Stocks Rise On Fed Rate Cut, GOP Win

Stocks rose Wednesday on a surprise 50-basis point rate cut by the Federal Reserve and a Republican victory in the Senate. Cisco beat estimates after the close, but lowered guidance.

The Nasdaq rose 17 to 1418, the S&P 500 gained 8 to 923, and the Dow rose 92 to 8771. Volume surged to 1.64 billion shares on the NYSE, and 2.15 billion on the Nasdaq. Advancers led 21 to 10 on the NYSE, and 20 to 11 on the Nasdaq. Upside volume was 74% on the NYSE, and 78% on the Nasdaq. New highs-new lows were 27-22 on the NYSE, and 47-28 on the Nasdaq.

After the close, Cisco slipped after beating earnings and revenue estimates, but guiding forward estimates lower. The company said service provider spending remains tough, but that there is promise in the security, IP telephony, storage, wireless LAN, and data, voice and video convergence markets. Wireless Facilities and WebMD met estimates, but Aether and TMP Worldwide came in light on revenues.

During the day, priceline plunged on disappointing earnings results.

Brocade fell 13% on news that it is acquiring privately-held Rhapsody Networks.

Computer Sciences and slipped after missing earnings estimates but beating revenue estimates. and hit new 52-week highs.

China Telecom delayed and cut the size of its IPO.

ScanSoft surged 22% on a deal with IBM.

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.

A trifecta of major news for the market to digest today, the most important of which is the Fed’s extremely bold rate cut. Will it be sold, as every other rate cut has been? Certainly it sends the message that the Fed is still worried 22 months after the first rate cut, a negative, but it also opens the liquidity floodgates even further, a positive. Let’s look at the available evidence. The Dow (first chart) broke through 8726-8762 resistance today, a nice break for the bulls. Next up is 9000, and 8600 is now critical support. But the Nasdaq and S&P (second and third charts) have yet to clear the major resistance levels of 1426.76 and 924, respectively. 1360-1385 is a support zone on the Nasdaq, and the S&P has support just under 910. The big positive in all three charts is that the trend strength indicator, ADX, is turning up, while selling pressure (-DI) falls and buying pressure (+DI) rises. Also a plus is the continued skepticism in the equity put-call ratio and the VIX, the options volatility index. On the downside, the most important sector of all, the banking index (fourth chart), formed a bearish hanging man today, and ADX and buy-sell pressure show none of the positive attributes of the main indexes. Our guess, until the trend becomes clearer, is a correction but not new lows. As always, watch support and resistance for clues.

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