Wall St.'s trick and treat
Nasdaq rises on better-than-expected GDP data; blue-chip selling spooks Dow.
NEW YORK (CNNmoney) - The Nasdaq rose Wednesday as two unexpected treats gave U.S. tech investors a reason to buy - a better-than-expected gross domestic product report and news that the Treasury will stop selling 30-year debt. But some ghoulish blue-chip selling scared the Dow.|
"The market wanted to go higher and that's a very positive sign," Jim Waggoner, chief market strategist, Sands Brothers Asset Management, told CNNfn's Street Sweep. "If nothing else, it's a reversal in trend."
The Nasdaq rose 22.79 to 1,690.20. The Dow Jones industrial average fell 46.84 to end the day at 9,075.14. The S&P 500 lost a scant 0.01 to close at 1,059.78.
In October, the Dow industrials rose 2.6 percent after falling 11 percent in September. The Nasdaq composite rose 12.7 percent after falling 17 percent in September. And the Standard & Poor's 500 added 1.8 percent in October after it gave back 8.2 percent during the previous month.
U.S. gross domestic product, the broadest measure of the economy, shrank at an annual rate of 0.4 percent in the third quarter, the Commerce Department said in its first reading of the economy's performance. That was better than the expectations of economists, who were looking for a loss of 1 percent, although it was a reversal of the 0.3 percent growth rate in the second quarter.
Also helping was news that the government will immediately discontinue issuing 30-year bonds. Although the Treasury could resume issuing at any time, the news seems to imply that the government believes that lower-cost short-term debt can cover borrowing costs in the near term.
While the end of the 30-year bond is not necessarily bullish for stocks, it shows the government is managing debt better, and definitely gave investors a little psychological boost, said Donald Selkin, chief investment strategist at Joseph Gunnar.
But investors may want to be cautious of committing too much ahead of key indicators due out later in the week, said Bryan Piskorowski, market commentator at Prudential Financial.
"There is still going to be a lot of uncertainty through the next few days, ahead of the data," Piskorowski said.
On Friday, the Labor Department will release October unemployment data. The unemployment rate is expected to rise to 5.2 percent from 4.9 percent in September, according to a consensus of economists surveyed by Briefing.com.
Treasury prices rose, with the 30-year bond yield cascading to 4.87 percent from about 5.20 percent late Tuesday. U.S. Treasurys enjoyed their biggest one-day rally in 14 years. The dollar was stronger against the yen and euro.
Asian stock markets finished mostly lower Wednesday. Technology stocks pushed European bourses higher at the close.
Markets in Latin America, including the Argentina Merval, rose. The Argentine economy is entering its fourth year of recession and is still waiting for word on its greatly needed economic package. Argentina's potential to default on its $132 billion debt has impacted world markets of late.
U.S. market breadth was positive. On the Nasdaq, winners edged losers by a 3-to-2 margin as 1.88 billion shares traded. On the New York Stock Exchange, advancers beat decliners by an almost 2-to-1 margin as 1.30 billion shares changed hands.
Sun Microsystems, Intel, among Wednesday's most active
Networking issues, computer hardware and semiconductors lifted the Nasdaq, while Eastman Kodak, which had its debt rating cut by Moody's Investors Service, pulled down the Dow.
"The corporate news has stopped deteriorating and it some cases is just flat," David Briggs, head of equity trading, Federated Investors, told CNNfn.
Brian Finnerty, co-head of capital markets at C.E. Unterberg, Towbin, told CNNfn's Market Call that the Nasdaq needs to be the leader in any recovery.
Sun Microsystems (SUNW: up $0.61 to $10.15, Research, Estimates) soared in the overall rise, but also on some positive comments out of Goldman Sachs. The maker of Unix servers, which power Web sites and networks, also indicated an uptick in orders during its presentation at the Prudential Tech conference.
No. 1 chipmaker Intel (INTC: up $0.88 to $24.42, Research, Estimates) offered some comparatively bullish comments at its virtual analyst fair regarding long-term growth, saying it expects to see profits once the high-tech recession pulls back. The Philadelphia Semiconductor index, or Soxx, rose more than 4 percent.
Prudential made positive comments about computer hardware maker Dell Computer (DELL: up $0.74 to $23.98, Research, Estimates) after meeting with CEO Michael Dell late Tuesday, saying that the company is on track to meet the middle of its third-quarter revenue range.
Eastman Kodak (EK: down $2.23 to $25.57, Research, Estimates), which has been trading at 15-year lows, kept the Dow in check. On Tuesday, Moody's Investors Service cut its debt ratings for the photography company and said it may cut the rating again as the company is hurt by falling profit and the trend to digital photography. Also Tuesday, brokerage Lehman Bros. chimed in with negative commentary.
Also showing some weakness was Philip Morris (MO: down $0.90 to $46.80, Research, Estimates), still down from Tuesday's news that Goldman Sachs had cut the tobacco maker from its purchase list and lowered the company's estimates and ratings.
Continental Airlines (CAL: up $0.84 to $17.49, Research, Estimates) reported a loss of $1.76 a share, excluding federal aid after the attacks and one-time items, bettering estimates.
Qwest Communications (Q: down $3.05 to $12.95, Research, Estimates) lost 8 cents a share in the latest quarter, missing expectations of a profit of 3 cents a share, and reversing earnings of 14 cents a share a year earlier.
Alcatel (ALA: up $1.17 to $14.93, Research, Estimates), Europe's fourth-largest telephone equipment maker, posted a third-quarter loss and announced 10,000 job cuts.
Internet-based credit card issuer Nextcard (NXCD: down $4.48 to $0.87, Research, Estimates) was unusually active after it said it lost $1 a share in the third quarter when analysts expected a loss of 14 cents. The company lost 27 cents a share a year earlier. It also said it has hired Goldman Sachs to help it find a buyer.
Adobe Systems (ADBE: down $2.35 to $26.40, Research, Estimates), which makes graphic design software, warned about fourth-quarter results and said it is cutting 5 percent of worldwide employees, or about 150 people.
Goldman Sachs upped its 2001 and 2002 earnings-per-share estimates on Medicare health plan manager Pacificare Health Systems (PHSY: up $1.07 to $16.56, Research, Estimates) after the company said it earned 52 cents in its current quarter, beating estimates by 18 cents.
Chicago data also provide a lift
In addition to the GDP report, the markets got a lift upon learning the National Association of Purchasing Management-Chicago's regional manufacturing index fell to 46.2 percent in October from 46.6 percent in September, bettering expectations of economists who were looking for 43.0.
A sharper decline had been expected for the Chicago number, since the September report had shown a rise that was thought to reflect the situation before the Sept. 11 terrorist attacks. The fact that Chicago sustained much of the September increase can be seen as a positive for the economy.
"We're in good shape for now, but there's still going to be this anxiety, where people are looking over their shoulders, waiting to see what's coming next on the national level," Joseph Gunnar's Selkin said.
In bioterrorism news, a 61-year-old New York woman who had no apparent connection to Congress, the media, or postal service died after contracting inhalation anthrax.
Military retaliation for the Sept. 11 attack continued in Afghanistan, as jet fighters targeted Taliban troop positions north of the nation's capital, Kabul.