Market Update: Stocks Loaf Through Uninspiring Session; Nasdaq Ends Slightly Higher

<LI>IBM, H-P, 3M help Dow.</LI> <LI>Biotech and boxmakers remain strong.</LI><LI>Volume stays thin.</LI>

Author:: Eric Gillin
Publish date:: Feb 6, 2001 4:17 PM EST

<LI>IBM, H-P, 3M help Dow.</LI> <LI>Biotech and boxmakers remain strong.</LI><LI>Volume stays thin.</LI>

The Dow Jones Industrial Average was a quitter. Sign it. Seal it. Deliver it.

The Dow ended down 8 points to 10,957, paring down earlier gains and again failing to close above 11,000 -- a feat it has not accomplished since Sept. 14.

The Dow drew the majority of its strength from three companies:

IBM

(IBM) - Get Report

(MMM) - Get Report

and

Hewlett-Packard

(HWP)

. The trio added a combined 35 points to the Dow. Unfortunately, H-P and 3M slid in strength toward the end of the day.

That deterioration, coupled with overall weakness and the minute-by-minute crumbling in

J.P. Morgan

(JPM) - Get Report

, helped push the Dow into the red.

Cisco

(CSCO) - Get Report

reports earnings this evening and the questions were flying about the company's performance. Would it beat estimates but give horrible guidance for the future? Would it miss estimates but say the future was too uncertain to make predictions? Some from column A? Some from column B?

Whatever the outcome, the kids were bullish on the Cisco. It rose 3.4%, to $35.75.

In addition to Cisco, strength in areas like biotechnology and PC makers was offset by weak volume. Volume on both the

New York Stock Exchange and the

Nasdaq was thin, an indication that many people are sitting out trading sessions until the economic outlook solidifies and also an indication that market moves are not supported by the full weight of the market community. That means we can look forward to a lot more sideways movement and unclear leadership.

But, biotechnology and PC makers were nonetheless strong. The

American Stock Exchange Biotechnology Index

rose 3.8%, with many of its components deep in the green.

Myriad Genetics

(MYGN) - Get Report

announced a second-quarter net loss that beat analyst estimates, while touting the discovery of a gene that puts men at risk of prostate cancer. Revenues at the company rose to $11.9 million from $8.3 million.

That was really all the news this battered sector, which has fallen for the five straight sessions, needed to rebound. As a result, Myriad rose 6.5% to $71.50. Big bellwethers

Affymetrix

(AFFX)

and

Protein Design Labs

(PDLI) - Get Report

and smaller guns

Vertex Pharmaceuticals

(VRTX) - Get Report

and

Human Genome Sciences

(HGSI)

were all atop the Nasdaq's leaderboard.

SDL's

(SDLI)

stock has been bananas all day after the

Justice Department

approved the company's merger with

JDS Uniphase

(JDSU)

. In order to get clearance for the deal, JDS Uniphase sold a fiber-optic manufacturing plant to Nortel for $3 billion in stock, but as the kids in the street say -- it was all good. The move unites JDS Uniphase, the world's largest fiber-optic gear maker, with SDL, the world's second largest. That's a whole lotta big merged company. SDL rose $11.13 to $196.50. JDS Uniphase rose 3.6% to $51.81.

Elsewhere in tech, that little rally in H-P and IBM tossed a bone to the emaciated mutts in the PC sector, reeling from slowing consumer and corporate spending. The

Philadelphia Stock Exchange Computer Box Maker Sector

index, a loser in the last five sessions, gained 3.6% today.

But, the market had its share of losers, too. Precious metals should probably consider some new adjectives after the

Philadelphia Stock Exchange Gold & Silver Index

dropped 2.1%. This is the third-straight session of losses for the gold bugs, which rose to prominence as a defensive play while the presidential election turned into a junior high student council race with juvenile behavior, lots of finger- pointing and a margin of victory somewhere in the hundreds.

Banks and insurers were also lower. The

Philadelphia Stock Exchange/KBW Bank Index

dropped 2.3%, led by a 4.3% drop in

Bank of America

(BAC) - Get Report

, while the

S&P Insurance Index

slid 2.1%. Both indices had gains yesterday.

What does this all mean? Well, for earnings season: Churn. Churn. Churn.

Sector Watch

After a positive report from

Merrill Lynch

outlined a decent future for electronics contract manufacturers, most of the biggest names in the sector fell. What gives?

Well, a lot of these guys, especially

Celestica

(CLS) - Get Report

Flextronics

(FLEX) - Get Report

and

Solectron

(SLR)

, have been rocketing up since Dec. 1. The three companies listed rose 38.4%, 56.7% and 29.6% over that span respectively.

And what the markets giveth, the markets taketh away -- for profit-taking purposes. Celestica dropped 5.2%, Flextronics dropped 3%, while Solectron fell 4.1%.

Bonds/Economy

Treasury notes are trading slightly lower as the market awaits the auction of $32 billion worth of new and reopened Treasury debt. Dealers are selling to create space in their portfolios for the latest available issues due on the market later this afternoon. The long bond has slid further in reaction to the advice of a

Bond Market Association

committee that its issue be continued. Yields are up by about 3 basis points at the short end and by a point for the bond.

The

Treasury Borrowing Advisory Committee

, comprising investors, had suggested last week that the 30-year bond be removed after its August sale due to continued federal budget surpluses. However, the

Primary Dealer Committee

of the BMA, composed of dealers that trade directly with the

Federal Reserve in the Treasury market, advised against it yesterday to lessen the cost of buying back older debt. It also said that the 30-year remained the most suitable security for long-term oriented bond investors.

The benchmark 10-year

Treasury note lately was down 8/32 to 104 2/32, yielding 5.203%.

In economic news, the

BTM-UBSW Weekly Chain Store Sales Index

(

definition |

chart ) was down 0.1% for the week ending Feb. 3 after having advanced 0.6% in the previous week. The slight fall was due to a decrease in consumer spending with no retailer exceeding the weekly sales target. The yearly moving average rose 3.7% from its reading 12 months earlier, although it was down from 3.9% recorded in the end of January. Analysts believe that consumer spending will fall no further, and will derive strength from the cash available through mortgage refinancing, lower tax rates and Fed easing.

The

Redbook Retail Average

(

definition |

chart ) for the fifth week of January was up 2.2% from its value in the closing week of December. Sales for the month rose 3.2% from the same period a year ago and have been targeted for a 3.1% gain in February. Fast moving merchandise due to heavy promotion and heavy discounts have kept the numbers healthy.