Stocks Take A Well-Deserved Breather

Stocks took a well-deserved breather Thursday a day after soaring to record gains on record volume after a surprise Federal Reserve rate cut.

The ISDEX http://www.wsrn.com/apps/ISDEX/ slipped 12 to 369, and the Nasdaq gave back 4 to 2612. The S&P 500 fell 8 to 1338, and the Dow rose 8 to 10,953. Volume rose to 1 billion shares on the NYSE and 1.25 billion on the Nasdaq. Advancers led by 14 to 13 on the NYSE, and 19 to 15 on the Nasdaq. The Labor Department will report December's employment data tomorrow morning, and traders will be looking to see if that's what got the Fed so worried. 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.

Inktomi fell 4 1/2 to 14 on an earnings warning. CacheFlow lost 4 7/8 to 13 1/4.

The Fed's rate cut had an immediate effect on telecom service providers, who are heavily dependent on the credit markets to raise money. XO Communications rose 2 3/8 to 22 7/16 on news that it was raising new capital in the bond market. Metromedia Fiber rose 2 11/16 to 15 5/8, and Global Crossing rose 2 1/2 to 20 3/16. There were also rumors that GX could be a takeover target. XO's news was good for telecom service providers, who have been hard-hit by worries about slowing capital spending by service providers.

Online brokers also benefited from the rate cut. E*Trade rose 1 to 10 1/2, and Ameritrade added 1 1/2 to 9 1/2.

JDS Uniphase fell 2 7/8 to 50 3/4 on rumors that the company may have trouble making its quarter.

BMC Software soared 7 1/8 to 22 3/4 on a positive earnings pre-announcement.

Vitria plunged 4 1/4 to 3 3/4 on an earnings warning. Resonate , down 7 1/4 to 4, also warned.

barnesandnoble.com tacked on 3/8 to 2 7/32 after announcing an eBooks imprint, Barnes & Noble Digital.

Some technical comments on the market: Note: We are now including 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

Well, we expected some jitters after the dramatic Fed rate cut, and so far the market hasn't disappointed. Rumors abounded this morning that another fiasco like the Long Term Capital debacle of 1998 was in the making, and others were wondering if the economy is headed for recession. Not unreasonable speculation, given the unprecedented Fed action. But we have to wonder if Alan Greenspan isn't also a pretty good market technician, in addition to being a not-half-bad central banker. This is the second time Greenspan & Co. have come to the market's rescue after the Nasdaq's 1990 logarithmic trendline was pierced, the first time being in October 1998 (see first chart). Perhaps Greenspan realizes the importance of technology to the strong productivity gains of recent years. His timing is certainly noteworthy.

As we said at yesterday's close, we had a number of very big positives yesterday. The Nasdaq, S&P and Dow all hit higher highs. Up volume led down volume by 13 to 1 on the Nasdaq; 10 to 1 is a traditional sign of a bottom. The NYSE new highs and lows were their best in years, 337 to 31. And the Dow Transports closed above 3000, whi