MARKET TALK: Enron To Kmart To Dillard's
29 Jan 16:05
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
4:05 (Dow Jones) If Kmart (KM) can blame Enron (ENRNQ) for the skittishness
that helped plunge it into bankruptcy, then maybe Dillard's (DDS) can blame
Kmart for a scare late last week. While aggressively haggling with its
suppliers and withholding payments for holiday shipments in what it thought was
business as usual, Dillard's suddenly found lenders putting holds on orders
from its department stores. Dillard's has since paid suppliers and the holds
have been lifted, but "this was totally uncalled for," says Dillard's Treasurer
John Hawkins. The company's balance sheet is strong, with plenty of cash, he
says. It's Kmart-related hysteria, Hawkins says, but "it'll settle down again."
(JMC)
4:03 (Dow Jones) A forgettable day for the bulls. Unlike recent sessions, not
because it was so dull - in fact, it was far from that, with stocks getting
brutalized on general worry about accounting and credit, real or perceived, and
some sentiment that, if we know the Fed's not going to move tomorrow, why not
just unload things now. Another big issue for the major averages now is the
charts, which don't look good. Banks, energy beat up but good, and huge volume
in Tyco makes it around fourth in all-time NYSE volume for a single day. DJIA
sheds 238 to 9627, Nasdaq Comp drops 51 to 1893, and S&P 500 falls 32 to 1101
(preliminary). (TG)
3:54 (Dow Jones) UBS Warburg economist Jim O'Sullivan expects an outright
decline in the GDP price index for the 4Q as the "distortion" from the
adjustment for the Sept. 11 terrorist attacks is unwound. In 3Q this had a net
upward effect on the rate of price change. O'Sullivan points out that even
without this special effect in 4Q, "there is very little sign of inflation."
(JM)
3:46 (Dow Jones) Computer services sector is faring poorly in today's
sell-off. A Morgan Stanley downgrade of Automatic Data Processing (ADP) and a
false rumor about executive departures at Electronic Data Systems (EDS) aren't
helping. ADP, EDS and Perot Systems (PER) are down 8% apiece; while Computer
Sciences (CSC) falls 5%. "Money is leaving the group" and the liquid big-cap
stocks are taking the brunt of the selling, says Stephen McClellan of Merrill
Lynch. (MLP)
3:34 (Dow Jones) The worst is behind DaimlerChrysler (DCX), says Bear
Stearns, which initiates coverage at neutral. "The company has finally
implemented the appropriate organizational structure to utilize its resources
and improve its financial standing." The stock is fairly valued, says the firm,
which sets a 12-18 month price target of $42, based on 15x Bear Stearns' 2003
EPS estimate. DCX shares are losing 28 cents to $40.56. (GS)
3:15 (Dow Jones) Options volatility saw a big jump after a long spell without
big jumps as investor anxiety rose a visible notch. The CBOE's market
volatility index, or VIX, increased 4.13 to 25.90 - up a whopping 19%. Monday's
close of 21.77 had been this fear gauge's lowest close since last June. Stocks
now at session lows - DJIA off 240 at 9626, S&P 500 falls 33 to 1099, and
Nasdaq Comp sheds 58 to 1886. (KT)
3:02 (Dow Jones) Bank and brokerage stocks fell Tuesday on news of PNC Bank's
(PNC) accounting miseries, J.P. Morgan's (JPM) Global Crossing (GX) exposure,
and in anticipation of unchanged interest rates from the Fed on Wednesday.
Philly Stock Exchange KBW Bank index off 5%. (LMC)
2:53 (Dow Jones) As the beating stocks are taking continues, there are now
only five sectors of the 86 Dow Jones industry groups moving higher - precious
metals, mining, lodging, advanced medical devices, and distillers and brewers.
According to a handful of technicians, closes on DJIA, Nasdaq Comp and S&P 500
at current levels paves the way for more weakness. DJIA down 197 at 9668,
Nasdaq down 50 at 1894, and S&P 500 sheds 28 to 1104. (TG)
2:47 (Dow Jones) Penny-pinching appears to have paid off for Lehman Brothers
(LEH). But how has the firm, unlike its peers, managed to ward off mass
layoffs? Discipline, according to CEO Richard Fuld, who spoke Tuesday at a
Salomon Smith Barney financial services conference. The firm "rarely" enters
into job guarantees of more than a year and limits the dollar amount of the
contracts it does do. The firm also stopped hiring in June because it had
reached a "comfortable" level given the market conditions. Fuld said he was
still comfortable with firm's staffing level of 13,090. Shares off 3% at
$62.50. (CWM)
2:35 (Dow Jones) J.P. Morgan wasted little time in downgrading Williams Cos.
(WMB) to market performer after the energy company delayed the release of its
4Q report because of issues related to debt obligations. The firm blamed the
rating cut on its forecast of negative earnings growth in 2002, management
turnover given CEO Keith Bailey's retirement in May, and outstanding Williams
Communications (WCG) exposure. WMB shares losing $5.05, or 21%, to $19.06.
(WMB)
2:17 (Dow Jones) Philip Morris (MO), set to report its 4Q and year tomorrow,
may also announce its successor to Chairman and CEO Geoffrey Bible, who is due
to retire in August. Since Feb. 27 is the only other date the board is
scheduled to meet before the annual meeting in late April, there is speculation
that a vote may come during the Wednesday board meeting. Front runners are CFO
Louis Camilleri and U.S. tobacco chief Mike Szymanczyk. An outsider is thought
to be unlikely. Shares flat at $49.95. (CEG)
2:12 (Dow Jones) Feb. fed funds have gained a basis point in the course of
the session, with a last price of 98.275. That leaves the contract pricing in a
10% chance of a 25 basis point cut by the end of this week's FOMC meeting,
trader says. That compares to Monday's 6%. (CMN)
2:02 (Dow Jones) Deutsche Bank strategists say real bond yields compare
favorably to real equity yields in the U.S., and, to a lesser extent, in
Europe. U.S. corporate bonds are particularly cheap relative to equities. Being
long U.S. corporate bonds versus the S&P index offers a "quasi-arbitrage"
opportunity. Strategists find that the probability of equities outperforming
bonds over the next 20 years is now at 37% in the U.S. (MCG)
1:53 (Dow Jones) "We expect earnings to surprise positively in 1H02 but to
fall short in 4Q02," Morgan Stanley strategist Steve Galbraith says, adding
that analysts excessively cut 4Q01 expectations but left 4Q02 at high levels.
So how should investors play positive near-term earnings surprises but a 4Q
shortfall? "We would err on the side of defensive stocks. We also like the
clear sector leaders that are likely to gain share in this environment." (GS)
(END) DOW JONES NEWS 01-29-02
04:05 PM |
