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Today's Market: Stocks Mixed at Midday, but Internals Remain Strong

Bucking recent trends, there were more advancers than decliners on both the NYSE and Nasdaq at midday.

The market's made a habit out of bouncing back and forth. For a time, tech stocks were strongest, but they've recently faded, with the

Nasdaq Composite Index falling into the red on this, the penultimate session of what's been the worst year for the stock market in a long, long, time.

Breadth, it should be noted, has been strong for the second straight day, a contrast to recent months, when the major indices would move higher despite poor internals. Today, more stocks are rising than falling, despite the lackluster performance out of the major indices. The PC sector is coming under fire after

Prudential

TST Recommends

trimmed revenue estimates on

Dell

(DELL) - Get Report

and

IBM

(IBM) - Get Report

.

Lately the

Dow Jones Industrial Average was up 24 to 10,827; the

S&P 500 lost 1 to 1328, and the Comp was off 10 to 2529.

Pru cut fourth-quarter revenue estimates for IBM to $24.5 billion from $25.3 billion, citing weak software and PC sales. The stock was lately unchanged at $84.69. Pru trimmed its revenue estimates for Dell to $8.29 billion for the quarter from a previous estimate of $8.38 billion. Lately Dell was traded off 2.4% to $17.56. The

Philadelphia Stock Exchange Computer Box Maker Index

was recently down 1.5%.

Other major technology indices had fallen into the red, as buying interest waned heading into the afternoon. The

Amex Networking Index

fell 0.9%; the

Nasdaq Telecommunications Index

dropped 0.3%, and the

Philadelphia Stock Exchange Computer Semiconductor Index

lost 0.6%. Big-cap technology stocks were having a rough go of it today, including the likes of

Sun Microsystems

(SUNW) - Get Report

, lately down 3.9% to $29.16, and

Microsoft

(MSFT) - Get Report

, down 4.2% to $44.50.

The defensive stocks were carrying their weight, however.

Johnson & Johnson

(JNJ) - Get Report

, which hit a 52-week high yesterday, was once again at a new high, rising 1.7% to $104.75. Health-care stocks were in good shape as well, with names such as

UnitedHealth Group

(UNH) - Get Report

and

HealthSouth

(HRC) - Get Report

once again hitting 52-week highs. The

Amex Healthcare Index

lately was up 1.2%.

Sentimental Journey

Sentiment has improved in the last couple of days. There's a growing feeling that the

Federal Reserve will soon cut interest rates, which would at least provide a psychological boost to investors. Interest-rate cuts, however, won't eradicate existing problems within the stock market, such as the reduced demand and debt issues plaguing quite a few companies. These issues asserted themselves most prominently in the telecommunications sector -- even if the Fed eases credit, those companies still have debt to pay.

But conviction that all this is going to settle in an orderly fashion with lots of stocks going up doesn't quite seem to be there yet. With the exception of energy and aerospace names, the stocks dominating the charts are defensive names, such as pharmaceuticals, healthcare and insurance stocks. Among those hitting 52-week highs today are

Bergen Brunswig

(BBC) - Get Report

, a medical supply company and

Texaco

(TX) - Get Report

.

A couple of earnings warnings hit the Street since yesterday's close. Last night,

Union Pacific

(UNP) - Get Report

, the nation's largest railroad company, said it planned to cut 2,000 jobs and take a charge of 26 cents a share in the fourth quarter. The stock was down 4.9% to $50.06 in trading today.

American Standard

(ASD)

(they make toilets -- lots of 'em) said it would cut its work force by 1,200 nationwide and close a plant. The stock was lately up 2.9% to $46.69.

Market Internals

Breadth was positive on above-average volume.

New York Stock Exchange: 1,694 advancers, 1,092 decliners, 533 million shares. 236 new 52-week highs, 35 new lows.

Nasdaq Stock Market: 2,091 advancers, 1,740 decliners, 1.107 billion shares. 121 new highs, 215 new lows.

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Most Active Stocks

NYSE Most Actives

  • Lucent Technologies (LU) : 20.9 million shares.
  • AT&T (T) - Get Report: 13.2 million shares.
  • Nortel (NT) : 11.8 million shares.

Nasdaq Most Actives

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Sector Watch

Drug stocks were having a reasonably strong day. In addition to J&J,

Merck

(MRK) - Get Report

was lately up 1.6%, and

Pfizer

(PFE) - Get Report

gained 0.7%. The

Amex Pharmaceutical Index

rose 1.3%.

Aerospace and defense stocks were uniformly strong.

Boeing

(BA) - Get Report

, a stalwart all year, was lately up 3.2%, while

Northrop Grumman

(NOC) - Get Report

rose 0.9% and

Lockheed Martin

(LMT) - Get Report

gained 1.1%.

Regional banks were having a somewhat strong session.

Wells Fargo

(WFC) - Get Report

rose 1.1% and

Summit Bancorp

(SUB) - Get Report

was lately up 3%. The

Philadelphia Stock Exchange/KBW Bank Index

rose 0.7%.

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Bonds/Economy

Treasury notes and bonds were trading mostly lower as the market absorbed the latest economic data without much reaction. The number of people applying for unemployment insurance fell and last month's sales of previously owned homes were strikingly higher. Such optimism was however neutralized by a slumping attitude among consumers. The fact that many traders are home and those at work are unwilling to revise their portfolios at the year's close is another reason for the minimal response. Yields were up from their previous closing levels.

The benchmark 10-year

Treasury note lately was down 5/32 to 104 20/32, raising its yield to 5.136%.

In economic news, the

Mortgage Applications Survey

(

definition |

chart |

source

), the release of which had been delayed by a day, detected an increase in refinancing and a decrease in new mortgage activity as mortgage rates remained low. The Refinancing Index rose to 794.1, closer to its previous peak recorded in May 1999. The Purchase Index slipped to 278.2, its lowest level since February.

Initial jobless claims

(

definition |

chart |

source

) fell much more than expected. First-time claims for unemployment insurance fell to 333,000 from 356,000 the previous week. However, 18 of the states have turned in estimated data, so the revised number may be closer to the Reuters estimate of 351,000. The four-week average fell to 340,750 from 347,750.

Existing home sales

(

definition |

chart |

source

) rose more than expected to 5.22 million in November from 5 million in October. Economists polled by Reuters had forecast a drop to 4.9 million for the month. Low mortgage rates have been helping the housing market.

The

Consumer Comfort Index

(

definition |

chart ) remained at 27%, 11 points lower than its 12-month high but not far below its 12-month average of 29%. Buyers lining up for last-minute gifts kept the number steady.

The

Consumer Confidence Index

(

definition |

chart |

source

) fell more than forecasted to 128.3, its lowest level since December 1998. The Reuters poll had reflected similar sentiments in pegging it at 128.7. Economists watch this index closely due to its influence on consumer spending, which accounts for two-thirds of the

gross domestic product

(

definition |

chart |

source

).

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International

Currency trading extended recent trends. The euro strengthened against the dollar as perception of economic strength continues to shift toward Europe, while the Japanese yen dropped to a 16-month low against the greenback, on further concerns of economic weakness in Japan. The euro lately traded at $0.9255, while the dollar/yen was lately at 114.61. European stocks were mildly stronger at the close. Paris'

CAC-40

gained 63.45 to 5920. London's

FTSE

was lately up 5 to 6223, and Frankfurt's

Xetra Dax

was up 5 to 6333. Asian stocks ended mixed. Hong Kong's

Hang Seng

ended the day up 48.19 at 14,796.55, while Tokyo's

Nikkei 225

slipped 34.53 to 13,946.96

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