今天的IBD

jamesmith

(courtesy of chuckchuck laoda)

An afternoon reversal Wednesday lifted the indexes modestly, but top-rated stocks struggled.

The Nasdaq rose 0.3%, while the S&P 500 and NYSE composite added 0.2%. Volume climbed on both major exchanges.


While the stock market, a leading indicator, is better at predicting the news than the news is at predicting the market, nervous chatter is on the rise.

A couple of developments are attracting attention. On Tuesday, U.S. stock indexes eased from highs after buzz about potential U.S. rate hikes. Meanwhile, China raised rates Tuesday for the fourth time since October. And the European Central Bank is expected to raise interest rates a quarter-point Thursday.

Traditionally, it's taken three or four significant rate hikes by the Federal Reserve to unleash a bear market. If this is true of China as well, no one told the Shanghai composite. The index rallied 1.1% Wednesday after a similar gain Tuesday.

A second factor is the federal budget standoff. The deadlock could lead to a government shutdown Saturday.

The last two times a shutdown occurred were in November 1995 and December-January 1996. The Nasdaq's decline was 4% in the first case and 3% in the second instance. The Nasdaq fell the most (5%) in the first week or so after government resumed operations. After that throat-clearing dip, the Nasdaq rallied 28% in the next five months.

So if history repeats, a government shutdown might not be an uptrend killer.

Ultimately, new companies with new products or services drive the stock market.

In 1995-96, leaders included computer network products maker Cisco Systems (CSCO), innovative private prison operator Corrections Corp. of America (CXW) and discount retailer TJX Cos. (TJX), which at that time was expanding internationally.

This year, it's been companies like online restaurant reservations handler OpenTable(OPEN), restaurant chain Chipotle Mexican Grill (CMG), retailer Lululemon Athletica(LULU) and online gamer Sohu.com (SOHU).

Top-rated stocks, however, took some hits Wednesday, as the negative Market Pulse listings illustrate

Cobra

HTER

rosyrosy

usamonkey

Jeff

wave