An impressive day in the market. The indices came under heavy pressure after a weaker than expected April New Home Sales report. Number came in at 894 K, which was well below consensus of 975 K. The slide in April was the biggest drop since April 1997. The market was troubled by the report because the housing market had been surprisingly resilient given rising unemployment. The sharp decline in April is the first hint that the consumer is finally feeling the pressure of rising layoffs and reduced job security. However, as we surmised might happen in our Tech Stocks page, the indices made a modest comeback in the afternoon which was led by chips and chip equipment stocks. Not participating was wireless chipmaker TriQuint (TQNT 20.59 -4.22) which stayed under heavy pressure after guiding down numbers in its mid-qtr conference call. Outside of tech, alternative energy and biotechs were the hot sectors today including ABGX +10%, MEDI +10%, MYGN +9%....Cyclicals were generally not the place to be. Paper stocks were weak as Salomon Smith Barney downgraded four paper stocks: IP, BCC, MEA, TIN. Retail apparel stocks were interesting as they are all over the map: CLE -16%, PVH -11%, while some were terriffic: GYMB +31% and TOM +11%...Yesterday, traders were given two reasons to take profits: 1) a weak book-to-bill ratio for the chip equipment industry and 2) Senate change. However, the orderly nature of the retreat suggests that the underlying tone remains intact. Briefing.com views this market as a buy-on-the-dips market given that many portfolio managers remain underweighted in equities - particularly tech. This should continue for the near term until we head into earnings warning season. The strength this afternoon confirmed this view. DJTA -0.6%... DJUA -0.2%... SOX -0.2%... XOI -0.0%... BTK +4.2%... Nasdaq 100 +2.3%... S&P Midcap 400 +0.3%... Russell 2000 +0.6%... NYSE Adv/Dec 1576/1471... Nasdaq Adv/Dec 2103/1647.



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