MARKET SNAPSHOT
Major indexes rangebound
Nasdaq plows ahead
By Julie Rannazzisi, CBS MarketWatch
Last Update: 1:25 PM ET May 25, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- Investors ignored old-economy companies and instead focused on battered technology stocks Thursday, enabling the Nasdaq to stage a modest rally.
The market has remained in a tight range throughout the session and though volume on the Nasdaq has picked up substantially -- always an encouraging sign when the market rallies -- a cautious tone prevails in the marketplace.
"While volume is improving [as the Nasdaq rises], there's not a lot of optimism in the overall market," said Peter Coolidge, senior equity trader at Brean Murray.
"The nervousness remains and there's still uncertainty on the interest rate front. The economic data continues to come out strong," he said. "We're still in the doldrums and the market needs something to grab on."
Chip and networking stocks led the technology arena on the upside as investors picked up bargains while the broader market saw gains in the retail, biotech and brokerage sectors. Leading on the downside were paper, airline and utility stocks.
The Dow Industrials lost 28 points, or 0.3 percent, to 10,507 at 1:22 p.m. Downside movers included General Motors, Microsoft, 3M and Wal-Mart. On the upside were shares of Intel, Home Depot and Walt Disney.
The Nasdaq Composite rose 86 points, or 2.6 percent, to 3,356 while the Nasdaq 100 index, which encompasses the largest Nasdaq stocks by market capitalization, gained 96 points, or 3.0 percent, to 3,277.
Healthy gains in shares of technology leaders Cisco Systems, Oracle, Intel and Sun Microsystems fueled the Nasdaq's fire.
The Standard & Poor's 500 Index gained 0.7 percent while the Russell 2000 Index of small-capitalization stocks rose 1.6 percent.
Volume came in at 569 million on the NYSE and at 900 million on the Nasdaq Stock Market. Advancers beat decliners by 15 to 13 on the NYSE and by 22 to 15 on the Nasdaq.
Impact from China Trade bill
The technology sector is receiving some support from news that the House approved late Wednesday a China trade bill that will grant the country permanent normal trade relations and sharply increase U.S. exports to the world's most populous nation. Read the story.
Merrill Lynch said it believes the passage of the China trade bill will be a
long-term positive for many U.S. communications equipment companies.
"China currently represents about 6 percent of the total communications equipment market, but if new service providers are allowed to enter the Chinese market, we would expect spending in China to accelerate," Merrill said in a note to clients.
In the near term, Merrill said the biggest beneficiary of this trend could be UTStarcom, given its regulatory knowledge and manufacturing and sales presence in China.
But Merrill is not as sanguine on Qualcomm's prospects. "In the near-term, passage of this bill may reduce any remaining leverage the U.S. can have on the adoption of CDMA [technology] in China. Passage of this bill may still be perceived negatively for Qualcomm," the brokerage said.
Shares of Qualcomm (QCOM: news, msgs) added 1 9/16 to 78 5/16, Motorola (MOT: news, msgs) added 5/16to 97 5/16 and UTStarcom (UTSI: news, msgs) rose 2 7/8 to 38 7/8.
Meanwhile, one economist stressed that the benefits from PNTR are long-term ones.
"This is an event of great political importance, but our key point is that it is of little near-term macroeconomic consequence," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
"U.S. trade with China is too small to make much difference to the big numbers. Granting China PNTR simply does not compare to, say, NAFTA," Shepherdson added. However, eventually freer trade between the two nations will make a difference and will increase the real incomes of both countries -- and this should not be dismissed, he continued.
Sector movers
Shares of Linux-related companies, which compete with Microsoft, benefited from news that U.S. District Court Judge Thomas Penfield Jackson questioned whether the government's proposal to split the software behemoth into two separate companies goes far enough -- citing suggestions by outside parties to break the software behemoth into at least three companies. See full story.
Microsoft (MSFT: news, msgs) fell 2 7/8 to 64 1/16 while Red Hat (RHAT: news, msgs) jumped 2 1/4 to 18, VA Linux Systems climbed 2 3/8 to 43 7/8 and Canadian-based Corel added 7/32 to 3 31/32. Oracle, which is also set to gain from a Microsoft breakup, added 5 to 69 1/4.
