Meet, Meet, Miss, Meet, Miss

It was a day of duck, duck goose on Wall Street, with companies in a variety of sectors doling out earnings guidance for next quarter. While some companies actually reaffirmed earnings, most guided projections lower for next quarter. Surprising, most of the stocks whose earnings projections were lowered actually moved up on the day.

Stocks like Eastman Kodak (EK), Advanced Micro Devices (AMD) and DoubleClick (DCLK) warned of shortfalls, but managed to stay out of trouble today. They were up $1.50, down $0.06 and up $1.94 respectively. This is further evidence that stocks might be close to being valued fairly, given projected slowdowns in growth.

Another company that warned of lower earnings was General Motors (GM). It indicated earnings would come in between $1.10 and $1.20, down from previous projections of $1.70. Moreover, the company announced that it would be phasing out its Oldsmobile unit over the next few years. GM's oldest brand of automobile has been a drag on earnings for, "a pretty good time period" said GM CEO Rick Wagoner. It currently commands only a 2% market share of U.S. autos. GM will go through a dramatic restructuring, taking a charge of between $1.5 and $2 billion in the process. The stock closed up $0.19 on the session, after being up over $2.00 earlier in the day.

Factoring in the most recent earnings revisions, growth rates within the S&P 500 are now slated to come in between 7 and 8% for the year. Just two months ago, analysts had estimated a growth rate of closer to 15%. Again, it appears that stocks are now trading on these lower growth expectations. This may mean that any impending rally may be short lived until we get actual earnings numbers out of companies, starting next month. Yes, it appears that we are in "show-me, prove-it" mode once again.

Today's Markets:

The NASDAQ (COMPX) still could not put together three straight days of gains. The index never made it into the black today, as sellers squashed any rally attempts. The good news was that trade was fairly lackluster with 1.8 billion shares trading hands. Decliners beat out advancers 2424 to 1560. The visit above 3,000 was short lived but given the fact that we have some catalysts on the horizon (end to the election and the Fed meeting) we may pay another visit soon.

The DOW (INDU) gave us a "camouflaged" up day today, as just a few retail stocks within the average were responsible for the bulk of the gains. Proctor and Gamble (PG) was up $2.88, or 4.16%, to $71.94 after the company said it sees earnings coming in on target for its second quarter. Eastman Kodak (EK), mentioned above, was another DOW mover, finishing up $1.50, or 3.79%, to close at $41.06. Volume on the big board came in at 1 billion and advancers lagged decliners 1273 to 1592.

The S&P 500 was off 9.02, or 0.65%, to 1371.18. It closed below its 50-dma just one day after its bullish break through of this technically important level.

Treasuries gained modestly today as stocks weakened throughout the session. The benchmark 10-year note added 2/32 to yield 5.355, while the 30-year bond gained 1/4, to yield 5.53%. Treasuries dealers were awaiting tomorrow's release of the November retail sales report. The Wall Street consensus is for retail sales to be up 0.3%.

Stocks and Sectors On the Move:

Telecomm stocks (specifically the wireless group) dialed up big gains on the day as investors scooped up bargains in a sector that has been pummeled recently. The catalyst was the FCC's auction of 422 wireless licenses in 195 U.S. markets. The auction consisted of the sale of additional airwaves and new spectrums that will solve some of the problems now being encountered with more handsets using limited airwaves. This will also free up more spectrums that can be dedicated to "next-generation" internet access in the near future. Some stocks benefiting from renewed investor enthusiasm in the sector were WorldCom (WCOM) up $1.25, or 7.63%, to $17.63, AT&T (T) up $1.06, or 5.18% to $21.56 and Nextel (NVTL) up $1.56, or 4.95%, to $33.13.

Financial and insurance stocks saw some profit taking after recent run ups. The AMEX Insurance index (IUX.X) fell 6.41 to 836.67 but was able to hold at its 10-dma, keeping its up trend alive. The CBOE Banking Index (BIX.X) fell only 2.92 to 606.18 as it continues to close in on the pivot point of a double bottom formation.

After the bell today, Compaq Computer (CPQ) became the latest PC maker to warn of lower earnings. The company said that it expects fourth quarter earnings of between $0.28 and $0.30 a share, down from expectations of $0.36 a share. CEO Michael Capellas blamed "general softness" in the U.S. consumer, small and medium businesses and internet businesses. While the knee-jerk reaction in after hours trade was a brief drop below $20 a share, we shall see if the Street is actually surprised with the admission of the obvious when the stock opens for trade in the morning. Compaq closed up $0.53 to $20.77 in the regular session.

Looking Forward, Always Forward:

We have certainly been encouraged by this week's market action, however, we have seen 10-15% rallies roll over before. The current NASDAQ rally is now 16% off the bottom tick of 2523. That puts us in make-or-break territory.

An announcement out of the Supreme Court could certainly sway us one way or another but I prefer to think that stocks (and the market in general) are moving on economic and company specific factors.

A technical indicator that moves the odds of a recovery in our favor is the fact that many large-cap tech stocks are now above their 50-dma. The 50-dma often acts as a launching pad and as downside support for stocks. If these stocks can hold their 50-dma, we look for the NASDAQ to hold above 3,000 and for it to eventually test the 3,500 level on the upside.

Another big "if" hanging out there is whether the Fed will move to a neutral bias at its meeting next Tuesday. With the stock market and treasury market pricing in better than 50-50 odds that the Fed will ease by the end of the second quarter, a switch to a neutral bias is almost a must at this point. With growth slowing and preannouncements starting to jam the news wires, a Fed switch would go along way to lifting investor sentiment and might act to get some cash off the sidelines.

Good Luck and Book Those Profits Early!

Craig Seidler
Assistant Editor