MARKET REPORT
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Try as they might Nasdaq and small caps stocks couldn't maintain positive
ground in Monday trading, pulled down by continuing earnings woes and a
slowing U.S. economy.
It was a day of high drama that saw the U.S. Supreme Court issue a ruling
vacating a Florida Supreme Court order allowing hand counts of presidential
votes in the election controversy in the Sunshine State. The high court set
aside the Florida ruling and sent the case back "for further proceedings."
Within small cap indexes, the benchmark Russell 2000 Index fell 6.45
points, or 1.41%, to 450.39, while the S&P 600 dropped 1.25, or 0.62%, to
199.90. The Wilshire 1750 surrendered 11.69 points, or 1.6%, to 716.95.
The Nasdaq Composite Index ended lower in a choppy day of trading. The
tech-heavy index lost 29.54, or 1.12%, to 2615.75 after heading into
positive territory in afternoon trading. Chip stocks fared better, as the
Philadelphia Semiconductor Index gained 13.13, or 2.44%, to 551.48, but
ended off Monday's highs.
"The market is still pretty much hostage to the election outcome," said
Charles White, portfolio manager at Avatar Associates. But "the big driver
is going to be the employment report at the end of the week," he noted.
Analysts for weeks have been pointing to a rise in the unemployment rate to
inspire the Federal Reserve to relax its grip on monetary policy.
"This would be a defining moment for the Fed to at least come off their
tightening bias," White said, who further said he expects to see a rise in
the unemployment rate. "Tougher times in the labor market and smaller
increases in wages . . . would feed into the Fed and its timetable for
moving back to a neutral bias and perhaps even easing credit conditions."
Other analysts have suggested the Fed's inaction has pushed the U.S.
economy perilously close to a recessionary cliff for failing to alter its
anti-inflation stance and maintaining restrictive credit policies and high
interest rates.
"The Fed has been disappointing in its lack of movement," noted Michael
Holland, chairman of Holland & Co. "There's no question all the data
indicate a dramatic diminution in the economy's growth. The bond and stock
markets have been factoring those in over the last couple of months," he added.
Blue chip stocks, which headed lower after the opening bell, rebounded on
fresh economic data and continued to head higher after the Supreme Court
decision. The Dow Jones Industrial Average vaulted 187.41 points, or 1.81%,
to 10,560.95, after ending Friday down 41 points. The broader S&P 500
picked up 9.74, or 0.74%, to 1324.97, after ending Friday's session nearly
flat.
Within small cap stocks, Louisiana-Pacific Corp. (NYSE: LPX) said after
market close Friday it plans to shut two of its lumber mills and
permanently close two industrial plants. The buildings material supplier's
shares gained 5/16, or 4.2%, to 7 13/16 in Monday trading.
Universal Access Inc. (NASDAQ: UAXS) said it entered into an alliance with
Williams Communications Group Inc. (NYSE: WCG) to improve Internet and
other telecommunications services to the companies' clients. Universal
Access, a network and database-services provider, saw its share price drop
25/32, or 7.4%, to 9 25/32.
United Therapeutics Corp. (NASDAQ: UTHR) plummeted 29 11/16, or 62.3%, to
17 15/16 in Monday trading. Deutsche Banc Alex. Brown analyst Kevin Tang
downgraded the developer of pharmaceuticals to treat vascular diseases,
from "strong buy" to "market perform."
In economic news, reports that showed the nation's leading economic
indicators dropped 0.2% and new-home sales fell nearly 3% in October sent
Nasdaq and small cap stocks lower in Monday morning trading.
The Conference Board, a non-profit business group, said the nation's
economic indicators fell 0.2% in October, slightly greater than analyst
expectations of a 0.1% decline and September's flat reading. The index of
10 economic indicators is used to predict economic activity six to nine
months in the future.
Separately, the Census Bureau said new-home sales fell 2.6% to 928,000 from
September's revised 953,000. Analyst had expected the rate to drop to
909,000, indicating consumers appetite for new homes remains robust.
A report in Monday's <I>Wall Street Journal</I> saying the Federal Reserve
is likely to soften its anti-inflationary stance boosted Nasdaq stocks in
the early going on Wall Street. The newspaper reported the Fed's softening
could pave the way for a rate-cut early next year, a move many analysts are
anticipating.
Redbook Instinet Research reported its E-tail stock index fell 12.8% in the
week ending Friday, compared to a 2.3% gain the previous week. The research
firm noted the S&P 500 fell 2% during the same period. The E-tail index's
52-week performance was a negative 79.0%, compared to a fall of 6.7% for
the S&P500.
The biggest winner over the week was the newly merged Delia's Corp.
(NASDAQ: DLIAD), up 67%, mainly reflecting a 68% surge on Monday alone, on
which the company had no comment. Major losers included Egghead.com Inc.
(NASDAQ: EGGS), down 35%, Webvan Inc. (NASDAQ: WBVN), down 32%, and
Drugstore.com Inc. (NASDAQ: DSCM), down 31%, according to Redbook.
Investors this week have another host of economic data to sift through,
which most analysts believe will point to a slowing U.S. economy.
Republican Vice Presidential candidate Richard Cheney said on Meet the
Press on Sunday he believes the economy may already have entered a
pre-recessionary period.
In Canadian trading, the Toronto Stock Exchange ended Monday marginally
higher after a choppy day of trading, adding just 3.53 points to 8944.70.
The Canadian Venture Exchange dropped 31.44, or 1.1%, to 2906.89.
In currency markets, the Canadian dollar gained 0.1% to US$0.6475 from
US$0.6470, while in late New York trading the euro was higher at US$0.8892,
after gaining strongly Friday.
In commodities news, crude oil futures slipped after surging higher in
early trading. January crude oil futures dropped 80 cents, or 2.5%, to
$31.22, while January natural gas surged 76 cents, or 11.4%, to $7.43,
after setting an all-time new high of $7.95. February gold gained $1.90, or
0.7%, to $273.80.
