NEWS AND COMMENTARY
December 13, 2000
Stocks Are Mixed As Earnings Outlook Tempers Enthusiasm
By David Runk, The Wall Street Journal Online
Election Battle Coming to a Close, But War on Wall Street Rages On ... Weiss comments
NEW YORK - The technology sector retreated Wednesday as investors turned their attention to the corporate-earnings outlook following an initial round of enthusiasm that the long-running election drama is nearing a close. Blue chips were mildly higher.
Trading was volatile Wednesday, with stocks getting a short-lived boost from a U.S. Supreme Court ruling that all but sealed the election of Republican George W. Bush as the country's 43rd president. The Nasdaq composite rose as much as 2.4% early Wednesday before pulling back to trade in negative territory, while the industrial average was up nearly 150 points before narrowing its gains.
Reports shortly after midmorning that Democrat Al Gore has decided to drop out of the presidential race also briefly lifted Wall Street, pulling the Nasdaq composite momentarily out of the red. But the latest warnings from tech leaders such as Compaq Computer put pressure on the market, analysts said, as investors awaited word expected later in the day from Mr. Gore.
A resolution to the deadlocked election should free up the market to focus on corporate fundamentals and the economic outlook. It may also lure back investors who have kept their money on the sidelines until the stalemate was decided.
"We're entering a period of slower growth, lower expectations and, hopefully, a little more normalcy," Mr. Ackerman said.
So much for Elephants and Donkeys; the Bears have won this war.
Buy on the rumor, sell on the news. That's the mantra that the bulls will try to sell you. They'll say that the end to the Presidential election crisis was already priced into the market, and that's why today's rally didn't last. But, they expect that investors will come back to the market after next week's Fed meeting.
They're dead wrong. Last week's rally was a technical bounce. The stock market doesn't head straight down in a bear market. There are always times when the market will receive a slight boost, but the sign of a solid bear market is that these rallies don't last more than a few days.
Investors aren't in a rush to head back into the market just to lose their shirt. The endless list of companies issuing earnings warnings is enough to keep any smart investor on the sidelines. Plus, a look at the economic fundamentals - tight labor market, rising energy prices, and ballooning trade deficit - tells us that the Fed won't cut rates any time soon.
Today's brief rally was over as quickly as it began because the market knows that the economy is poised for dire times no matter who the President is.