Big Al stepped to a
Senate Budget Committee
microphone to rock the funky
testimony market watchers hung to every word, hoping for even the faintest shred of information about the outcome of next weeks'
Federal Open Market Committee meeting.
didn't miss much. The
Federal Reserve chair stuck to the script, addressing fiscal challenges for the Bush administration, Social Security issues and a possible tax-cut. A "thrilling" question-and-answer period followed. Highlights include Sen. Robert Byrd (D-W. Va.) asserting that natural disasters have gotten more severe in the 80-odd years he's been on Earth and a long, rambling string of cliches from Sen. Phil Gramm (R-Texas).
The closest hint about the Fed's move was Greenspan's answer to Sen. Paul Sarbanes' (D-Md.) question about the economy. Big Al said we are "very close to zero growth at this particular moment," and that "we know the fourth quarter was a very small positive, but there is an inventory liquidation process going on..."
Zero growth is not good. This drives home the point that Greenspan is certainly concerned about the state of the American economy, which has known nothing but growth for more than a decade. So, will the Fed cut by 50 basis points for the second time this January? Or will it merely drop by 25 basis points? We'll know for sure on Jan. 31.
Before the speech started, the
Nasdaq Composite Index was in the red by about 40 points, while the
Dow Jones Industrial Average was up by slightly more than that. And when all the plodding, preplanned remarks had concluded, both were doing the same thing -- only more so. The Dow pushed to session highs, while the Comp slid to session lows, resurrecting a word that hasn't been heard in a while. Bifurcation.
Tech names stumbled, pretty much across the board, while Old Economy stocks fared well. It seems that the slate of downside earnings surprises and the uncertain economic future have finally caught up with the tech sector. Profit-takers have swept in to the market, dropping the Comp, which has been rallying almost non-stop ever since Jan. 5.
Telecom suppliers were the worse in tech, particularly fiber-optic cable maker
, telecom equipment-maker
and networking equipment company
. And if you have children in the room, please ask them to leave before talking about communications equipment-maker
, the Robert Downey Jr. of troubled telecom companies.
When Corning announced that it
beat estimates, but warned of softening sales in the first quarter -- the sector had all the bad news it could stand. That warning -- coupled with Lucent's incredible string of
problems and announcement that it would manage its inventories lower as well as Nortel's corrected inventories -- pushed
Salomon Smith Barney
to downgrade JDS Uniphase to outperform from buy.
Lately, Corning and Lucent were the most actively traded stocks on the
New York Stock Exchange and were down 19.8% to $56.25 and 8.3% to $18. JDS Uniphase was falling 12.5% to $55.19 and Nortel was 5.9% lower to $37.63.
Semiconductors, boxmakers, large-cap tech, disk drive peripherals, networkers and dot-coms were all lower, too. That's really not a good sign for the Comp, which fell 105 to 2754.
And while you're here, a ton of Nasdaq companies are reporting this evening. Here's a look at some of the biggies and how they fared:
But the tech fall didn't affect anyone else, with petroleum-related stocks, retailers and healthcare trending higher.
pulled the Dow to the upside, while yesterday's losers
, managed to reverse direction.
Notable losers were in short supply, although
weren't helping anyone out today. Overwhelming positivity swept through the Dow, with 17 of the 30 blue-chips lodged firmly on the green side of the tape.
And for the fourth day this week, trading could best be described as lackadaisical, with volume lower-than-usual and stock prices drifting along. Explosive movement and volatility have been virtually nonexistent as people look to next week, waiting for the Fed to take action at its meeting.
Most are pricing in a 50 basis-point cut. The
fed funds futures contract traded on the
Chicago Board of Trade
discounted an 88% chance that the Fed cuts rates by 50 basis points to 5.5% next Wednesday. Earlier today, that proxy, which serves as the best indication for how futures markets believe the Fed will act, was factoring in an 83% chance.
In a note to investors just after Greenspanapalooza concluded,
chief economist Bruce Steinberg, wrote: "Alan Greenspan has stated in his testimony today that we have had a very dramatic slowdown in the economy and that we are very close to reaching zero growth. We think that these remarks indicate that the Fed will ease by 50 basis points next week as the 'Street' is expecting."
