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1x1;ord=2390645146.36993? WJPBR Email News List [EMAIL PROTECTED] Peace at any cost is a Prelude to War! Techs lead market's charge Blue chips volatile, settling at modestly better levels By Julie Rannazzisi, CBS.MarketWatch.com Last Update: 5:07 PM ET Nov. 26, 2001 NEW YORK (CBS.MW) -- The Dow Industrials reversed gears and finished Monday's session within a stone's throw away from the 10,000 mark as technology issues continued to light up the market following big gains in the chip and hardware groups. The Nasdaq, which is closing in on the 2,000 mark, ended at its highest level since mid-August. The gains came in the face of cautious calls from a handful of analysts, including a cut in J.P. Morgan's equity weighting and a Lehman Brothers advisory to lighten up on tech stocks. With no economic data to focus on, investors started to let sink in news they had long expected yet dreaded: the U.S. economy has been in a recession since March, ending the longest expansion at exactly 10 years, according to the National Bureau of Economic Research, a group that officially dates U.S. expansions and contractions. See full story. Market watchers feel that the averages need to spend some time consolidating after running up so furiously in such a short period of time. "The markets are in a short-term overbought condition [as] many stocks have made good moves to the upside. Many stocks are starting to stall and are [to start] a resting period that will last several weeks [as] key resistance levels will take some time and volume to work through. A pullback in the 5 to 10 percent neighborhood is likely," said Robert Dickey, technical strategist at RBC Dain Rauscher. The Dow Jones Industrial Average ($INDU: news, chart, profile) rose 23.04 points, or 0.2 percent, to 9,982.75. Intel, Honeywell, American Express, Walt Disney, Merck, General Motors and Citigroup led on the upside while Home Depot, DuPont, Coca-Cola, Alcoa, Exxon Mobil, Exxon Mobil, Johnson & Johnson and Philip Morris declined. Chip, software and hardware stocks closed with handsome gains while networking issues lagged throughout the session following analyst downgrades in the group. In the overall market, declines in oil and oil service shares mirrored a fall in crude prices and natural gas and utility issues followed the group lower. But biotech, airline and financial shares underpinned the broader averages. Check market stats and latest sector performance. On the war front, several hundred U.S. Marines landed near the Taliban stronghold of Kandahar, with additional Marines expected to arrive. Afghan factions are scheduled to meet in Germany on Tuesday to set up a new interim government. See full story. The Nasdaq Composite ($COMPQ: news, chart, profile) sprinted 38.03 points, or 2.0 percent, to 1,941.23 while the Nasdaq 100 Index ($NDX: news, chart, profile) swelled 42.18 points, or 2.7 percent, to 1,619.65. The Standard & Poor's 500 Index ($SPX: news, chart, profile) edged up 0.6 percent while the Russell 2000 Index ($RUT: news, chart, profile) of small-capitalization stocks advanced 0.6 percent. Dickey said the healthcare and biotech groups stand out as strong sectors that will likely hold up well in the face of a general market dip. "Otherwise a better, general buying opportunity appears to be about two to three weeks away," he concluded. Banc of America Securities strategist Tom McManus remained in the camp of those viewing the current rally as just another convulsion within a bear market. "Many are citing the recent performance of the stock and bond markets as evidence of imminent recovery. We continue to see the rally as an oversold bounce," the strategist told clients. "Several stronger-than-expected economic reports drove stocks higher, even in the face of sharply higher interest rates. In our view, upcoming reports of activity in the manufacturing and service sectors, combined with fresh readings of consumer confidence, will pose a new challenge for the 'V-bottom' devotees," McManus commented. He also feels that the fourth-quarter pre-announcement season will damage overly optimistic expectations for the second half of 2002. But A.G. Edwards chief equity strategist Stuart Freeman believes that the stage is being set for an economic expansion in 2002. The strategist pointed to lower rates, slumping energy prices and easier earnings comparisons. "This buoyant market behavior makes sense, although profit-taking and pullbacks will also accompany the early stages of