US Equities Midday: Up as bonds rally on Greenspan comments
Dow up 4, Nasdaq up 18 Profit warnings hurt computer, chip stocks
By Frank Sakdalan, Bridge News
New York--Jun 17--US stocks were narrowly higher in midday trade as
earnings worries kept the market from joining a rally in bonds after
Federal Reserve Chairman Alan Greenspan ended his congressional
testimony on monetary policy and the economy.
The Dow Jones industrial average was last up 4 at 10,789, while the
Nasdaq composite index was up 18 at 2535 and the S&P 500 was up 4 at 1334.
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Advancers led decliners by a 15-to-12 ratio as 347 million shares
traded on the New York Stock Exchange.
Procter & Gamble Co. (PG) led the point gainers among Dow components,
rising 2 13/16 to 88 7/8.
But the Dow's 2 technology stocks were among the losers as profit
warnings put additional pressure on computer and chip stocks.
Hewlett-Packard Co. (HWP) fell 15/16 to 89 13/16 and IBM Corp. (IBM)
eased 9/16 to 120 1/8.
Hugh Johnson, head of the investment policy committee at First Albany
Corp., said the financial markets were interpreting Greenspan's
comments to mean the Federal Open Market Committee is "going to raise
rates by a quarter of 1 percent" at its Jun 29-30 meeting.
He said bonds rallied on the notion that the "modest rate hike will
work -- that the economy will slow and keep inflation at bay. That's
music to the ear of bond people. For them, inflation is public enemy
No. 1." At 1200 ET, the bellwether 30-year bond was at 89 30/32, up 1
3/32, to push its yield down to 5.973% from 6.062% late Wednesday.
On the other hand, Johnson said stock market participants "are
concerned that earnings will do poorly in an economic slowdown."
PROFIT WARNINGS
Compaq Computer Corp. (CPQ) fell 1/4 to 22 after forecasting a second
quarter loss of up to 15 cents, versus the First Call estimate for net
income of 20 cents, due in part to higher operating expenses and
pricing pressure. Compaq also expects to take "a substantial
restructuring charge" in the third quarter.
Western Digital Corp. (WDC) also slid 3/16 to 6 11/16 after the
disk-drive maker projected a fourth quarter loss of 90 cents to 98
cents a share because of pricing pressure in the desktop computer
sector. The First Call estimated loss is 51 cents a share.
Meanwhile, Intel Corp. (INTC) slipped 2 to 57 11/16 after Credit
Suisse First Boston said it sees Intel's second quarter earnings at the
lower end of estimates at 53 cents a share. The First Call consensus
estimate is at 54 cents.
Intel is experiencing weaker revenue due to both lower processor
selling prices and lower unit shipments, the brokerage report said.
CS First Boston lowered its 1999 estimate to $2.25 a share from $2.32,
but maintained a $75 price target in the next 12 months and reiterated
its buy rating. ECONOMIC NEWS
The US trade deficit narrowed slightly to $18.939 billion in April,
from a record $18.948 billion in March. The deficit, which reflects
annual benchmark revisions, came in below market expectations of a
$19.2-billion gap.
An increase in auto shipments pushed exports higher, but a surge in
oil imports largely offset that gain.
New claims for state unemployment insurance benefits fell 28,000 to
297,000 during the week ended Jun 12, the Labor Department said, well
below the 305,000 median estimate of analysts surveyed by Bridge News.
The 4-week moving average fell 750 to 308,250.
The Philadelphia Federal Reserve Bank's June business index fell to
5.3 from May's 21.1 reading, when the market had expected a basically
unchanged reading.
The report's price components were mixed, though, with the
prices-received index declining to minus 6.3 from minus 5.7 in May,
while the prices-paid index rose to 13.0 from May's 4.7 reading. |
