them, though, as was the completion of the Treasury Department's monthly two-year note auction.
The benchmark 10-year
Treasury note lately was up 1/32 at 101 15/32, lowering its yield to 5.553%.
The government revised its estimate of third-quarter
gross domestic product growth down to 2.4% from 2.7%. That is the slowest rate since the third quarter of 1996, but not as slow as economists were expecting. Economists polled by
forecast a revision to 2.2%, on average.
The slide in stock prices helps send money into bonds by suggesting that the economy will slow further.
The completion of the two-year note auction ends dealer unwillingness to buy Treasuries so as not to drive prices higher ahead of a bidding deadline.
Back to top