Market snatches gain in afternoon rebound
moneycentral.msn.com CNBC Market Dispatches 2/25/2003 4:02:51 PM
Consumer confidence plunges, and so do stocks -- but only for a few hours. Bulls regain control late in the day. Is the see-saw action a prelude to a big drop? After hours, H-P beats Street. AdvertisementA dismal consumer confidence number whacked stocks this morning, but by session’s end, the market had snatched victory from the jaws of defeat. Both the Dow Jones industrials and the Nasdaq Composite Index closed comfortably in the green. Fast filing = fast refund! Do your taxes online. Why the turnabout? With little volume on Wall Street, it can be hard to pinpoint. Among the explanations: short-covering, asset reallocation, and a rumor that Russia might be breaking ground on a disarmament deal with Iraq. Another factor: Technicians have seen buying support come into the market at the Dow 7,850 level before, and some traders began buying again today in hopes of catching a quick market bounce. Among the sectors gaining for the day: transports, tobacco and consumer stocks. For a detailed sector look, click here. After the bell, Hewlett-Packard (HPQ, news, msgs) posted pro forma earnings that beat analyst projections by a slight margin. Revenue for the giant maker of computers and printers fell a bit short of estimates. The see-saw scenario What to make of the see-saw market? Market strategist Philip Erlanger, author of the Erlanger Squeeze Play Web site, says we may just have to get used to it -- at least in the next few weeks. In his posting today, Erlanger writes that “The one-day-up and one-day-down scenario is what the market does to grind both bulls and bears out of the market. We saw this action for most of the first half of last year before the eventual collapse. We wouldn't be surprised if the same thing happened this year, especially since the best the bulls can offer is the hope that a post-Iraq conflict will give the market a lift a la 1991. “For us, that's ‘slim pickins’ in terms of bullish factors for investors." The confidence vote The Conference Board said its index of consumer confidence fell sharply to 64 in February from a revised 78.8 in January. That's the lowest reading since 1993. Economists were expecting the index to edge down to 77. The consumer confidence numbers landed in a market already on the run. Traders fretted early today about the latest geopolitical development, reports of a missile test in North Korea. Meanwhile, the United States and Britain worked to line up U.N. Security Council votes in support of resolution authorizing an attack on Iraq So just how bad were the numbers on consumer confidence? About as bad as they could be, Conference Board economist Delos Smith told CNBC, with all the numbers you want to go down rising. "It's a grim report any time you're down 15 points, any time you're in the range of the 60s," he said. "It is Iraq, it is terrorism. Then you add things like oil prices. People are shocked at $2 (per gallon) gas prices," Smith said. Other numbers in the report, based on a survey of 5,000 U.S. households, looked nearly as bad as the headline index. The gauge of consumer expectations six months down the road fell from 81.1 to 65.6. Ominously, the number of consumers making plans to buy homes fell, too. And more consumers reported that jobs were getting harder to find. Strong consumer spending and home sales have been strong positives in the slumping U.S. economy. By coincidence, just today, the National Association of Realtors said existing home sales rose to 6.09 million in January from 5.9 million in December, ahead of forecasts. But that makes the forward-looking confidence numbers still more worrisome. "You just have a very, very nervous consumer. It is not just New York and Washington, it is all over," Smith said. "We need to know solutions on Iraq. We need to know the resolution." Qwest for justice The SEC filed suit against seven former and one current executive at Qwest Communications (Q, news, msgs) for allegations involving the telephone company's accounting practices. They're accused of "a fraudulent scheme orchestrated to meet at all costs Qwest's predictions of double-digit revenue growth," Reuters reported. And the Justice Department charged for former Qwest execs with booking millions in phony revenues. (For a complete report, click here.) What's moving One of today's biggest positive moves today came from the downtrodden pipeline giant El Paso (EP, news, msgs), which jumped about 10% after announcing a huge new financing deal and plans to sell more assets. Mind you, El Paso is down 30% year to date and 90% over the last 12 months. Other noteworthy names: European retailer Ahold (AHO, news, msgs) continued the plunge that began yesterday, driven by news that two key execs had resigned over accounting irregularities. The stock was down again by about 16% today. Dow component Home Depot (HD, news, msgs) reported fourth-quarter earnings of 30 cents per share, 3 cents better than expectations. The company affirmed 2003 sales growth targets of 9% to 12%, but said it would only provide annual guidance from now on. Despite the solid quarterly performance, Blaylock & Partners analyst Mark Mandel told CNBC’s Squawk Box that he prefers Home Depot’s arch-rival Lowe’s (LOW, news, msgs). Mandel said while Lowe’s is expanding into metropolitan markets and attracting upscale customers, Home Depot “has a lot of work to do” turning around its 1,500 existing stores. He also said Home Depot may still be trying to grow too fast. How high can oil go? Soaring oil prices continue to worry consumers and weigh on the equity market. Yesterday crude jumped to a 27-month high, approaching $37 per barrel. Concerns about a cut in supply during a war with Iraq have been compounded by especially cold weather in the United States, which has driven the price up. “Bring on global warning, we could use it right now,” said Phil Flynn, crude oil analyst at Alaron Trading. Flynn said prices could rise above $40 per barrel since people have underestimated the effect of the Venezuelan strike and the United States has a very limited supply at the moment. “We’re a cigarette butt away from shortages,” Flynn said. But he said that could be alleviated if the United States taps its 600 million barrel strategic petroleum reserve. Flynn expects the government to do just that if a war breaks out. Could oil prices rise above $50 per barrel? Flynn said for that to occur, Saddam Hussein would have to not just set fire to his oil fields, but somehow completely destroy his oil fields. He said that scenario, combined with a revolution in Venezuela could send prices through the roof, but also said the chance is very unlikely.
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