MARKET REPORT
************************************
A strong surge in semiconductor stocks spread to other tech issues in an
inspired session that moved small cap indexes into positive territory
during the last minutes of trading.
It was an up-and-down session that finally allowed the tech-laden Nasdaq
Composite Index to see its first gain after three straight losing sessions.
It gained 67.27 points, or 2%, to 3523.10.
Analysts attributed much of the movement to investor enthusiasm about
companies that haven't stepped forward with negative third-quarter
pre-announcements.
Small caps rose by day's end, too, in response to this "no news is good
news" posture.
The Russell 2000 Index gained 2.82 points, or 0.6%, to 507.49, while the
S&P 600 ended equally higher in percentage terms up 1.23 to 213.23. The
Wilshire Small Cap 1750 made the strongest gains, adding 6.80, or 0.8%, to
824.76.
It was a session that saw nearly all small cap oil and gas stocks lose
ground, with companies such as Southwestern Energy Co. (NYSE: SWN) losing
4.3%, or 3/8, to 8 3/8, and UTI Energy Corp. (AMEX: UTI) dropping 1 9/16,
or 6.6%, to 22.
Despite the surge in tech stocks, a number of small cap Internet issues
suffered big losses. Shares of Saga Systems Inc. (NYSE: AGS) lost a
whopping 32.1%, or 2 5/8, to 5 9/16, while Accrue Software Inc. (NASDAQ:
ACRU) lost 1 1/8, or 14.1%, to 6 7/8, on a downgrade by SG Cowen & Co.
analyst Rehan Syed.
Strength was evident throughout the day in semiconductor issues, with the
Philadelphia Semiconductor Index of large cap issues vaulting 50.11 points,
or 6.2%, to 863.06.
But the enthusiasm for chip stocks didn't carry over into all tech stocks.
The divide between winners and losers was clear within two components of
the Dow Jones average Microsoft Corp. (NASDAQ: MSFT) and Intel Corp.
(NASDAQ: INTC). While Intel ended higher by 1 11/16, or 4.2%, to 42,
Microsoft sagged, lopping off 1 1/8, or 2%, to end at 55 7/16.
"There is no leadership in high tech stocks," said Scott Fullman, options
strategist for Swiss American Securities.
And within other large cap issues, Fullman noted, unlikely leadership has
surfaced in the form of Walt Disney Co. (NYSE: DIS) and Philip Morris Cos.
(NYSE: MO), whose stock performances year-to-date have exceeded 30%.
"We've seen an evening out in the market" with regard to the role leaders
have been playing as well as in valuations, Fullman said.
While much of the focus on weaker stock performance of late has been on
lower corporate earnings, increased energy prices are affecting consumer
behavior.
"Oil prices have a greater affect than the Fed" on the stock market,
Fullman said.
He noted that investors are suffering through a "seasonally weak period,"
but expects to see a turnaround in the last week of October or early November.
Earlier Wednesday, the Commerce Department reported factory orders rose 2%
in August, higher than analysts' estimates of 1.7% and reversing July's
revised 8.1% tumble. Markets paid little attention to the news, however.
In broader market action, the S&P 500 gained by nearly 8 points, or 0.6%,
to 1434.31, while the Dow Jones Industrial Average, which had gained over
100 points earlier in the session, added 64.74, or 0.6%, to 10,784.48.
In Canadian trading, the Toronto Stock Exchange tacked on 68.30 points, or
0.7%, to 10,524.70, while the Canadian Venture Exchange dropped 6 points,
or 0.2%, to 3499.68.
In the currency markets, the Canadian dollar gained 0.5% to US$0.6681 from
$US0.6650, while the euro ended slightly higher at US$0.8744.
In commodities trading, November crude oil futures sagged, dropping 72
cents, or 2.3%, to $31.35 a barrel. November natural gas futures fell 5
cents, or 0.9%, to $5.30, while December gold slipped to $273.40, off $1.40
or 0.5%.
