Major market indices fall Friday as traders decide to take money off the table heading into a three day weekend. The Dow ($INDU) gave up 51.33 points on the session, closing at 10,282.83. The S&P 500 ($SPX) also lost ground, declining 0.32 percent to 1,125.32. The Nasdaq ($COMPQ) tested the 2K level Friday, falling 8.89 points, or 0.44 percent, to 2,006.66. Volume was extremely light with the NYSE trading 1.08 billion shares and the Naz turning over just 1.20 billion shares. Market breadth was flat on the Naz, with winners surpassing losers on the Big Board by a 21-to-12 margin.
The big news Friday was the release of the June employment report. However, most of the components of the report were below expectations, pushing stocks lower from the onset. Nonfarm payrolls rose by just 112K versus estimates for a gain of 250K. Both the average workweek and average hourly earnings fell short of expectations as well. Despite this negative news, stocks saw an orderly decline even though volume was extremely light. Traders decided to take off early Friday to get a jump on the three day weekend. Though the jobs data did disappoint, it does lower the odds that the Fed will be inclined to push rates up at a quicker rate. The last thing the Fed wants to do is dam economic growth and hiring practices.
The chip sector fell sharply Friday, with the Semiconductor HOLDRS (SMH) giving up 2.11 percent. The sector got good news from the Semiconductor Industry Association [SIA] about growing global chip sales. From May 2003 to May 2004, sales grew by 36.9 percent. However, a downgrade of Intel (INTC) at Deutsche Securities to “Hold” took a toll on chip stocks. Shares of Intel fell 2.55 percent and are near support which resides just below $26 a share.
Shares of Apple Computer (AAPL) were a drag on the tech sector today after the company stated its new iMac would not be ready for shipment until September. AAPL shares fell 3.78 percent on the news, with the CBOE GSTI Hardware Index ($GHA) down about one percent while finding support at its 200-day moving average. Earnings warnings from Maxtor (MXO) and WebMethods (WEBM) also took a toll on the tech sector.
Looking ahead, second quarter earnings season is on the horizon and this should be a positive for stocks. However, there still are worries about terrorism and inflation, but as long as these things are kept in check, traders might be more apt to buy stocks on strong earnings news.
Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site
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