MARKET SNAPSHOT
Tech sector looks to add to gains
Will buyers step up?
By Julie Rannazzisi, CBS MarketWatch
Last Update: 7:42 AM ET May 25, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- The broad market is looking to add to Wednesday's late-day gains when trading commences on Thursday.
The technology sector in particular may receive some support from news that the House approved late Wednesday a China trade bill that will sharply increase U.S. exports to the world's most populous nation. Read the story.
June S&P 500 futures added 4.20 points, or 0.3 percent, and were trading roughly 1.30 points above fair value, according to HL Camp & Co. Nasdaq futures, meanwhile, climbed 34.50 points, or 1.1 percent.
In the bond market, prices were a sliver lower in early dealings as investors look to the equity market's moves for direction. Treasurys have traded inversely to stocks over the past sessions with little in the way of economic news to focus on.
The 10-year Treasury note shed 2/32 to yield 6.48 percent and the 30-year bond lost 3/32 to yield 6.19 percent.
In economic news, the revision to first-quarter productivity will be released. It's expected to be downwardly revised to show a 5.3 percent growth rate compared to the previously reported 5.4 percent, according to a survey of economists conducted by CBS MarketWatch.com. Also due out are April existing home sales, expected to come in at a 4.84 million rate. See economic calendar and forecasts and historical economic data.
In currency markets, the dollar traded mixed against the yen and the euro. Dollar/yen edged down 0.1 percent to 107.64 while euro/dollar lost 0.1 percent to 0.9012.
Wednesday's trading activity
A wave of buying in a cluster of big-name tech stocks late in the session propelled the Nasdaq to sharply higher levels Wednesday, ending a five-day losing streak.
It was a day of incredible volatility, as the major averages changed direction swiftly and furiously, a glaring reflection of investors' continued uncertainty over interest rates and valuations.
"The lows set Wednesday and the crescendo of pessimism heading into those lows suggest we've established a good bottom in the short term," said Scott Bleier, chief investment strategist at Prime Charter.
However, Bleier expects the market to trade defensively until the next central bank meeting at the end of June. "The real fear here is that the Fed will crash the U.S. economy into a recession," he said.
While Wednesday's high volume lends credibility to the upward move, Donald Selkin, chief market strategist at Joseph Gunnar, said the market needs to perceive that the current tightening cycle is over before rallies can have solid legs.
"We need to see economic data on the more moderate side," Selkin said.
In the tech arena, computer software and chip stocks paced the Nasdaq's late day recovery. In the broader market, the airline sector remained the outperformer, gaining significant ground on the heels of the UAL purchase of US Airways. The AMEX Airline Index ($XAL: news, msgs) jumped 12.1 percent. Also in the plus column were bank, biotech and drug shares while retail, brokerage and oil service stocks led on the downside.
The Dow Industrials tacked on 113.08 points, or 1.1 percent, to 10,535.35.
Upside movers included Intel, Coca-Cola, Boeing, 3M and Philip Morris while the biggest losers were Home Depot, International Paper, Citigroup and Hewlett-Packard.
The Nasdaq Composite gained 106.06 points, or 3.4 percent, to 3,270.61 after falling as much as 122 points in intra-day dealings -- reaching a low of 3,042.
Sam Stovall, Standard & Poor's senior investment strategist, said the Nasdaq has good support in the 2,900 to 3,000 area. Reaching those levels, he said, would trigger a wave of dip buying.
The Nasdaq 100 index, which encompasses the largest Nasdaq stocks by market capitalization, climbed 156.89 points, or 5.2 percent, to 3,180.31 after tumbling as much as 126 points during the session.
A sharp turnaround in shares of tech bellwethers like Sun Microsystems, Cisco Systems and Intel unlocked a bout of buying in late afternoon trading that lifted the broader market.
The Standard & Poor's 500 Index gained 1.8 percent while the Russell 2000 Index of small-capitalization stocks added 0.6 percent.
Volume picked up substantially, with 1.14 billion shares trading on the NYSE and 2.08 billion changing hands on the Nasdaq Stock Market. It was the Nasdaq's first two billion-plus day since April 18. Decliners beat out advancers by 25 to 16 on the Nasdaq and by 15 to 14 on the NYSE.
Separately, Merrill Lynch said that its fundamental outlook on the global semiconductor industry remains robust as a result of increasing unit volumes and continued firm pricing across the industry. In its global semiconductor quarterly handbook released Wednesday, Merrill said it's raising its estimate for global semiconductor revenue growth in 2000 from 24.7 percent to 31.5 percent. And the 2001 estimated growth rate was upped to 20.9 percent from 17.0 percent.
"If we are correct, and the recent poor performance from semiconductor stocks represents a mid-cycle correction as opposed to the beginning of the end, then significant buying opportunities exist," Merrill continued. The brokerage reiterated its current intermediate-term "buy" ratings on LSI Logic, Vitesse Semiconductor, Cypress Semiconductor, Xilinx and Samsung Electronics and its intermediate-term "accumulate" ratings on Conexant Systems and Analog Devices.
Chip stocks rose in tandem with the overall tech sector and the Philadelphia Semiconductor Index ($SOX: news, msgs) added 1.2 percent.
