Thursday's Market: Nasdaq Squeaks Out a Win; Dow Posts Big Gain - TheStreet

The

Nasdaq Composite Index is one very lucky index, squeaking out a gain of 7 to 2340 as the closing bell echoed in New York. During the last hour of trading, the Comp swung wildly from losses to gains, before settling to the upside and snapping a seven-day losing streak.

The Comp was crazy, jumping up and getting down like

Little Richard

in an Apollo Theatre dance-off with

James Brown

, the Godfather of Soul. Earlier today, the index swung below 2300, an unthinkable fall from grace for the Comp, which spent a little more than a month trading at more than double that level, hitting a record 5132 in March. Biotechs led the way, providing enough late-day strength to help the Comp finish with a gain, even as the chipmakers crumbled.

Semiconductor makers have been rattled by earnings warnings, high levels of inventory at major chip buyers, a slowing economy, subsequent analyst downgrades -- you name it and the chipmakers have been spiraling lower on the news. And today, the

Philadelphia Stock Exchange Semiconductor Index

was a big disappointment, sliding 0.8%. Earlier today, that index was up as much as 6%.

Overall, the tech picture was still pretty crappy. On the Nasdaq, 705 stocks hit 52-week lows today, while the number of stocks in the red easily outnumbered those in the green. And volume was heavy, too.

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Most areas of the technology world were racking up losses after marking up sizable gains earlier in the day. That said, many sectors spent the morning deep in the red, touching 52-week-lows. The

Morgan Stanley High-Technology 35 Index

hit a 52-week-low before paring down those losses, a sign that large-cap tech was continuing its wayward and volatile path.

A look at the biggest losers on the Nasdaq reveals some pretty high profile names.

Palm

(PALM)

dropped 32.8% after announcing last night that sales would slump because of parts shortages.

RealNetworks

(RNWK) - Get Report

continued to be RealBad, falling 44%, along with the rest of the Net names. The once mighty

Qualcomm

(QCOM) - Get Report

and

Sun Microsystems

(SUNW) - Get Report

both had losses in excess of 1%.

So guys. Take the hint. There's more to business than just technology. In fact, investors seemed to be rediscovering companies with earnings, revenues and viable business models. Despite the atrocities being committed to the silicon world, good ol' meat-and-potatoes, brick-and-mortar industries were rising higher.

Retailers got a nice little boost in the wake of the Fed's Tuesday decision to change its bias and lean towards a rate cut. In a note to investors this morning,

Merrill Lynch

pointed out that a rate cut, one that seems inevitable now, would spark interest in specialty retailers. And apparently it has, with investors sweeping into retail stocks, despite all appearances that sales this Christmas will not impress many people.

Home Depot

(HD) - Get Report

and

Wal-Mart

(WMT) - Get Report

were impressive blue-chip winners. As was the entire industry barometer, the

S&P Retail Index

.

Brokers also took home some super-sized gains, with the interest rate sensitive

J.P. Morgan

(JPM) - Get Report

top gainer among the industrials. Morgan added 50 points to the Dow.

Citigroup

(C) - Get Report

and

American Express

(AXP) - Get Report

, two other financials within the Dow, were also tracking higher -- but not as high as Morgan.

All in all, 10 of the 30 industrials added 10 points or more to the Dow. This means but one thing, especially given the flaccid performance of technology stocks -- investors have learned to play by new rules. Although this seems remarkable, it really isn't. Ever since the Comp hit a March peak, investors have been quietly moving into other industries, like beer and airplane.

Sure,

Anheuser-Busch

(BUD) - Get Report

and

Boeing

(BA) - Get Report

aren't going to make the guys in the bar stand and salute, lacking the sexy allure of an industry with

potential

growth in the triple digits. But, people have realized that Wall Street has become the land of value and not potential.

That said, people are upset that the land of massive percentage gains has become the land of make believe.

In a shocking bit of news,

PaineWebber

said that investor optimism was dropping along with stock prices. The company's Index of Investor Optimism fell 38 points in December, with investors spooked by the slowing economy and the presidential election.

The kids aren't all right -- they're scared. Older investors, those who saw the gas shortages of 1972, crashes in 1987, the rise and fall of Japan plus thousands of buying opportunities come and go, are having an easier time with the recent bull market death. It's their younger counterparts, the ones who've known 20% growth and nothing else, that are awash with grief.

