Market Can't Make Up Its Mind
In a session that seemingly did little to resolve the ongoing debate about the market's near-term future, major market averages overcame early declines but failed to sustain either a midday rally or a late-session push, ending marginally higher.
The
Dow Jones Industrial Average
closed up 0.2%, to 8589.07 after trading as low as 8487.53 and as high as 8625.89. The
S&P 500
ended up 0.1%, to 909.94 vs. its intraday low of 896.39 and high of 909.97, while the
Nasdaq Composite
finished up 0.4%, to 1396.51 after trading as low as 1377.71 and as high as 1407.15.
Aside from some early fireworks on the downside -- prompted mainly by geopolitical concerns after the interception in the Arabian Sea of a North Korean tanker laden with Scud missiles -- and subsequent midmorning recovery, the session was largely uneventful. Indeed, trading volume was lackluster again, with just 1.24 billion shares exchanged on the
Big Board
.
Reflecting the quasi-holiday atmosphere on Wall Street, much of the focus was on economic reports due Thursday, especially the November retail sales data, for which economists forecast a rise of 0.3% overall and 0.2%, excluding autos. Concerns about consumer spending were enhanced by lowered guidance/cautious comments from consumer-product makers
Kimberly-Clark
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,
Sara-Lee
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and
Yum! Brands
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.
Expectations for a weak retail sales report were credited in aiding Treasuries, although trading volume in fixed income also was sparse. The price of the benchmark 10-year rose 12/32, to 100, its yield falling to 4%.
The market's state of limbo was further reflected in the latest
Investors Intelligence
survey, where bullish sentiment fell to 50.5% from 51.1% last Wednesday. The fall in bullish sentiment is considered a positive, because sentiment is often a contrarian indicator. But bullishness remaining over 50% is relatively high, and thus a negative. Bearish sentiment also fell, to 24.2% from 25% the prior week.
Something for Everyone
As with the sentiment data, there was fodder for both sides of the bull vs. bear debate in many aspects of Wednesday's session.
For example, the closely watched IPO of
Seagate Technologies
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failed to print above its $12 issue price, which itself was below the expected range of $13 to $15. Shares of the disk drive maker closed down 4.2%, to $11.50.
The lack of upside on Seagate's first day of trading was proof of lackluster demand for technology issues, said skeptics, or at least that underwriters were overly aggressive in pricing the deal. However, the bottom line is 72.5 million shares of the company were allocated and that supply, nor the disappointing performance on its first day of trading, seemingly did little to dampen traders' broader demand for tech shares.
Similarly, bears were quick to point out some cautious comments from
Intel
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Chairman Andrew Grove, who said late Tuesday it's too soon to forecast the beginning of an upturn for the semiconductor industry. Grove's comments pushed Intel shares down only a fraction and couldn't prevent the Philadelphia Stock Exchange Semiconductor Index from rising 0.3%.
Elsewhere, executives of
J.P. Morgan
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and
Citigroup
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were grilled by congressmen about the firms' alleged roles in helping Enron hide debt. Citigroup slid 1.4% but J.P. Morgan ended only fractionally lower while the Philadelphia Stock Exchange/KBW Bank Index was off just 0.3%.
Finally,
Schlumberger
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announced heavy layoffs and a $3.2 billion restructuring charge to realign is business, prompting a credit rating downgrade by Moody's. But after trading as low as $43.85, Schlumberger shares finished off a relatively modest 1.1%, to $44.86 while the Philadelphia Stock Exchange Oil Service Index was down 0.8%.
More overtly positive developments included raised guidance by
MetLife
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and upbeat comments from Lehman Brothers about
EDS
(EDS)
and
Oracle
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.
Still, in sum, there were plenty of fundamental reasons for the market to stumble, and it didn't. That's either a bullish sign of the market's ability to absorb bad news, or traders' refusal to acknowledge reality. It all depends on your perspective. Personally, I still think the market will move higher into year-end and early 2003, as it continues to mirror the pattern of late 2001.
That said, I'm uncomfortable being in the same camp as some folks on a certain financial TV news outlet, who -- on a relatively slow news day -- breathlessly and endlessly reported on the market's historic strength in late December-early January, as well as the potential for pension fund rebalancing to aid the market in 2003. I'm hard-pressed to recall these folks warning that any of the past three years would be negative for stock proxies.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.
