Economic News Buoys Stocks

Better than expected news on inflation, industrial production and consumer confidence boosted stocks on Friday.

The ISDEX slipped 1 to 164, and the Nasdaq rose 14 to 1868. The S&P 500 surged 13 to 1166, and the Dow rose 90 to 10,607. Volume rose to 1.48 billion shares on the NYSE, and 1.69 billion on the Nasdaq. Advancers led 18 to 12 on the NYSE, and 19 to 15 on the Nasdaq.

Adobe rose 7% after beating estimates and raising guidance, but Oracle fell 6% after missing revenue estimates and saying that tech spending will lag the overall economy.

Overture fell 11% on concern that the company’s agreement with AOL may expire this month.

Rational fell 13% on JP Morgan estimate cuts.

IBM managed to edge higher despite a Wall Street Journal report that said 60% of the company’s earnings per share gains since 1995 have come from share buybacks and 25% from a lower tax rate. The story also said that the company’s pension income is likely to decline this year for the first time since pensions became an income item in 1996. If the market turns down again, IBM may have to begin recording pension as an expense, the article said.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

The Dow (first chart) closed the day right below that big upper trendline; a move above 10,630-10,640 on Monday could give the index room to run, with the caveat that 10,650-10,800 is one very big resistance zone. Support is 10,550, 10,475 (critical), 10,425, and 10,300-10,380 (also critical). One more comment on that -DI reading of 10 in the Dow; such a low reading of selling pressure has led to a top, or at least a 5% pullback, 6 out of 7 times in the last four years. The one time it didn’t work was during the strong early 1998 rally, but it otherwise has marked a top within a few percentage points over the last few years. The S&P (second chart) cleared the important 1160 resistance zone. 1150 and 1140 are important support for next week, and 1173-1177 is critical resistance. The Nasdaq (third chart) faces a boatload of resistance between 1880 and 1910. Support is 1845, 1830 and 1793-1805. The SOX (fourth chart), the semiconductor index, managed to end the week above that lower trendline, which should be at about 575 next week. Critical resistance is 638.




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