Stocks Rise On Signs Of Slowdown, Lower Oil Prices

Stocks rose Monday on a better-than-expected reading for June from the National Association of Purchasing Management and news that Saudi Arabia will boost oil production. The Nasdaq closed just below the psychologically important 4000 level.

The ISDEX gained 8 to 752 and the Nasdaq added 25 to 3991. But beaten-down blue chips were the biggest winners, led by the financials. The Dow gained 112 to 10,560, while the S&P 500 added 14 to 1469. Volume was light in a shortened trading session, with 445 million shares changing hands on the NYSE and 597 million on the Nasdaq. Advancers led 19 to 8 on the NYSE and 19 to 17 on the Nasdaq. June employment data will be released on Friday, and Yahoo will kick off earnings season July 11.

The NAPM declined for the fourth consecutive month to 51.8%; analysts had expected 53%. It was the lowest reading since January 1999. A reading below 50% would show contracting economic activity. The Saudi news would boost production to the point that prices could decline.

Digital Island soared 8 5/8 to 57 1/4 on word that the company may soon announce major contract wins. Akamai gained 8 1/16 to 126 3/4, extending gains after an upbeat analyst meeting on Friday. soared 2 1/4 to 10 after announcing the launch of Spanish-language sites in Mexico and Argentina.

Allaire added 4 3/4 to 41 1/2 on news that it would work with Intel to provide e-business solutions.

Ariba gained 61/64 to 99 after trading as high as 101 15/16. gained 6 1/4 to 71 3/8, breaking through resistance at 70. soared 1 7/8 to 3 15/16 after falling to just above 2 on Friday. Hearst Communications is considering increasing its stake in the company, which trades at about three times cash.

CrossWorlds Software added 3/4 to 18 7/8 after the company said it expects to meet or exceed analyst estimates when it reports earnings in three weeks.

Internet infrastructure plays continued to gain. JDS Uniphase gained 7 3/4 to 127 5/8, GSI Lumonics bolted 4 1/8 to 39 1/4, Corning added 3 1/8 to 273 1/2, and SDL rose 9 7/16 to 294 5/8.

Some technical comments on the market: Two nice days in a row, but because of pre-holiday trading conditions, we need confirmation on Wednesday. Since finding support at 10,336 last week, the Dow has rallied more than 200 points. The index will be hard-pressed to rise much further; the Dow has turned back twice in the 10,600 range in recent weeks, and its pattern for months has been a series of descending peaks. If the Dow can take out 10,600 resistance and then 10,700, the upper boundary of its bearish diamond pattern, the bulls may yet win this. Conversely, a break below the lower trendline of 10,200-10,300 would be bearish and imply a drop to 8,400 or lower. With plenty of news coming in the next couple of weeks, this tight trading range isn’t likely to last much longer. The Nasdaq needs to get back above 4000 and take out 4073 to negate its key reversal and bearish rising wedge of two weeks ago. Recent support on the index is 3832-3838, but key support is 3725 and 3585. The S&P 500 also is forming a diamond in the weekly charts, with upper and lower boundaries of 1480 and 1370, respectively. The S&P and the Dow have now flashed MACD buy signals in the 60-minute charts; the Nasdaq has had one in place since last week. The ISDEX is holding up very well and remains above important support of 700; a clean break of that number would give the ISDEX room to 600, while a close above 790 would be bullish. Have a good holiday.

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