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Market Update: Nasdaq Bouncing Back in Morning Action After Recent Trouncing

The Dow, meanwhile, continues to struggle.

Technology stocks were holding onto their out-of-the gate gains while blue-chips succumbed to worries about soaring oil prices and euro weakness. The Dow Jones Industrial Average was lately down 26 to 10,781, whlile the Nasdaq Composite Index was still holding on to its early vigor, up 61 to 3788.

Oil and euro threats could also deflate a tech bounce later today. Yesterday, a strong rally in semiconductors was unable to sustain itself and sputtered into the close. The Comp was already beginning to slide from its morning highs.

With earnings pre-announcement season upon us, the combination of a slowing economy, rising fuel prices, a depressed euro and concerns over declining demand for semiconductors and PCs has created a veritable battlefield for stocks in recent action. The pre-announcement season kicked off last week and should last until the end of September, and investors have been quick to punish companies that warn of earnings weakness. Between Friday and Monday's action, the Nasdaq plummeted 187 to 3727, while the Dow gave up 279 to 10,809.

Online book retailer

Barnes &


was one of the Nasdaq's most active stocks after announcing a marketing deal with



this morning. The bookseller was lately up 31.5% to $6 while Yahoo! was 0.9% higher to $105.88.


(INTC) - Get Report

, which was getting a powerful boost from a

Banc of America

upgrade on the stock this morning, was padding the Dow's fall, adding some 13 points of upside.

J.P. Morgan

(JPM) - Get Report

was also doing its part, lately up 1.3% and contributing 12.6 points to Dow.

J.P. Morgan was soaring along with the rest of the brokerage stocks after

Goldman Sachs

(GS) - Get Report

reported earnings 11 cents better than analysts' estimates.

Also this morning, insurance giant

American International Group's

(AIG) - Get Report

president and COO Evan Greenberg unexpectedly resigned. Evan Greenberg was widely anticipated to become the company's new CEO when his father, Maurice Greenberg, steps down. Evan Greenberg gave no other reason for his decision except the always-cryptic "pursuing other interests." AIG shares rose 2.6% on the news.

In the world of blue-chip industrials, Dow component


(AA) - Get Report

was oil's first victim today. The company issued a profit warning Monday after the close, citing higher energy costs and softening markets. Alcoa was off 3.9% to $25.94.

TST Recommends

wrote about Alcoa in a

separate article. Despite the news,

Merrill Lynch

reaffirmed its buy rating on the stock this morning, saying the stock is significantly undervalued at current prices.

Lehman Brothers

also stepped up to defend the stock, saying any weakness is a long-term buying opportunity.

Diversified manufacturer


(IR) - Get Report

also warned that it sees lower-than-expected 2000 results due to a weaker euro and slower demand for infrastructure-related equipment. The company's shares were lower in off-hours action, and the stock was getting hit this morning, off 10.5% to $35.56.

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Sector Watch

Following the Intel upgrade, semiconductor stocks were soaring, with the

Philadelphia Stock Exchange Semiconductor Index

lately up 3%.

Oil stocks hit a bump in the road after continuing 10-year highs in oil prices had generated an incredible run. The

American Stock Exchange Oil & Gas Index

was lately down 1.9% to 540.20, while the

American Stock Exchange Natural Gas Index

was down 2.1% to 228.96.

Brokerage stocks were getting a bounce from Goldman Sachs earnings, with the

American Stock Exchange Broker/Dealer Index

up 0.4% to 646.25.

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The trend that has taken hold in the Treasury market in the last week -- long-term yields rising while short-term yields hold steady -- is on hold for today.

In the last several trading sessions, long-term Treasuries have fallen in price so much that the 30-year bond's yield finds itself higher than the 10- and five-year note yields for the first time since January. The shift has been driven mainly by the belief that the

Fed is unlikely to hike interest rates again.

But the shift was so sudden and violent that market participants are not surprised to see it pause for a day. After all, anyone who has simultaneously owned short-term Treasuries and been short long-term Treasuries over the last week was sitting on a fat profit, and could reasonably have been expected to close out those positions by selling the short-term issues and buying back the long-term ones.

The benchmark 10-year Treasury note lately was unchanged at 99 3/32, its yield 5.869%. But the 30-year Treasury snapped a three-session losing streak, and lately was about a quarter-point higher.

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