If not for some intraday volatility and a wild geopolitical backdrop, one could fairly describe recent market action as trendless, if not actually boring. Consistent with recent activity, vacillations within longstanding trading ranges continued Thursday, with a downward tilt for major averages.
Dow Jones Industrial Average
closed down 1.3% to 7673.99 after trading as high as 7777.42. The
fell 0.9% to 822.10 and the
shed 0.9% to 1302.90, each about three points above intraday lows.
The S&P remained within the 800 to 850 trading range it has been trading in for the past six weeks, as
Helene Meisler discussed. The Dow traded toward the lower end of its recent range -- Feb. 13's intraday low of about 7629 -- but didn't fall through, trading as low as 7659.09.
On some level, Thursday's session essentially represented a retracing of
Wednesday's gains plus a bit more, which makes sense given the fundamental and geopolitical backdrop.
The day's news included an unexpected rise for weekly jobless claims, which hit their highest level since December on both a weekly and four-week average basis. The claims data overshadowed an upward revision to fourth-quarter productivity and a 2.1% rise in January's factory orders. THey also confirmed the findings of Economy.com's business confidence index, which fell to 64.9 as of Feb. 28 vs. 85.2 a week ago and over 100 in mid-January. The index's four-week moving average fell to 75.9 vs. 80.7 the prior week and (again) over 100 in January.
"Business confidence is rapidly eroding
which is having an impact on business expansion plans," commented Mark Zandi, Economy.com's chief economist. "Most notable is a decline in the willingness of businesses to invest in new equipment. The decline has been most pronounced in the business and financial services industries,
and for large purchases of information technology equipment
. Businesses are also growing more reluctant to hire, which is evident across nearly all industries."
I added italics (Fleck-style) because a subplot to the session was that "everybody" was anxious to hear what
would say about IT spending in its midquarter update.
A revival of business spending is considered crucial to the sustainability of the economic recovery, especially now that even Alan Greenspan concedes consumer spending may slow due to a lessening of the "frenetic pace of home equity extraction," as reported
Certainly economic fundamentals were but one element of Thursday's action, and arguably not a primary one. Geopolitical developments continue to dominate short-term sentiment. Early on, murmurs about the capture of Osama bin Laden helped send stocks higher, until the White House denied their veracity. There were also rumors about Iraq bombing its oil fields, also later refuted.
Traders also focused on comments by British Foreign Secretary Jack Straw, who said the U.K. was "ready to discuss the wording of the
second U.N. resolution and take on board anysuggestions as to how the process set out in that draft could be improved." Straw also said that "if Iraq complies with
resolution 1441 and disarms its weapons of mass destruction, we accept that the government of Iraq stays in place."
Both those comments, particularly the latter, seem at odds with the policy statements of various White House officials. President Bush has a prime-time news conference scheduled for Thursday evening, and there was a lot of speculation about what he may or may not say. The White House has said no timetable for war will be announced.
The president's goal seems to be to restate the U.S. case against Saddam Hussein ahead of Friday's report to the Security Council by weapons inspectors Hans Blix and Mohamed ElBaradei. A vote on a second resolution is expected soon thereafter.
On the micro level, names in the news included
, which fell 5.5% after warning its earnings would fall shy of expectations, citing rising pension costs.
also warned, falling 9.7%.
was the day's most actively traded stock, sliding 1.9% after South Africa's DiData, which sells Cisco networking products, warned.
Trading volume remained relatively subdued and stock proxies trapped between the hesitancy of buyers and reticence of short-sellers to press their bets.
The price of the benchmark 10-year Treasury note fell 5/32 to 101 23/32, its yield ticking up to 3.65%.
Other markets were fairly subdued, with the dollar slightly weaker while crude futures rose 0.8% and gold climbed 1.1% to $356.90 per ounce.
Having argued previously that
technical factors are dictating trading as much as geopolitics, I'd be remiss in not examining their potential influence on Thursday's session. (Yes, that's a repeat of what I wrote yesterday.)
There was some chatter among traders early in the session about Elliott Wave, a chart-based theory who (in a nutshell) contends that "mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific and measurable patterns," according to Elliotwave.com.
"The Elliott Wave pattern is in a position that suggests prices will experience a steep decline over the next two weeks, at the least," Steve Hochberg, chief market analyst at Elliott Wave International commented Wednesday evening. "Blue-chip indexes should top
Thursday and start next leg down."
Support for the Dow resides in the 7285 to 7458 range and around 790 for the S&P 500, which "remain as magnets for prices and should be tested prior to any short-to-intermediate-term bottom," he continued. "The indexes have no business being above Monday's
intraday highs" -- of 7997.66 for the Dow, 852.34 for the S&P and 1353 for the Comp -- "or something else is going on other than our immediately bearish wave pattern."
Investor pessimism is increasing -- the CBOE Market Volatility Index rose 6.2% to 36.34, the put/call ratio traded as high as 1.08 before settling at 0.94, and the 1-day Arms Index jumped to 1.23 from 0.72 the prior day -- "but it's not at the levels yet you'd consider to be bottom-inducing," Hochberg said in an interview Thursday afternoon. "It's coming, but it's not there quite yet."
Rather than attempt to calling a "crash" or anything of that ilk, the aforementioned note merely represented "a reaffirmation
we see the market topping and the trend is still down," Hochberg stressed, as if that will make anyone long stocks feel any better.
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.