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CLOSING WRAP-UP, May 12
By Jody Osborne, Optionetics.com
5/12/2004 7:00:00 PM

http://www.optionetics.com/articles/article_full.asp?idNo=10379

Stocks stage amazing comeback, although the Nasdaq ($COMPQ) still finishes in the red. The Dow ($INDU) closed the session with a gain of 25.69 points to 10,045.16. Intraday the Dow reached a low of 9,852.19. The S&P 500 ($SPX) added 1.83 points to 1,097.28, which was 21 points above its intraday low. The Nasdaq at one point Wednesday traded as low as 1,878.77, but finished the session at 1,925.59, a loss of just 5.76 points. Volume was moderate, which tells us that the drop and recovery wasn’t necessarily the formation of a bottom. The NYSE traded 1.68 billion shares, with the Naz turning over 1.87 billion. Market breadth was flat on both the Big Board and Naz today.

Rising oil prices sent stocks sharply lower in the early going Wednesday, with the price of a barrel of oil shooting to nearly $41. High oil prices are already creating problems for airline companies and could start to slow consumer spending. The fear is that OPEC is not going to do anything about rising demand and this will just lead to higher oil prices. As oil prices raise it takes a toll on disposable income and this is a concern for the economy. At the same time, firms need to recoup the cost of higher fuel prices by raising consumer prices and this leads to inflationary pressures.

Shares of Cisco (CSCO) closed with a loss of 1.3 percent, though this was well off its intraday low. The networking giant announced earnings last night that beat estimates by a penny, but traders sold the good news after sending the stock higher this past week. Cisco also provided a rather optimistic outlook, as did Qualcomm (QCOM). QCOM shares fell 1.3 percent as well Wednesday despite raising its third quarter and 2004 earnings and revenue estimates.

Tobacco stocks took a hit today following a negative announcement from the Florida Supreme Court. This court agreed to look at the dismissal of the $145 billion judgment against several cigarette companies. Shares of Altria (MO) fell 6.74 percent, with R.J. Reynolds (RJR) shares declining 5.64 percent.

Overall, traders took advantage of an oversold market today to buy stocks heading into the close. However, volume was not very heavy, showing that many traders are still waiting for more information about the economy. Though interest rates are expected to rise in the near term, many traders are now wondering how quickly the rise will be. In the next two sessions, there will be some key economic reports that could answer some of these questions.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site