WALL ST WEEKAHEAD-Bond market could damp
tech rally
By Jennifer Westhoven
NEW YORK, Feb 6 (Reuters) - U.S. stocks will offer amusement park thrills this week, as
investors looking for a tech-stock rally also gird themselves for any lurches in the troubled
bond market, analysts say.
Technology stocks rode victorious out of last week, with the Nasdaq Composite Index
surging 357.07 points, its biggest weekly point gain ever, to close Friday at a record
4244.14.
The index, a tech stock gauge, rose 9.19 percent on the week, second only to a 9.54 percent gain posted during the week of
October 11, 1974, according to technical analysts. The Dow industrials and Standard & Poor's 500 index also moved higher
on the week.
The gains came despite an interest rate hike last week and heavy turbulence in the Nasdaq the previous week.
''We've had two sharp corrections (on the Nasdaq) and the year is only five weeks old. We seem to have had a worthwhile,
sustained rally since the market turned around on Monday,'' said Annette Geddes, managing director for M.D. Sass in New
York.
''That's the way bull market corrections are: very sharp, hideously frightening, and they don't last very long. We had whiplash
last week between the positive earnings reports and the inverted yield curve,'' she said.
Internet equipment maker Cisco Systems Inc. (NasdaqNM:CSCO - news), the world's third-largest company by market
capitalization, is expected to post strong earnings this week. Wall Street is currently forecasting profits of $0.23 a share
compared to $0.18 in the year-ago quarter, according to First/Call Thomson Financial.
The Cisco report, due after the closing bell Tuesday, combined with growing enthusiasm for the release of Microsoft Corp.'s
(NasdaqNM:MSFT - news) new Windows 2000 operating system February 17 and expected positive comments from an
analysts' meeting with Sun Microsystems (NasdaqNM:SUNW - news) in San Francisco set a rosy stage for the week,
technology analysts said.
Other companies handing in report cards this week include Dell Computer Corp. (NasdaqNM:DELL - news), MCI
WorldCom Inc. (NasdaqNM:WCOM - news) and insurance companies Aetna Inc. (NYSE:AET - news), AXA Financial Inc.
(NYSE:AXF - news), CIGNA Corp. (NYSE:CIG - news) and Allstate Corp. (NYSE:ALL - news).
Dell warned in January that its earnings would not match Wall Street's expectations. But the shortfall is not expected to hurt
broader sentiment as the market has had time to price in the lower earnings. The personal computer-maker is expected to post
profits of $0.15 a share, matching the amount it earned in the same quarter in 1999, according to First Call.
Generally, the 1999 fourth-quarter has been a happy surprise -- one of the best in the past 13 years, according to I/B/E/S. The
earnings analysis firm said the strong numbers mean that Wall Street's analysts corps, on average, have jacked up their
estimates for each quarter of fiscal 2000.
The Street had been expecting a quarterly profit growth rate in the high teens, but I/B/E/S analyst Joseph Abbott said that
growth of over 20 percent for the Standard & Poor's 500 index now ''appears to be a certainty''.
But the bond market could throw a monkey wrench into any rally, with some key economic data on the horizon.
Monday afternoon consumer credit is expected to show an $8.7 billion increase for December, adding to November's stunning
three-fold increase of $15.6 billion as shoppers financed holiday spending sprees with credit cards. Street estimates range
widely for this figure, from $4 billion at Deutsche Banc Alex. Brown to $12.6 billion at Argus Research.
Fourth quarter productivity is expected Tuesday to show a 3.7 percent gain, compared with 4.9 percent in the previous period.
Unit labor costs will be released at the same time.
''The productivity number should confirm ... that suddenly productivity has been kicking in with a vengeance,'' said Michelle
Clayman, chief investment officer at New York-based New Amsterdam Partners. But she cautioned that both numbers could
hurt markets if either waved red flags on inflation.
January retail sales data are due Friday. Analysts polled by Reuters expect on average a gain of 0.6 percent.
Supply of long-term debt has been drying up since the U.S. Treasury's decision to issue less and buy back some $30 billion of
its outstanding debt. As a result, yields on long-term debt are now lower than on shorter-term debt.
The government is due to hold a five-year note auction Tuesday, a 10-year note auction Wednesday and a 30-year auction
Thursday.
More Quotes
and News:
NYSE:CIG - news
Aetna Inc (NYSE:AET - news)
Allstate Corp (NYSE:ALL - news)
AXA Financial Inc (NYSE:AXF - news)
Cisco Systems Inc (NasdaqNM:CSCO - news)
Dell Computer Corp (NasdaqNM:DELL - news)
MCI WorldCom Inc (NasdaqNM:WCOM - news)
Microsoft Corp (NasdaqNM:MSFT - news)
Sun Microsystems Inc (NasdaqNM:SUNW - news)
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