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Commentary Wednesday, October 04, 2000 
Who Wants to be a Millionaire? Is this a bottom or just one more bounce? Give us your final answer, and if it is right you could win a million bucks, get it wrong and you wind up missing out on the big money. The market started out again to the down side today, as it has so often over the past six weeks. Still suffering from the impact of the bombing in the wake of the cryptic Federal Reserve meeting yesterday, the futures this morning looked down. The NASDAQ Composite Index (COMPX) complied with ease, dropping down to 3,382.53, a cool drop of 73.3 points and penetrating the 3,400 support within an hour of the open. From there, the COMPX played catch-up, getting as high as 3532.43 before settling at 3,523.10 with a 67.27 gain on 2 billion shares exchanged. Meanwhile, the Dow Jones Industrial Average (INDU) took a few minutes of pause and then climbed above 10,800 to 10,825 for a gain of 106 while the COMPX was bottoming. From there the INDU drift lower and at the close added 64.74 to 10,784.48. NYSE traded nearly 1.2 billion. Decliners beat advances on the NYSE by a 15 to 12 margin and by a 21 to 18 margin on the NASDAQ. However, there was more buying than selling, as the up volume beat down volume on the NYSE 59 to 55 and on the NASDAQ 12 to 9. The morning looked bleak after Knight Trading (formerly Trimark) (NITE) warned that it would miss estimates due to the problems with the NASDAQ and its expansion overseas. NITE gapped down almost $8, or 23%, to $24.75 at the open. It closed at $28.50, a drop of $3.69. Oracle (ORCL) was still weighing on traders from yesterday's $10 drop and added another $9 on the down side just after the open. Yesterday, ORCL had a meeting with analysts and they were not impressed. One analyst said he did not like the body language of the CFO, saying it sent a bad signal. But ORCL began recovering and this afternoon the company came out and said it was on track to meet all there estimates, which took the stock as high as 70.75. ORCL was the most active on the NASDAQ, trading 102 million shares before closing at 68.13, down $1.37. Computer Associates (CA) also issued an earnings warning and rose $3.63 to $28.06. Analysts figured that the warning was better than they thought, so they bought to stock. The book on Amazon.com (AMZN) added another chapter today, as Robertson Stephens issued a report this morning that under their current business model AMZN can't make money. Investors found it under fiction and bought the stock anyway, sending the stock up $0.94 to $36.00 on average volume of 7.8 million shares. Microsoft (MSFT) held down the second most active slot but continued its slide, hitting a new low at $54.50 on more than double average daily volume of 68.2 million shares and closed down $1.13 at $55.43. Unlike Microsoft, the other NASDAQ generals, Intel (INTC) and Cisco (CSCO), both rose after recent down trends. Over on the NYSE the cyclicals and fundamental stocks took off to extend their rally off multi-year lows, as oil companies fell on a drop in oil prices. Dupont closed up $1.00 to $45.38 on almost double average daily volume (ADV). Meanwhile, Proctor & Gamble (PG) gained $1.43 to $70.25, Boeing (BA) gained $1.25 to $61.13 and Home Depot gained $1.75 to 55.56 all on higher volume. After the close, Dell warned that it will meet estimates, but overall sales may be slower. At market close the stock was at a closing low and intra-day hit a new low of $26.31. During the day Dell traded 55.5 million shares. Also after the bell, Harmonic (HLIT) warned of lower earnings and dropped $8 in after-hours trading. The box makers were already dissected after the Apple Computer (AAPL) warning last week, so Dell may not have a big impact, but HLIT is in the Optical sector and this may have impact on that highflying sector. Pitney-Bowes (PBI) copied XRX tonight and issued a warning saying it would miss earnings by about 3 cents. PBI was already hammered in the wake of the XRX warning. The market learned today that more people said "Pepsi please," as its earnings beat estimates by $0.02, coming in at $.82. Last year's take was $0.59 per share. Still, the joy-of-cola lost $0.88 to $45.13 on the day. After the market closed Micron Technology (MU) reported blowout earnings of $1.20 compared to analysts estimate of $0.96. The stock moved up $5 from a close of S43.06 to $48 and change. That may mitigate some of the impact from Dell for at least the semiconductor sector. The 30-yr bond traded in a narrow range, closing at its low for the day with a yield of 5.947%. Oil prices dropped. The Euro has climbed off its low, but still is worth only $0.87. How much farther down can the market go? Some traders and analysts see the market as greatly oversold. The problem is that most days the market has opened up and then slowly eroded during the day, ending with a flush that makes it difficult to trade. This hasn't given the market the purge of seller's it needs to find a bottom. On the other hand, how much farther down does it need to go? The reason the market dropped and failed to rise as the FED tightened interest rates was in expectation of the slowing we are now seeing. With that drop and the latest drops we've had accompanying the actual news of the effects, when does the news get fully discounted? Apparently, the belief that the Fed would change its stance to a "neutral" bias was widely expected and a big disappointment yesterday when it didn't happen. The effects of the rate hikes are only now beginning to impact the economy with slowdowns in retail sales, home construction and borrowing. Normally, the market anticipates events and these events were already anticipated. Investors will be looking for some sign of easing so that anticipation of new growth can start an up trend. Investor sentiment is negative. Many believe that once actual earnings begin to be released and they show upside surprises the market will turn. October is also the month the markets usually bottom and new up trends begin. Money is waiting on the sidelines to jump in and has been coming in selectively. Earnings season begins in earnest next week and we will soon learn where the bottom is.
Maris Eshleman
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