Sector Investing

[ReturntoSender]

CLOSING WRAP-UP, Aug. 5
By Jody Osborne, Optionetics.com
8/5/2003 5:45:00 PM

http://www.optionetics.com/articles/article_full.asp?idNo=8834

Tuesday results in lower prices, with the bulls unable to rally stocks like they did on Monday. Interestingly, the day started in a similar fashion, with positive economic news unable to move the major market indices higher. However, unlike Monday, the end of the session brought out more sellers rather than seeing a rally. The Dow ($INDU) fell 149.72 points, or 1.63 percent, to close at 9,036.32. The S&P 500 ($SPX) declined 1.77 percent o 965.46, which is the lowest close for the SPX since May 30. The Nasdaq ($COMPQ) saw the largest losses, giving up 2.37 percent to 1,673.50. Volume remained on the light side, with the NYSE trading 1.29 billion shares and the Naz turning over 1.7 billion. Market breadth was negative by a 22-to-10 and 21-to-10 margin on the Big Board and Naz respectively.

Economic news was in the spotlight on Tuesday, though the positive news was overlooked in favor of a negative Challenger report. On the bright side, the ISM non-mfg. index rose to a new all-time high of 65.1, well above estimates for a figure of 58.1 percent. This report continues to show that the services sector has been able to avoid recessionary pressures for the most part. However, news that the economy is improving has put a hurt on bonds and this has led to some concern about rising interest rates.

Despite the growth that is developing for the economy, the jobs market continues to be a major concern. On Tuesday, the Challenger report showed that job cut announcements increased by 43 percent in July to 85,117. Nonetheless, this is still below the average for the first half of the year of more than 100,000. Even so, the fact that most job related economic reports have been weak is still a problem.

Traders were also awaiting a key earnings report from Cisco (CSCO) after the bell. Ahead of this news, shares of Cisco fell 2.08 percent. After the bell, Cisco announced earnings that were in line with estimates, with revenues coming in slightly ahead of expectations. Nonetheless, the stock is down in after hours trading by more than a dollar. This could reverse before Wednesday’s open, but so far, traders are selling the news, mainly because the stock didn’t surpass high expectations.

Overall, the major market indices continue to see volatile day to day trading. However, they now are at key points, with the Dow just above key support at 9,000. At the same time, the CBOE Market Volatility Index ($VIX) is sitting just below resistance as well. If the VIX breaks through resistance, it could lead to even lower prices for stocks.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

Vix charts can be found in this post:

http://www.investorshub.com/boards/read_msg.asp?message_id=1282799

RtS