The Bush rally is over. Al Gore conceded last night, confirming that George W. is indeed the one on his way to the White House, but investors were betting that the rally on that news had already been accounted for in stock prices. That's called buy-on-the-rumor/sell-on-the-news. And the major indices were headed down as earnings and economy worries gripped the market.
Nasdaq had come off its lows, but remained underwater. PC-makers and semiconductor stocks rebounding from yesterday's losses were countered by weakness everywhere else. The
Dow remained deep in the red on weakness in financial giant
The Nasdaq wasn't helped much by a positive report from
on the tech index this morning. Merrill said it is bullish on the Nasdaq over the next few months, thinks the index is oversold and expects it won't fall below 2,500.
But some individual stocks in the report were rising. "A lot of technology names are beginning to round out some very nice bottoms," said Merrill, which recommended
. Most of these names were rising 3% to 5%, but Microsoft was up just 1%.
Corning was also getting a boost after it bucked the confession trend this morning and said it expected fourth-quarter earnings to hit the higher end of its previously announced forecasts of 26 cents to 28 cents. Corning also said it expected fiber-optics volume to grow 30% to 35% in the fourth quarter and that for 2001, it will earn $1.40 to $1.43 a share. The current estimate for the year is $1.43. Corning was 1.2% higher. Optical stocks were some of the last highflying tech stocks as the Nasdaq dove lower this fall.
In the broader market, financials were a mess as concerns that a
weak stock market was cutting into earnings came to the fore. This could become an important issue all over the map this earnings season. This morning, merger partners
Chase Manhattan Bank
and J.P. Morgan warned they would miss fourth-quarter earnings estimates because of weakness in their capital investments.
took a closer look at what the companies
said. J.P. Morgan, which has had a steep rise in the past week, was a major drag on the Dow, cutting over 59 points from the blue-chip index. Chase was down 6%.
Philadelphia Stock Exchange /KBW Bank Index
was off 3.1%.
capital spending, a thriftier consumer and burgeoning credit risk have some fearing the economy is headed into a recession.
Some feel the economy's only hope for recovery is the
Federal Reserve. Last week, the Fed said that signs showing the economy is slowing too sharply could spur it to act. The market is hoping that Fed Chairman
Alan Greenspan will cut interest rates in the next few months -- and the sooner the better. The Fed meets next on Dec. 19 to decide its interest-rate policy. Lower interest rates help speed up the economy by making borrowing cheaper and encouraging corporate and consumer spending.
This morning, the November
producer price index (known as PPI) showed that producer prices growth slowed in November to 0.1%, right in line with expectations. The PPI had risen 0.4% for October. However, producer prices excluding energy and food -- called the core PPI -- were unchanged in November compared to October. Economists polled by
had expected this core number to rise 0.1% rise.
The producer price index measures the change in prices received by domestic producers of commodities in all stages of processing. Investors may have hoped for weaker numbers -- weak enough to encourage the Fed to cut rates next week.
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Sectors everywhere were bathed in red this morning, with only the most defensive of defensive stocks -- that's gold -- and yesterday's biggest tech losers -- the boxmakers and the semiconductors -- in the green. The
Philadelphia Stock Exchange Gold & Silver Index
was lately 1.4% higher,
Philadelphia Stock Exchange Semiconductor Index
was up 14%, and the
Philadelphia Stock Exchange Computer Box Maker Index
was rising 1.6%.
Other defensive stocks thought to be favored by a Bush presidency -- such as drugs and tobacco -- were falling, however, in a case of buy on the rumor, sell on the news. The market was selling on the theory that a Bush presidency has already been accounted for in these stocks. The
American Stock Exchange Pharmaceutical Index
was falling 0.7% and the
American Stock Exchange Tobacco Index
was tumbling 0.4%.
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Bond prices were higher after a report showed little change in goods prices at the wholesale level, suggesting that inflation will remain under control.
The benchmark 10-year
Treasury note was up 16/32 at 104 6/32, dropping its yield to 5.194%. That yield represents a new low for the year.
Producer Price Index
), which measures prices paid by businesses for goods, rose 0.1% in November, in line with the average forecast of economists polled by
. The annual rate of increase of producer prices held steady at 3.6%.
The core PPI, which excludes food and energy prices, was unchanged. Its annual rate also held steady, at 1%.
In other economic news, first-time claims for unemployment insurance fell for the second week in a row, indicating increasing demand for workers. Bond investors would rather see slackening demand, which would signal economic weakness.
Initial jobless claims
) fell to 320,000 -- the lowest in six weeks -- from 352,000. The four-week average fell to 343,250 from last week's 28-month high of 345,250.
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