Stocks headed higher ahead of the Federal Reserve’s decision on interest rates due out at 2:15 p.m. Analysts widely expect the Fed to leave rates unchanged, and a few are even saying that the Fed could change its tightening bias to neutral.
The ISDEX gained 1 to 723, and the Nasdaq rose 10 to 3578. The S&P 500 climbed 10 to 1447, and the Dow soared 110 to 10,810. Volume rose to 470 million shares on the NYSE and 840 million on the Nasdaq. Advancers led by 14 to 11 on the NYSE, but decliners led 19 to 15 on the Nasdaq. The big economic report for the week is Friday’s unemployment report. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.
B2B stocks, one of the few pockets of strength in the Internet sector the last few months, continued to fall victim to profit-taking. i2 Technologies , off 15 7/8 to 154, continued to fall on yesterday’s revelations that the company’s head of technology sales is leaving to join a private B2B exchange, and that the trading exchange formed by i2, Ariba
, off 6 1/16 to 121, and IBM
lost The Global Health Care Exchange as a customer. Commerce One
dropped 6 7/8 to 65 11/16 on a Jefferies downgrade to Hold from Accumulate.
Primus Knowledge Systems plummeted 6 to 4 7/8 after warning that its revenues will not meet estimates, citing delays in closing a half-dozen transactions. V-ONE
, down 9/16 to 1 7/8, also warned.
NetCreations fell 3/8 to 11 despite being acquired by DoubleClick
for about $12.15 a share in a stock deal. DoubleClick fell 2 1/16 to 27 9/16. Fellow e-mail marketer Netcentives
gained 1 3/4 to 10 3/4.
Internet infrastructure plays returned to the forefront. Avici soared 10 5/8 to 91 on news of an alliance with Qwest
. Nortel
gained 2 5/16 to 64 11/16 on a 10-year, $1.4 billion contract with Cable & Wireless. Bellwether Cisco Systems
recovered 2 7/8 to 58 3/8.
Yahoo finally rallied, gaining 4 1/16 to 90 1/8. The company reports next Tuesday.
China.com slipped 3/8 to 11 15/16 despite announcing that it expects to meet estimates for the third quarter.
Netopia rose 1 11/16 to 11 1/2 on a Kaufman Brothers Strong Buy rating. Interwave
climbed 1 7/16 to 9 3/16 on a Salomon Smith Barney Buy rating and $65 price target.
Corel soared 2 1/2 to 6 3/16 after announcing an alliance with Microsoft’s .Net initiative.
Some technical comments on the market: Note: We will now be including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html
A day after breaking critical support, the October 1998 trendline (the black line), the Nasdaq doesn’t look too bad. As we said yesterday, if the Nasdaq can form a new October 1998 trendline at about 3400-3450 (the gray line), on a line with the October 1998 low and the May low, the index could still put in a bottom here. Lower than that, and the index will likely retest the May lows of 3042. One positive (and it’s a little early still to point this out), the Nasdaq may be forming a falling wedge
here. That’s a sign that sellers may be running out of steam, and the first falling wedge we’ve seen since the Nasdaq’s sell-off began in April. However, given that the apex of the pattern is still quite a ways from here, the Nasdaq could still fall a couple hundred points before bottoming. A break above that upper trendline at 3700 would be a sign that a bottom could be in place. However, don’t expect the Nasdaq to go soaring back to its old highs. A move out of a falling wedge is a slow, meandering one. For an example, look at the chart of Amazon.com, which broke out of a falling wedge at 35 in August. Amazon has held 35 support beautifully since then, but it also hasn’t gone very far. If the Nasdaq bottoms with a similar pattern, the end result could be a market that rises more in line with historic norms. One caveat: the Nasdaq can’t fall much more than a rate of 10 points an hour without breaking the falling wedge to the downside. If it does, that would be a sign that selling could be accelerating.
The ISDEX also broke critical support yesterday, its May uptrend line at about 735. The ISDEX turned back at 735 today, so that’s now first resistance. Next support is 693-700, and then 650. The Dow broke above its downtrend line just under 10,800 today. If the index can get above 10,900, the cycle of lower highs will be broken and the old economy stocks could have room to run. To the downside, critical support is the October 1998 trendline at about 10,600 (also in the chart, note the gray lines, the bearish diamond pattern that could signal a market top). The S&P 500 continues to be bound by its April trendline (the black line) at about 1425 to the downside and its broken May trendline (the gray line) at about 1465 to the upside.
One other sign of a potential bottom here, the inverse head-and-shoulders pattern forming in the 60-minute chart on the S&P 100 (OEX), is still developing. Above 773 and stocks should have room to run (the index got as high as 772 today). To the downside, the OEX can’t go lower than 759, or the pattern would be negated.
Recession indicator update: The 10-year and short-term treasury yields have now been inverted for two months, a phenomenon that has presaged a recession 86% of the time within six months since 1960. Given that the last 50-basis point Fed rate hike is just beginning to hit, the economy could be in for a significant slowdown in the first half of 2001.
