M A R K E T--S N A P S H O T--U P D A T E--8:47 A.M.
Shares set for sloppy open
Motorola warns, sends futures markets lower
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 8:47 AM ET Dec 7, 2000
NEW YORK (CBS.MW) - A profit warning from Motorola and a cautious analyst note on Microsoft sent the stock futures markets straight down Thursday, suggesting a sharply negative open for shares.
December S&P 500 futures shaved 7.30 points, or 0.5 percent, and were trading roughly 7.50 points below fair value. Nasdaq futures erased 55.00 points, or 2.0 percent.
Dow, S&P and Nasadq stock Microsoft (MSFT) fell $3.69 to $53 in Instinet following a cautious note from Goldman Sachs. Analyst Rick Sherlund lowered earnings-per-share estimates for the software giant to $1.88 from $1.91 for fiscal 2001 given the evidence of sluggish retail PC demand.
"Consumer PC sales account for only about 10 percent of Microsoft's total revenues, so with corporate demand likely in line with expectations, our estimate revision is only relatively moderate," Sherlund added. He trimmed the December quarter revenue by $125 million while $200 million was cut from March quarterly revenue and $150 million from June's.
Meanwhile, Motorola (MOT) revealed early Thursday that it won't meet fourth-quarter revenue and earnings due to slowing market conditions in the semiconductor industry as well as delays in achieving expected cost reductions in wireless phone production. The fourth quarter earnings-per-share estimate now stands at 15 cents a share versus the previous estimate of 27 cents.
Motorola is the latest in a string of companies citing inventory issues in the chip sector as reason for profit shortfalls. The stock dropped $2.56, or 14 percent, to $15.25 in Instinet pre-market dealings. The Philly Semiconductor Index ($SOX), of which Motorola is a component, slid 4.5 percent on Wednesday.
On the analyst front, WR Hambrecht lowered its rating on Yahoo (YHOO) to a neutral" from a "buy" due to persistent weakness in the online advertising market, with the fourth quarter proving to be extremely challenging for all participants. The stock erased $1.25 to $36.25. WR Hambrecht added that there's a legitimate chance that Yahoo could fall short in the quarter, adding that full-year 2001 projections are also in question. "Despite recent weakness in Yahoo's shares, we suggest investors remain on the sidelines until the smoke clears," the firm added.
On a positive note, Ciena (CIEN) checked in Thursday with fourth-quarter profit of 14 cents a share, beating the First Call estimate by two cents. Going forward, Ciena said it expects their business to grow faster than the overall market and raised revenue guidance, believing it'll be able to achieve fiscal year 2001 revenue growth of between 75 and 85 percent. The stock ended off 4.4 percent on Wednesday.
In the government arena, prices edged higher as stocks were bracing for an open on the downside. The Treasury market has been on a roll this past week, posting significant gains over the past couple of trading days. The 10-year Treasury note gained 3/32 to yield ($TNX) 5.305 percent while the 30-year government bond erased 2/32 to yield ($TYX) 5.52 percent.
On the economic front, Thursday saw the release of weekly jobless claims, which fell 9,000 to 352,000. Still ahead is October consumer credit, seen coming in at $8 billion. View Economic Preview, economic calendar and forecasts and historical economic data.
Cornering the currency market, dollar/yen gained 0.4 percent to 110.61 while euro/dollar put on 0.4 percent to 0.8953, its second straight session of gains.
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