In a see-saw session, with the positive prospects for lower interest rates on one side and the negative prospects of lower earnings on the other, stocks eked out modest gains on reduced volume.
News that the National Association of Purchasing Management’s (NAPM) factory index fell again in December renewed expectations that more Federal reserve interest rate cuts are likely, and perhaps sooner rather than later. The NAPM factory index fell to 41.2 last month from 44.3 in December, the fourth month in a row below 50, to its lowest level in nearly 10 years. New orders and production levels fell to their lowest levels in nearly 19 years, since the serious contraction of 1982. Any reading below 50 indicates contraction, so these new numbers reflect an increasingly serious weaker economy.
All major indexes advanced. The Dow Jones Industrial Average, which rallied strongly at the finish to close at its intraday high, was ahead 39 points, for a gain of 0.9 percent. The Nasdaq Composite Index rose just under 10 points for a 0.4 percent gain, but closed below its high. And, the S&P 500 Index added seven points for a half-a-percent gain.
For the month of January, the Nasdaq Composite Index appreciated 12.2 percent, and outperformed both the Dow Jones Industrial Average (up 3.5 percent) and the S&P 500 Index (up 1.5 percent) by wide margins.
The ISDEX shed nearly eight points to close at 414, as losers overtook gainers late in the session and outnumbered them nearly two to one at the close. Five stocks managed gains exceeding four and a half percent:
- CMGI Inc. +8.2%
- S1 Corp.. +6.8%
- Sapient Corp. +6.7%
- Portal Software, Inc. +4.8%
- i2 Technologies, Inc. +4.6%
Advancing issues led decliners on the New York Stock Exchange (NYSE) by five to four. On the Nasdaq, decliners led advancers narrowly 44 to 41 percent. Up volume exceeded down volume on both markets by about a five to four margin. And, notably, despite a flat finish in the indexes, new highs crushed new lows 238 to 36 on the NYSE and 106 to 17 on the Nasdaq.
From a technical perspective, on January 10th, the Nasdaq broke out above its one-month (20-day) moving average which had been steadily declining since last September 7th. However, it bounced off its trailing three-month (65-day) moving average a week ago, Wednesday the 24th, and is currently trapped within the two narrowing averages. A similar pattern occurred last mid-June, with the Index trading for a while just above its three-month average, but after a couple of months of sideways price movement, the Nasdaq slipped into its four-month swoon which bottomed on January 2nd.
Among today’s movers and shaken were:
- InterTrust Technologies Corp. (ITRU), a digital security firm, gained 42 percent. Recently, Nokia Corporation (NOK), the global leader in mobile communications and InterTrust signed an agreement by which Nokia will license the InterTrust Commerce and Rights/System DRM solutions, and has selected InterTrust as its preferred DRM technology. In addition, Nokia will invest and acquire nearly 5% ownership of InterTrust stock for $20 million.
- Aeroflex, Inc. (ARXX), a leading designer, developer and manufacturer of microelectronics and automated testing solutions for the broadband communications market, yesterday announced record operating results for its second quarter ended December 31, 2000. The stock jumped 24 percent.
- On the downside, Network Appliance Inc. (NTAP), which makes network data-storage equipment, was downgraded by a First Boston (Credit Suisse) analyst from a buy to a hold. The stock dropped 13.2 percent for the day.
- Also slipping, Cacheflow Inc. (CFLO), today announced that revenue and operating results for its third quarter ended January 31, 2001, will be below the company’s previous expectations. The stock dropped more than 12.5 percent on the news.
Note: Technical commentary with charts with will return tomorrow, Friday, February 2, 2001.