MARKET REPORT
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U.S. stocks ended higher on Friday after a volatile day of trading that saw
tech stocks dodge in and out of positive territory.
An upbeat earnings report by JDS Uniphase Corp. (NASDAQ: JDSU) helped lift
beleaguered optical-networking stocks, which took a big hit earlier in the
week, after Nortel Networks Inc. (NYSE: NT) said it saw its sales in the
technology fall from the first two quarters. It was just enough to send the
tech-laden Nasdaq Composite Index higher for the session.
Small cap indexes mirrored tech stocks, with the bellwether Russell 2000
Index remaining nearly flat, advancing just points to 479.85, while the S&P
600 eked out 0.3-point rise, or 0.1%, to 207.52. The Wilshire Small Cap
1750 headed higher by 3.01 points, or 0.4%, to 802.32.
The Dow Jones Industrial Average put in an impressive performance, driven
by financial and bank stocks, adding 210.50 points, or 2%, to 10590.62,
while the broader S&P 500 gained 15.14 points, or 1.1%, to 1379.58.
Benign economic news out of Washington also helped sustain the market.
Analysts expressed hope that the latest Gross Domestic Product figures,
which showed a significant slowdown in the torrid pace of the U.S. economy,
will cause Federal Reserve Chairman Alan Greenspan to consider dropping
interest rates.
"The perception is finally coming although it has been long in the works
that the economy is slowing down," said Peter Green, head trader at
Gerard Klauer Mattison.
The next major move by the Fed will be to lower interest rates, Green said.
"Basically, the market wants Greenspan to say, 'Yes, the interest-rate
hikes I have administered over the last couple of months are filtering into
the system and taking pressure off stocks.'"
Despite the good news, tech stocks early on suffered a rocky session.
Semiconductor issues continued to flail, as several big names, include
Micron Technology Inc. (NYSE: MU) and Applied Materials Inc. (NASDAQ: AMAT)
headed sharply lower.
"There is a lot of insecurity out there," said Jay Suskind, director of
equity trading at Ryan Beck & Co. "That keeps markets kind of tenuous. I
think there's a lot of 50/50 bets on this market. Investors are saying the
good news is we're at the end of October."
The end of October brings with it pressure on stock prices caused by
concerns over third-quarter earnings, as well as tax-loss selling by mutual
funds, hoping to offset gains but selling losing stocks.
"The other argument against the market is what's going on with this
economy? Are we slowing down too much? Are we going to have earnings-power
problems in the future?" Suskind added.
Other analysts continue to see a market and U.S. economy that are healthy,
though slowing, perhaps even more quickly than the Federal Reserve had
anticipated. In an interview on CNBC this morning, Citigroup Inc. (NYSE: C)
Chairman Sanford Weil said he expects the Fed to lower interest rates soon.
Data on the Gross Domestic Product for the third quarter confirmed a
slowing U.S. economy. The Commerce Department reported a 2.7% GDP rise for
the summer months that was well below analysts' expectations of 3.5%.
The government left second-quarter growth at 5.6%, and said the GDP
deflator, a measure of inflation in the prices of goods and services,
increased 2% for the third quarter, less than Wall Street's estimates of
2.3%. The report also said prices rose 2.4% in the second quarter, as
previously reported.
The Nasdaq Composite Index ended higher, gaining 6.18 points, or 0.2% to
3278.36. The Philadelphia Semiconductor Index, comprised of large cap chip
stocks, fell, losing 20.37, or 2.9%, to 685.60, after gaining more than 40
points Thursday.
Among small cap chip stocks, Sipex Corp. (NASDAQ: SIPX) sank 4 7/16, or
11.5%, to 34 1/8, while QuickLogic Inc. (NASDAQ: QUIK) dropped 13/32, or
4.3%, to 9, and GaSonics International Corp. (NASDAQ: GSNX) lopped off 1
7/16, or 7.6%, to 17 7/16. FSI International Inc. (NASDAQ: FSII) and Brooks
Automation Inc. (NASDAQ: BRKS) were both off in excess of 5%.
In Canadian trading, the Toronto Stock Exchange's earlier rebound soured,
compounding its two-day, 920-point loss. In afternoon trading, the TSE
retreated 106.90, or 1.1%, to 9321.90.
The Canadian Venture Exchange headed higher, gaining 19.40, or 0.6%, to
3259.78. In the currency markets, the Canadian dollar slipped 0.3% to
US$0.6550 from US$0.6567, while the euro retreated a bit to end at US$0.8402.
In commodities news, crude oil futures headed lower, reversing all of
yesterday's gains and then some. December crude futures lost 91 cents, or
2.7%, to $32.80, while November natural gas futures slumped 8 cents to
$4.67, also off 1.7%. December gold fell to $266, off 60 cents, or 0.2%.