That pretty much sums up both the obvious and the market mood lately.
Nasdaq internals only serve to highlight the split between the haves and have-nots. The haves were on the Big board. The losers were on the Nasdaq. Volume was moderate.
New York Stock Exchange: 1,588 advancers, 1,236 decliners, 1.253 billion shares. 115 new 52-week highs, 4 new lows.
Nasdaq Stock Market: 1,580 advancers, 2,227 decliners, 2.252 billion shares. 59 new highs, 20 new lows.
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Most Active Stocks
NYSE Most Actives
- Corning (GLW) - Get Corning Inc Report: 47 million shares.
Lucent (LU) : 27.5 million shares.
General Electric (GE) - Get General Electric Company (GE) Report: 20.8 million shares.
Nasdaq Most Actives
- Ericsson (ERICY) : 64.9 million shares.
Cisco (CSCO) - Get Cisco Systems, Inc. Report: 63.2 million shares.
Oracle (ORCL) - Get Oracle Corporation Report: 60 million shares.
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Call it petroleum. Black gold. Texas tea. Or, just call it profitable.
A whole slate of oil companies have dragged home huge earnings due to the high price of crude. Big names like
have already reported massive revenue and profit numbers, which is great for not only these companies, but the entire industry.
American Stock Exchange Oil Index
rose 2.8%, while the
Philadelphia Stock Exchange Oil Service Index
rose 3.6% and the
American Stock Exchange Natural Gas Index
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Treasury prices slid precipitously for a while as
Federal Reserve chairman
Alan Greenspan gave few clues about monetary policy and chose instead to elaborate on the benefits of a possible tax cut. He was addressing the
Senate Budget Committee
this morning and there had been hopes that he would allude to corrective fiscal steps to be taken at the
FOMC meeting next week. The absence of any such mention brought about an abrupt reversal in the money market, striking an especially jarring note since employment cost data released earlier had shown inflation to be firmly under control.
Bonds prices, however, began to climb back as analysts absorbed the truer context of the speech and kept their optimism alive about looser money supply in the very near future. The mix of distressing economic data released recently has had market watchers hoping for the central bank to swiftly turn the slump around, particularly with the help of interest rate cuts. While Greenspan may have preferred to concentrate on the tax proposal today, he did not rule out another major reduction in lending rates.
The benchmark 10-year
Treasury note lately was up 13/32 to 103 21/32, lowering its yield to 5.26%.
In economic news, the
Employment Cost Index
), which measures what workers are paid in wages, salaries and benefits, rose less than expected, by 0.8% in the fourth quarter of 2000. It is also lower than the 0.9% growth in the third quarter. Economists polled by
had forecast a growth rate of 1.1%.
initial jobless claims
) rose to 316,000 for the week ended Jan.20, up from 304,000 in the previous week. The rise was lower than the forecast of 339,000. The four-week average dropped for the second straight week, to 336,000.
Existing home sales
) dropped sharply by 7.4% to 4.87 million in December, down from 5.26 million the previous month. The reading is now at its lowest level since last July, and indicates that declining consumer confidence has begun to hurt the housing market.
Consumer Comfort Index
chart ), which measures the consumer's confidence in the economy's future, rose to 17% last week. It is still 18 points below its 12-month high of 35%.
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European markets were mixed.
was off 8.8 to 6255.6. Across the channel, markets were faring better, with the Paris
up 34.4 to 5934.7. Frankfurt's
was 20.8 higher to 6727.5.
The dollar was trading at $0.9237 euro this morning, a one-month high. The euro has been slowly gaining as the U.S. dollar weakens in the face of a slowing domestic economy.
Asian markets were mixed this morning following another lackluster performance on the U.S. markets Wednesday.
slipped again, dropping 90.20, or 0.65%, to 13,803.38. The index had been rebounding from a 27-month low it hit on Jan. 11 but lost momentum earlier this week.
Hong Kong markets are closed until Jan. 28 as people busily celebrate the Chinese New Year.
rose 3.22, to 0.17%, to 1914.20.
The greenback was lately trading higher at 116.71 yen.
For more on world stock markets, check out
global indices information.
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