MIDDAY ACTION, August 30

Stocks shook off early weakness and moved higher in midday trading Thursday. After falling more than 100 points in morning trade, the Dow Jones Industrial Average () was a few points higher in midday action. The tech sector is leading the rebound and the NASDAQ () is up almost 20 points.

Technology stocks are leading the advance. Motorola () rose after Lehman Brothers upgraded the stock to “overweight” from “equal weight”. Novell () is up 50 cents to $7.29 after reporting a smaller quarterly loss.

Many of the recent momentum names are doing well. Apple Computer () is higher for a second day on hopes the company will unveil a new iPod early next week. After rallying $7.00 yesterday, AAPL is up another $2.35 to $136.43. Research in Motion () is up to $83.82 and SanDisk () rose another $1.42 to $54.94. Yesterday, RIMM rallied $4.62 and SNDK added $1.51.

Brokerage stocks are not doing as well, however, after Lehman Brothers () lowered its outlook on several stocks in the sector. Bear Stearns (), Merrill Lynch (), Morgan Stanley (), and Goldman Sachs (), which were the subject of Lehman’s cautious comments, are all trading lower. The AMEX Broker/Dealer Index () is down 1.62 to 217.24.

Meanwhile, Freddie Mac () and Fannie Mae () are seeing selling pressure after Freddie reported a 45% decline in second quarter earnings. FRE is down $3.15 to $60.10 and FNM off $1.63 to $63.95.

Some of the retailers are also under pressure. Sears Holdings () is down $3.88 to $141.73 after reporting a 40% drop in profits for the latest quarter. Chico’s Fas () shares fell 11% after the company posted disappointing quarterly profits. Tiffany () is holding a bit higher on the heels of its earnings release.

The day’s economic news was mixed. A Gross Domestic Product [GDP] report released early in the day from the Commerce Department showed the economy expanding at a 4% rate during the second quarter, which was in-line with economist estimates.

At the same time, the latest weekly jobless claims rose more than expected. According to the Labor Department, the number of filings for jobless benefits rose by 9,000 to 334,000 in the week ended August 25. Economists were looking for a decline to 320,000.

Bonds are trading higher on the day’s news.  The benchmark ten-year Treasury bond (September) is up 7/32^nd and its yield edged down to 4.52 percent. After rallying nearly $2.00 yesterday, crude oil gave back some gains. Crude traded down 20 cents to $73.31 a barrel.

In the stock market, the trading is mixed. Tech stocks are higher. Financials are lower. That has been a pattern we have seen lately, as money seems to look for places not at risk from the turmoil in the credit markets. The mixed trading has led to a bit less market volatility midday Thursday.  

Frederic Ruffy
Senior Writer & Index Strategist
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