Stocks closed higher across the board on Tuesday. Blue chips lost steam late in the day, closing only modestly to the upside. Defensive sectors, especially drug stocks, experienced some selling as money flowed back into technology stocks. The Nasdaq, though closing off its intraday highs, finished to the plus side with breadth 23-14 positive.
To the bears, the gains of the past few days may constitute a "sucker's rally," while the bulls ponder whether the market has bottomed out.
Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum, believes the recent strength in the market is more than just a short-term rally. He says that with the Nasdaq's dramatic drop to nearly the 2000 level, bargain hunters are moving in, something he expects to continue in the overall market until the March 20 FOMC meeting. Hyman predicts a 50 basis point cut at the meeting.
"I think if you look at the Nasdaq, a lot of the negativity was fear-driven as investors thought technology wasn't a viable investment," he says. "I don't know if the bottom has been made in the Nasdaq, but I think we're pretty close to it." He adds that the Dow was weak as investors thought the Fed was behind the curve on the rate cut front.
"Underneath the damage in tech, there is good strength in the market," Hyman says, adding that many sectors have done well this year - mostly defensive issues. "The average stock in the S&P is up this year, whereas the index is lower because of the weighting, so there is some good underlying strength."
Hyman believes the stock market has ended the most recent down phase. "Last week was a fear-driven week," he believes. "I think the market now will define a different trend."
The Dow Jones Industrial Average ended with a gain of 28.92 points, or 0.27%, to 10591.22. The Nasdaq closed higher by 61.47 points, or 2.87%, to 2204.39. The S&P 500 finished higher by 12.24 points, or 0.99%, to 1253.65.
Treasuries were little changed before Wednesday's Beige Book and speech from Fed chairman Alan Greenspan. Tuesday was a day of ups and downs, for the long-end and for Greenspan who suffered a head cold on his birthday. The bond enjoyed a flurry short-covering in the morning thanks to a friendly combination of factors, but got snowed under by the end of the session in frost-bitten volumes as the winter storm settled into the Northeast.
Unit labor costs were revised to +4.3% from +4.1%. Output was marked lower to +0.8% from +1.2% previously. Hours worked were evised to -1.4% from -1.1%. Also, BTM-UBSW retail chain store sales index fell 0.4% in the week ended Mar. 3 after faling 0.3% the week before. Sales were generally on to below plan.
Stocks in the News
Goldman Sachs reinitiated coverage on Yahoo! (YHOO) and removed the stock from its recommended list, now rating it market outperform.
Xerox Corp. (XRX)plans to sell half its stake in Fuji Xerox Co. Ltd. to Fuji Photo Film Co., Ltd. for about $1.3 billion.
TriQuint Semiconductor (TQNT) says Q1 EPS could decline to $0.14, on revenues that could be $80 million, below Q4's $90.3 million.
Lehman expects McDonald's Corp. (MCD) management to guide Q1 consensus estimates lower and cut its conservative EPS estimates.
Asian equities closed sharply higher. In Japan, the Nikkei Index gained 365.58 points, or 2.97%, to 12687.74. In Hong Kong, the Hang Seng gained 185.79 points, or 1.31%, to 14321.05.
European stocks ended higher. In London, the Financial Times-Stock Exchange 100 index closed up 80.70 points, or 1.36%, to 6012.00. Some were encouraged by reports retail sales strong last month, that housing prices rise suggested improved economy. Germany's DAX Index ended up 69.93 points, or 1.12%, to 6286.31 in a carryover of yesterday's rally. In France, the CAC 40 closed up 88.45 points, or 1.65%, to 5457.28.