MARKET REPORT
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Tech stocks staged a rally on the last day of October that was anything but
scary.
Driven higher by the end of tax-loss selling by mutual-fund managers and
benign economic news, stocks scared up some pretty significant advances.
Small cap stocks joined the party and headed higher, as the bellwether
Russell 2000 Index surged 11.26 points, or 2.3%, to 493.98. The S&P Small
Cap 600 added 6.86, or 3.3%, to 215.43. The Wilshire 1750 gained 21.53, or
2.7%, to 827.37.
The Nasdaq Composite Index continued to bolt ahead, advancing 160.58, or
5%, to 3351.98, while the Philadelphia Semiconductor Index of large cap
stocks rumbled up 34.67, or 4.9%, to 737.70.
"For the first time, you have all the indexes up at the same time," said
Kenneth Sheinberg, head of listed trading at Brean Murray & Co.
"It was time for the market to go up," Sheinberg said. "There has been a
lot of pessimism out there. But the market recently has acted very well
now the tech sector is catching up to where the Dow had been trading.
"It will probably continues this way for the next couple of days,"
Sheinberg added.
The tech-sector bullishness pointed to renewed investor confidence within
the sector, as well as some bargain hunting. It was a broad-based rally
that saw issues as divergent as consumer goods and semiconductors gain.
"The tech sector has gotten too beat up," said Howard Penney, small cap
strategist at Morgan Stanley Dean Witter. "We've seen a huge correction in
earnings and earnings growth stocks reflected it."
Penney noted telecommunications stocks were particularly affected by the
strength in the tech sector.
"If you look at what SBC Communications Inc. (NYSE: SBC) is saying today
about DSL deployment, the biggest concern is the telecom market," Penney noted.
SBC said Monday it made an investment in General Bandwidth Inc. to offer
voice over broadband connections a boon to digital-subscriber-line
service, which is sold at a premium to existing phone service.
"Some of the DSL companies look interesting," Penny added, pointing to such
small caps as Efficient Networks Inc. (NASDAQ: EFNT) and Illuminet Holdings
Inc. (NASDAQ: ILUM). "These telecom-service companies that have gotten
killed probably should be bought."
Blue chips early on lagged behind their smaller counterparts, in reaction
to assorted economic data. But by midday, the wavering Dow Jones Industrial
Average found its footing and pushed higher toward the 11,000 level.
At 4 p.m. ET the Dow had gained 133.10 points, or 1.2%, to 10,968.87. The
broader S&P 500 gathered 28.44, or 2%, to1427.10.
Part of the Dow's ambivalence was due to the economic news, especially the
Conference Board report that showed consumer confidence, a measure of
Americans' faith in the U.S. economy, shrunk nearly 10 points in October to
130.5. Consensus estimates had called for the figure to ring in at 140.
September's measure was revised upward to 142.5.
Another report showed Midwest manufacturing in contraction. The Chicago
Purchasing Managers Index declined to 48.7, lower than analysts'
expectations of 51%, showing further reduction in factory output in that
region. The National Association of Purchasing Managers in Chicago, which
puts together the report, also revised September's measure upward to 51.4%,
compared with a previously reported 49.5%, pointing to expansion rather
than contraction in Midwest manufacturing last month.
The Census Bureau reported new-homes sales rose by 80,000 in September to
an annual rate of 946,000, buoyed by low mortgage rates. The increase far
surpassed analysts' expectations of 900,000 and was higher than August's
revised 866,000.
In Canadian trading, the Toronto Stock Exchange reversed its three-day
losing streak to add 386.50, or 4.2%, to 9639.60. The Canadian Venture
Exchange wavered in afternoon trading and ended higher by just 0.68 points
to 3239.77.
In currency markets, the Canadian dollar advanced 0.6% to US$0.6574 from
US$0.6532, while the euro brightened to US$0.8492.
In commodities news, December crude oil futures lost 12 cents, or 0.4%, to
$32.69, while December natural gas futures advanced a penny to $4.50, up
0.2%. December gold lost 80 cents, or 0.3%, to $266.60.
Economic news will continue to play a larger part in the markets this week,
as a bevy of important data makes its way out of Washington. Moreover, as
earnings releases wind down and tax-loss selling comes to an end, economic
news will play a larger part in market activity than it has since early
September.
Later in the week, look for important numbers on construction spending,
leading economic indicators and the big unemployment number due from the
Labor Department on Friday.
