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CLOSING WRAP-UP, May 7
By Frederic Ruffy, Optionetics.com
5/7/2004 2:15:00 PM

http://www.optionetics.com/articles/article_full.asp?idNo=10356

Sellers seized control of the stock market Friday and sent the major averages sharply lower. The sell-off was triggered by a strong monthly employment report, which sent bond prices tumbling and the yield on the benchmark ten-year note to its highest levels since July 2002. Stocks, which were able to hold steady throughout the first half of trading, eventually caved in. At the end of the day, the Dow Jones Industrial Average ($INDU) was down 123 points and the Nasdaq Composite Index ($COMPQ) had lost twenty. For the week, the Dow gave up 108 points and the Nasdaq was essentially unchanged.

Friday, the selling pressure became intense. On the New York Stock Exchange [NYSE], turnover totaled 1.65 billion shares and down volume overwhelmed up volume eight-to-one. At the same time, the ratio of advancing to declining issues was more than twelve-to-one negative! The number of stocks setting 52-week lows swelled. Yesterday, 311 stocks set new 52-week lows on the Big Board. Today, more than 700 set new 52-week lows and only 27 new highs.

Nasdaq stocks performed better and were trading in positive territory during the early trading hours. Yet, despite morning strength, market internals on the Nasdaq Stock Market turned negative. At the end of the day, overall volume totaled 1.62 billion shares and up volume trailed down volume nearly two-to-one. The ratio of advancing to declining issues in Nasdaq trading was three-to-one negative.

The heavy selling on Friday is being blamed on the Labor Department’s unemployment report, which is released on the first Friday of every month. The most recent report showed the US economy gaining 288,000 jobs during the month of April. Economists were expecting a 170,000 gain in new jobs. The stronger-than-expected numbers significantly increase the odds of a rate hike at the next Federal Reserve Open Market Committee [FOMC] meeting in June. As a result, bonds tumbled and rates soared on the news.

Interest sensitive groups like banks, brokers and utility stocks were among the day’s weakest. Airline stocks lost altitude amid concerns about rising energy and jet fuel prices. Crude oil rose 56 cents to $39.93 a barrel and the AMEX Airline Index ($XAL) fell 4.5%. However, gold mining shares were the day’s biggest casualties. As gold prices fell more than $9.00 to $379 a troy ounce, the PHLX Gold and Silver Mining Index ($XAU) tumbled more than 5% on the day.
Semiconductor stocks were able to buck the bearish trend on Friday after Nvidia (NVDA) said its first quarter earnings rose to 12 cents, compared to analyst estimates of 10 cents. Sales also topped analyst forecasts. Shares of the chipmaker finished the day up 17 cents to $22.08. Meanwhile, the PHLX Semiconductor Index ($SOX), which tracks the performance of chip and chip equipment companies, was the day’s only bright spot and finished the day up 1%.



Frederic Ruffy
Senior Writer
Optionetics.com ~ Your Options Education Site