this economic expansion," Freeman said. "At this juncture, we continue to recommend a 50/50 split between growth and value stocks. Value stocks -- mostly cyclicals -- should benefit from improving fundamentals in coming quarters. And selected growth issues, particularly those that have some cyclical dependence, should benefit from recovery as well as modest P/E expansion," Freeman said. Volume was on the light side, amounting to 1.08 billion on the NYSE and 1.74 billion on the Nasdaq Stock Market. Market breadth was marginally positive, with winners surpassing losers by 17 to 15 on the NYSE and by 21 to 16 on the Nasdaq. Separately, the Index of Investor Optimism declined modestly in November, falling to 117 from the previous month's 130 reading. Optimism fell as investors struggled with the effects of a weakening economy, UBS PaineWebber and the Gallup Organization said. On the fund flow front, Trim Tabs reported that all equity funds had outflows of $1.3 billion in the four trading days ending Nov. 21 compared with inflows of $100 million in the prior week. And equity funds that invest primarily in U.S. stocks had inflows of $600 million compared with inflows of $2.1 billion during the prior week. Finally, bond funds had outflows of $500 million vs. inflows of $1.0 billion the prior week. The fund flow tracker noted that corporate liquidity slumped significantly last week, with new offerings, mostly convertible bonds, on fire while stock buyback announcements fizzled. Trim Tabs said it'll remain bearish on the market until corporate investors remain negative. J.P. Morgan cuts equity weighting; Lehman lightens up on tech J.P. Morgan's chief strategist Doug Cliggott lowered his recommended equity asset allocation in a balanced portfolio to 50 percent from 60 percent and conversely raised bonds to 25 percent from 20 percent and cash to 25 percent from 20 percent. Cliggott's cautious stance on equities is a reflection of excessive complacency in the current market. He also said the backup in the 10-year note's yield over the past two weeks, coupled with a sharp advance in stock prices, has dramatically altered the relative value of the two asset classes. "We think bond returns will exceed stock returns by a comfortable margin in the next 12 months," he concluded. In the meantime, Lehman Brothers' Joseph Rooney pared back exposure to technology stocks and instead moved funds into traditional cyclicals, adding to an already overweight position in the group. "We remain enthusiastic about cyclical stocks, but would differentiate between tech cyclicals and traditional cyclicals. The recent rally has pushed technology valuations into the top half of their trading range [while] traditional cyclicals remain towards the bottom end of their relative valuation range," Rooney said in a research note, adding that a revival in growth expectations will be the catalyst to prompt another leg of outperformance in the cyclical group. And Stephen Roach, Morgan Stanley's chief economist, lowered his 2002 global growth forecast for the second time in two weeks following a reduction in European growth projections. Roach now sees 2002 GDP growing at 1.6 percent vs. the previous 1.8 percent estimate. Growth estimates for 2001 were left unchanged at 1.7 percent. Specific and sector action Retail issues ($RLX: news, chart, profile) edged up as the holiday shopping season kicked off this weekend. Wal-Mart (WMT: news, chart, profile) rang up a whopping $1.25 billion in sales on Friday, the heftiest number in the history of the retailer. See related story. But the real winners on Monday were e-commerce companies, with investors banking on a busy shopping season online. Amazon (AMZN: news, chart, profile) flew 34.5 percent and Yahoo (YHOO: news, chart, profile) sprinted almost 15 percent. See Net Stocks. Yahoo reported a huge year-over-year increase in online shopping while Merrill Lynch pointed out that items sold on Amazon's site in the past two weeks are running about 20 to 30 percent higher than last year. In the tech group, Chip stocks ($SOX: news, chart, profile) extremely fared well as Taiwan Semiconductor Manufacturing (TSM: news, chart, profile) raised its 2001 sales and profit expectations thanks to a "substantial increase" in customer orders. Read full story. The stock jumped 5.7 percent. Among other stocks in the group, Intel gained 2.6 percent, Advanced Micro Devices 5.9 percent and Applied Materials 3.4 percent. AMAT (AMAT: news, chart, profile) announced that it purchased a semiconductor test