The airline sector paused Thursday after taking off on Wednesday on news that UAL (UAL: news, msgs) is purchasing US Airways Group (U: news, msgs) for $4.3 billion in cash and is assuming $1.5 billion in debt and $5.8 billion in aircraft leases. See full story. The AMEX Airline Index ($XAL: news, msgs) lost 2.5 percent.
As a result of UAL's announced purchase of US Airways, Donaldson, Lufkin & Jenrette lowered its rating on the airline group to "market perform" from "outperform." DLJ advises avoiding UAL, AMR and Delta Air Lines until the dust settles.
US Airways shed 1 7/8 to 47 1/8 following mammoth gains on Wednesday while UAL lost 3/4 to 52 7/16. AMR, which was cut to a "neutral" from "outperform" by Salomon Smith Barney, lost 1 9/16 to 28 1/2.
The biotech sector rose, with Merrill's Biotech Holdrs (BBH: news, msgs) up 4.9 percent, led by Genentech (DNA: news, msgs), up 13 1/2 to 105 3/4, and Human Genome Sciences (HGSI: news, msgs), up 5 to 76 9/16.
Merrill Lynch had some positive comments on genomics stocks Thursday. The brokerage believes the beleaguered sector has lots of upside potential.
"Recent weakness provides investors with a buying opportunity and the ability to participate in what we believe will be a recovery phase for many stocks in the sector. We believe sector fundamentals remain very strong and we anticipate that 2000 and beyond will be characterized by continued growth for select companies that meet the demands of the industry," Merrill said in a note to clients.
Specific movers
In earnings news, Westvaco Corp. (W: news, msgs) reported second-quarter earnings of 61 cents per share compared to 27 cents per share in the year-ago period. The figure includes a gain of 7 cents per share and a charge of 9 cents per share. First Call expected earnings of 55 cents a share. See full story. The stock rose 1/16 to 30 13/16.
Tommy Hilfiger (TOM: news, msgs) registered a fourth-quarter profit from operations of 37 cents a share, 2 cents ahead of the First Call estimate. The company made 48 cents in the year-ago period. The stock added 3/8 to 7 15/16.
Krispy Kreme (KREM: news, msgs) posted earnings-per-share of 27 cents in its first quarter versus the 20 cents per share in the year-ago period. First Call expected a profit of 23 cents per share. The stock rose 3 11/16 to 50 1/2.
Priceline.com surged 4 3/8 to 40 7/8. The company (PCLN: news, msgs) announced a three-year marketing alliance with American Express (AXP: news, msgs) to drive small businesses to Pricline?s soon-to-be launched business-to-business portal.
Shares of LookSmart (LOOK: news, msgs) tacked on 2 1/2, or 19.4 percent, to 15 3/8. Merrill Lynch began coverage on the stock with a short-term "accumulate" and a long-term "buy" rating.
Treasury focus
Government prices turned higher after slipping earlier in the session. Treasury paid $2.38 billion to purchase $2 billion in par amount of 30-year bonds maturing between February 2019 and August 2023.
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The 10-year Treasury note gained 1/4 to yield 6.44 percent and the 30-year bond put on 21/32 to yield 6.15 percent. See Bond Report.
In economic news, first-quarter productivity was left unrevised at 5.4 percent. The number was expected to be downwardly revised to show a 5.3 percent growth rate, according to a survey of economists conducted by CBS MarketWatch.com. The market had a muted reaction to the numbers. See full story.
In other news, weekly initial claims rose 6,000 to 284,000 while April existing home sales fell 6.2 percent to a 4.88 million rate, which compared to an expected rate of 4.84 million. 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 107.61 while euro/dollar rose 0.6 percent to 0.9082, erasing earlier losses. As expected, the European Central Bank left short-term rates unchanged at its policy-setting meeting early Thursday.
In the commodity market, July crude added 17 cents to $30.10 while the Bridge CRB index lost 1.32 to 224.15. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