Intel (INTC: news, msgs) jumped 7 1/2 to 117 3/8. The chip kingpin introduced Wednesday a high-performance Pentium III processor that operates at 933 MHz. Further, Intel announced Wednesday afternoon that it will invest $2.0 billion to expand its New Mexico wafer fabrication facility.
In other news, Intel is collaborating with RealNetworks to jointly develop the next generation of Intel's streaming Web video software, which is already a part of RealNetworks' RealVideo 8 and RealSystem 8 products. Shares of RealNetworks (RNWK: news, msgs) rose 2 3/4 to 34 15/16.
Specific movers
UAL, the operator of United Air Lines, said it's purchasing US Airways Group (U: news, msgs) for $4.3 billion in cash and is assuming $1.5 billion in debt and $5.8 billion in aircraft leases. See full story. UAL (UAL: news, msgs) said it'll pay $60 for each share of US Airways -- a premium of more than 130 percent from the Tuesday closing price. Still, the UAL proposed acquisition of U.S. Airways is expected to face harsh scrutiny from antitrust regulators. Read the story.
US Airways soared 22 7/16, or 85.3 percent, to 48 3/4 while UAL shed 7 3/16, or 12 percent, to 53 3/16. UAL was downgraded by Donaldson, Lufkin & Jenrette to an "underperformance" from a "buy" rating. See Rating Revisions.
Shares of AMR Corp. (AMR: news, msgs) fell 2 9/16 to 30 1/16. DLJ lowered its rating on the company to a "market performance" from a "buy" while Merrill Lynch downgraded the stock to a "near-term, long-term accumulate" from a "near-term, long-term buy."
Microsoft shares put on 2 3/8 to 65 9/16. A federal judge rejected the software behemoth's (MSFT: news, msgs) call Wednesday for more time to examine a government breakup proposal, setting the stage for a final ruling in the landmark case as early as this summer. U.S. District Court Judge Thomas Penfield Jackson ordered the government to submit a revised plan by Friday and Microsoft will have 48 hours to examine the proposal before it's entered into the court record. Read the story.
Novell (NOVL: news, msgs) shed 1 11/16 to 8 1/16. Late Tuesday, the company said it made a profit from operations of 2 cents a share in its second quarter compared to the First Call estimate of 1 cent a share. Last year, Novell earned 11 cents a share. The company blamed sluggish demand for its packaged software products for the diminished profit compared to a year ago. Read the story.
VA Linux (LNUX: news, msgs) rose 3 to 41 1/2. After the close Tuesday, the company posted a third-quarter loss of 13 cents a share, less than the First Call estimate of a loss of 23 cents a share. The company lost 17 cents a share in the year-ago period. The company said demand for its server products was the main element behind the strong results.
Shares of Costco tumbled 8 3/4 to 31 7/8. The drop hurt the S&P Retail Index ($RLX: news, msgs), which declined 2.9 percent. The company (COST: news, msgs) posted third-quarter earnings of 26 cents a share, missing the First Call estimate by a penny. The company earned 23 cents in the year-ago period. Moreover, Costco said it expects fourth-quarter earnings to come in 1 to 2 cents below the First Call estimate of 45 cents a share. See full story. Merrill lowered Costco to a "near-term accumulate" from a "buy."
Internet Infrastructure stocks recovered marginally late in the session, with Merrill Lynch's Holdrs (IIH: news, msgs) up 0.8 percent. But many of the trust's components faltered. Exodus Communications (EXDS: news, msgs) fell 4 5/8 to 58, Digital Island (ISLD: news, msgs) lost 1 1/4 to 17 3/16 and Vignette (VIGN: news, msgs) dropped 1 11/16 to 27 7/8.
Shares of online brokerages took a veritable beating Wednesday with Ameritrade (AMTD: news, msgs), down 37/64 to 11 3/16, and E-Trade (EGRP: news, msgs), off 1 13/16 to 13 15/16, reaching fresh 52-week lows. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) fell 2.6 percent.
Robertson Stephens said Wednesday that it's lowering second-quarter earnings-per-share estimates for E-Trade, Ameritrade and Knight Trading Group (NITE: news, msgs) to reflect a more severe-than-projected slowdown in trading volume. Knight rose 1 9/16 to 27 5/8. See related story.
Shares of Intuit (INTU: news, msgs) tacked on 8 to 35 1/16. Late Tuesday, the company made 36 cents a share in the April quarter, up from 25 cents in the year-ago quarter and the First Call estimate of 33 cents a share. See full story.
See After Hours for post-market trading activity.
Treasury focus
Bond prices were modestly lower across the board, trading inversely to the U.S. stock market.
Treasury announced it would buy back up to $2 billion in par amount of 30-year bonds, with bids due by 11 a.m. Thursday.
Meanwhile, a total of $10 billion in 2-year notes were sold Wednesday afternoon, producing a high yield of 6.749 percent. The bid-to-cover ratio, a measure of demand, came in at 2.52.
The 10-year Treasury note slipped 10/32 to yield 6.48 percent and the 30-year bond lost 17/32 to yield 6.20 percent. See Bond Report.
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In currency markets, the dollar rallied against the yen and the euro. Dollar/yen climbed 1.4 percent to 107.87 while euro/dollar fell 0.3 percent to 0.9041, erasing earlier gains.
In the commodity market, July crude jumped $1.15 to $29.93 while the Bridge CRB index gained 1.39 to 225.47. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
