RealTime IT News

Stocks Drop On Worry That Rate Cuts Will End

Stocks fell Friday on concern that signs of economic improvement could mean less aggressive rate cutting by the Federal Reserve.

The ISDEX http://www.wsrn.com/apps/ISDEX/ lost 6 to 254, and the Nasdaq fell 21 to 2107. The S&P 500 declined 9 to 1245, and the Dow dropped 89 to 10,821. Volume was unchanged at 1.06 billion shares on the NYSE, and declined to 1.42 billion on the Nasdaq. Decliners led 17 to 12 on the NYSE, and 21 to 16 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

The Producer Price Index showed that inflation was tame last month, but stronger than expected retail sales and Michigan consumer sentiment reading caused a rout in the bond market. The Fed funds futures are now pricing in only a 50% chance of a 50 basis point Fed rate cut on Tuesday, but traders fully expect the Fed to ease by 25 basis points.

IBM dropped 3.39 to 111.81 on analyst concerns that the stock has become richly valued at current levels. Pixar surged 1.91 to 36 after topping estimates.

Homestore.com fell 2.68 to 30.20 on a Merrill Lynch note that said the company is using stock to pay operating expenses.

Ameritrade surged .94 to 8.90 on takeover speculation.

Siebel Systems slipped .60 to 41.43. Robertson Stephens said the stock is becoming pricey.

Nortel dropped .59 to 14.63 on word that CEO John Roth will retire next April and COO Clarence Chandran has resigned.

Proxicom , off .33 to 7.31, agreed to be acquired by Dimension Data Holdings for $7.50 a share after Compaq dropped out of the bidding.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

Note: The market commentary will not be published the week of May 14, and will resume the week of May 21.

Levels to watch for the week of May 14: The indexes are range-bound until they break one boundary of the trading range or the other. For the Nasdaq, important levels are 2000 to the downside (2090 could act as support), and 2252 to the upside (the index would break its September downtrend line at about 2200 and set a higher high at 2235). The S&P 500 would break out of its trading range at 1200 to the downside or 1300 to the upside. 1232-1240 is first support, and 1270 has been tough resistance. For the Dow, a close above 11,035 would be bullish, and the index would trade with a negative bias below 10,600. May 15 is an important cycle turn date, making the May 14-16 window important for determining market direction.

Special report: For a free introduction to technical chart patterns and an overview of last year's action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.