Market Update: Stocks Skittish as Investors Try to Read Greenspan
Investors weren't sure how to read
Fed Chairman
Mr. G's comments on the economy this morning. And many of them were clearly sitting it out until they could sort through his words.
The major indices jockeyed nervously around the flatline at the open in skinny volume, backing and filling as Greenspan's speech before the
House Finance Committee
unfurled. Breadth was very narrowly positive on both exchanges, with decliners just barely beating advancers on the
Nasdaq and advancers ahead by 13 to 11 on the
NYSE.
In a
printed version of that speech, Greenspan reiterated that the arctic freeze on the economy began to thaw a little in January, but also said that the slowdown has not yet "run its full course," and that the Fed has "quickened" its hand on interest-rate cuts.
Wall Street is hoping Greenspan will tip his hat toward imminent rate cuts sometime during the testimony. Stocks have seesawed in the past several days as expectations wavered over whether or not the Fed will cut rates before its next official meeting on March 20. While the above comments do not necessarily rule out a rate cut before the Fed's official meeting, they don't support such action either.
Tech stocks were all over the map this morning. Even programmable chipmaker
Altera
(ALTR)
was on both sides of the flatline. The company said after the close of regular trading yesterday that its first-quarter revenue would fall 20% sequentially. It also got hit by
Lehman Brothers'
TheStreet Recommends
analyst
Dan Niles, who
revised his estimates on the company's earnings for the second time in a week. Niles also
jumped on Altera rival
Xilinx
(XLNX)
.
Altera was lately off 0.8% and Xilinx was down 1%. The
Philadelphia Stock Exchange Semiconductor Index
was down 2.8%.
Battered bellwethers networker
Cisco
(CSCO)
, fiber-optics leader
JDS Uniphase
(JDSU)
and chipmaking king
Intel
(INTC)
were the most actively traded stocks on the Nasdaq. Cisco was up 0.8%, JDS was off 2.3% and Intel was up 2.2%. Mobile-phone maker
Nokia
(NOK)
and telecom-equipment maker
Nortel
(NT)
were the favorite trades on the New York Stock Exchange, up 4% and 0.4% in that order.
Meanwhile, data out this morning on fourth-quarter
gross domestic product showed estimates were revised downward to 1.1% annual growth from a previous estimate of 1.4%. Economists had forecasted that the revision -- which entails a more complete calculation of GDP -- would bring the number down to 1%. GDP -- the output of goods and services produced in the U.S. -- has slowed sharply; it was 5.6% in the second quarter of 2000.
But there was good news in the report for the inflation picture. The price index, an important inflation measure, was revised down for the quarter to 1.9%. Economists were expecting it to remain at 2.1%, on par with the advance estimate. But the revised 1.9% is still up from 1.6% in the third quarter. The impact of this number on the market may be limited, because the earlier "advance" estimate was released last month. Plus, most of the data used to calculate this number has already been issued.
The February
Chicago Purchasing Manager's Index
is also due out today. It measures the performance of the manufacturing sector in Chicago and is a relatively good predictor for the broader
National Purchasing Manager's Index. The number signals factory-sector expansion when it is above 50 and contraction when below it. The manufacturing sector has been on the decline the past several months and, in January, the Chicago PMI came in at 40.2.
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Sector Watch
Amid volatile trading, there were few definitive sector moves today. Gold stocks and brokerages were making a clear move down, while drugs, biotech and PC makers were making a sustained move up.
Investors began shedding gold stocks yesterday after rocketing them up over a four-day rally. The
American Stock Exchange Gold and Silver Index
was lately off 2.7%.
The downturn in the brokerage stocks wasn't too encouraging. Financials have been weak over the past month, but the sector saw a bit of strength yesterday and some traders were calling that a positive sign for market performance. The
American Stock Exchange Broker/Dealer Index
was lately off 2.3%.
Morgan Stanley Dean Witter
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,
Lehman Brothers
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and
Goldman Sachs
(GS)
were helping to weigh on the index after their estimates were lowered by
Merrill Lynch
.
The
American Stock Exchange Pharmaceutical Index
was up 1.1%, the
Philadelphia Stock Exchange Computer Box Maker Index
was rising 0.8% and the
Nasdaq Biotechnology Index
was lifting 1.4%.
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Bonds/Economy
Treasury prices were rallying this morning, but the benchmark 10-year
Treasury note lately was flat at 100 11/32, yielding 4.956%.
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