equipment unit of Schlumberger. Terms of the deal were not disclosed. Schlumberger slumped 2.5 percent. See full story. Networking issues sagged, with Lucent Technologies (LU: news, chart, profile) off 4.2 percent after downgrades from both Morgan Stanley and ABN Amro. Morgan Stanley cut its rating on Lucent to a "neutral" from an "outperform," citing belief that the company's recent stock price appreciation is ahead of any improvement in industry fundamentals. And ABN Amro lowered its view of Lucent to a "hold" from an "add," citing lack of confidence that the company can achieve sequential revenue growth in the second quarter of 2002 as well as non-compelling valuation. And fellow networker Tellbas (TLAB: news, chart, profile) lost 1.6 percent after ABN Amro sliced its view on the company to a "hold" from an "add." In the software arena, meanwhile, JD Edwards (JDEC: news, chart, profile) surged 12.5 percent after receiving an upgrade from CSFB to a "buy" from a "hold." Among its peers, PeopleSoft piled on 4 percent and Oracle added 2.3 percent. Hardware issues ($GHA: news, chart, profile) were among the best tech performers. Gateway surged 8.6 percent, Apple Computer 7.7 percent, Dell Computer 2.1 percent and Hewlett-Packard 0.9 percent. CS First Boston said a hardware-led recovery looks "more possible" in 2002. "A more positive outlook from the Ciscos, Dells and Brocades of the world is reflected in firming projections for a 2002 hardware recovery," the firm said in a research note. CSFB said it maintains its year-end target of 1,900 to 2,000 for the Nasdaq, indicating that sentiment is taking another leap forward while fundamentals are inching their way along, setting up an overbought situation in the market. In the oil patch, oil and oil service shares continued to feel the pinch of lower oil prices. Crude futures for December delivery declined 27 cents to $18.69 amid a continued lack of cooperation between OPEC and non-OPEC oil producers. See full story. Among oil shares, Dow component Exxon Mobil lost 1.7 percent and ChevronTexaco fell 1.6 percent. Biotech issues ended with the heftiest gains among broad market sectors, with shares of companies involved with stem-cell research piling on gains after stem-cell researchers at a privately-held biotech firm announced they had cloned human embryos. Geron Corp. (GERN: news, chart, profile) swelled 7.7 percent while StemCells (STEM: news, chart, profile) rallied 9.2 percent. See related story. Read Movers & Shakers for the latest individual stock action and read After Hours for trading after the official closing bell. Treasury focus Government bonds struggled with more bruising losses after checking in with gains earlier in the day. The rise in stock prices put a damper on the group in a session devoid of economic news. The 10-year Treasury note slipped 5/32 to yield ($TNX: news, chart, profile) 5.02 percent and the 30-year government bond declined 1/4 to yield ($TYX: news, chart, profile) 5.375 percent. See Bond Report. There was no economic news to clutter Monday's calendar. Tuesday will see the release of November consumer confidence, expected to register an 86.1 reading, and October existing home sales, seen coming in at a 4.90 million rate. Check economic calendar and forecasts. The revision to third-quarter gross domestic product will also be out later in the week. Bruce Steinberg, chief economist at Merrill Lynch, said third-quarter GDP probably shrank at a 1.5 percent rate vs. the 0.4 percent originally reported. Steinberg said fourth quarter GDP is probably shrinking at about the same pace and that recovery could begin in the first quarter of next year. "But we continue to believe a second quarter recovery is more likely. That's because record lows on corporate profit margins point to large-scale job reductions through the winter," he said in a research note. Steinberg expects the Fed to ease again on Dec. 11 and cut the fed funds rate by 25 basis points to 1.75 percent. In the currency arena, the dollar shaved 0.3 percent to 124.07 yen while the euro climbed 0.3 percent to 88.06 cents. *COPYRIGHT NOTICE** In accordance with Title 17 U. S. C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment to those who have expressed a prior interest in receiving the included information for nonprofit research and educational purposes only.[Ref. http://www.law.cornell.edu/uscode/17/107.shtml ] Want to be on our lists? Write at [EMAIL PROTECTED] for a menu of our lists! 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