"The drop in optimism was most pronounced among the least experienced investors, those with less than five years in the markets, averaging 91 in December compared with 134 last month," the report said.

According to the report, which was produced with those wacky Gallup pollsters, expectations for short-term growth have dropped. Lowered expectations and diminishing returns have combined to torpedo what people think they'll make. Consider this the rebirth of realism.

Oh, and remember that uncertainty? Remember how markets don't like uncertainty?

"When asked about the controversy over the Presidential election," the report said, "nearly three-quarters, 74 percent, believe the uncertainty has negatively affected the investment climate, compared with only 7 percent who say it has not had a negative impact."

Markets do not like uncertainty.

Market Internals

A tale of two markets. New York had more winners than losers and a rather brisk day as buyers lifted stocks on nice volume. The Nasdaq was rife with losers.

New York Stock Exchange: 1,680 advancers, 1,234 decliners, 1.411 billion shares. 180 new 52-week highs, 186 new lows.

Nasdaq Stock Market: 1,799 advancers, 2,240 decliners, 2.652 billion shares. 59 new highs, 705 new lows.

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Most Active Stocks

NYSE Most Actives

  • Lucent (LU) : 66 million shares.
  • AT&T (T) - Get Report: 59.2 million shares.
  • America Online (AOL) : 26.8 million shares.

Nasdaq Most Actives

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Sector Watch

Just stay away from

TheStreet.com Internet Sector Index

. It was last off 4.6%, and if that drop hold until the bell, which seems highly likely at this point, this will be the eighth-straight day of losses for the dot-coms.

Many of its 24 components have been destroyed with about half now worth less than $10 a share. Close to all have either hit or come within pocket change of record lows. And here's a fun little game -- take today's closing quote on the index, which should be around 283 points, and multiply it by four.

You'll still be about 20 points beneath where it opened the year 2000.

Airliners and transports rallied after falling yesterday due to

FedEx

(FDX) - Get Report

and fuel cost woes. Yesterday, when the major shipper talked about its earnings, which beat expectations, it mentioned that fuel costs would be impacting earnings. This hurt both the airliners and transports, which are packed with companies that do the same thing FedEx does -- spend money on fuel to make money flying around. The industry took a hit. Today, it gained some of that back.

The

American Stock Exchange Airline Index

rose 1.8%, while the

Dow Jones Transportation Average

rose 2.2%.

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Bonds/Economy

Treasury note and bonds are trading lower despite a slate of weaker-than-expected economic data. The probable cause: A rearguard action by equities, which are fighting to take back some ground after suffering heavy losses yesterday.

The benchmark 10-year

Treasury notelately was down 5/32 to 105 11/32, raising its yield to 5.043%.

In economic news, the

Philadelphia Fed Index

(

definition |

chart |

source

), a regional manufacturing-sector indicator, dropped to 6.1 in December, its lowest level since September 1998, from 5.2 in November.

Initial jobless claims

(

definition |

chart |

source

) rose, indicating slackening demand for workers. First-time claims for unemployment insurance rose to 345,000 from 320,000 the previous week. The four-week average rose to 347,250, a new 29-month high, from 343,250.

Finally, third-quarter

gross domestic product

(

definition |

chart |

source

) was finalized at 2.2%, down from 2.4%. The third-quarter price deflator, a measure of inflation, was finalized at 1.6%, down from 1.9%. Economists polled by

Reuters

had forecast no revisions. The change in the GDP was due principally to slower rates of inventory-accumulation by businesses, federal government spending, and capital spending by businesses.

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International

European markets were down at the close thanks in part to techs and telecoms.

London's

FTSE

was down 61 to 6116. Across the channel, Paris'

CAC-40

was off 7 to 5759 while Germany's

Xetra Dax

was 44 lower to 6205.

The flip-flopping euro was rising again, trading up to $0.9133. It has been gaining slowly in the past few weeks as the U.S. dollar weakens in the face of a slowing domestic economy.

Asian markets were bamboozled -- again -- overnight. Japan's

Nikkei 225

fell 491.22, or 3.53%, to 13,423.31. Yesterday, it closed below the key 14,000 mark for the first time in almost 22 months. Hong Kong stocks fell on weakness in techs and telecoms. The

Hang Seng

closed down 271.40, or 1.82%, to 14,659.32.

The greenback was falling against the yen to 112.06.

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