Market News Snapshot--Looking at jobs report for direction
By Emily Church and Julie Rannazzisi,
CBS MarketWatch
Last Update: 7:50 AM ET Apr 7, 2000 Market Pulse
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NEW YORK (CBS.MW) -- Technology shares are cautiously edging higher ahead of a key report Friday morning on employment.
In a market starved for direction after a volatile week, the jobs report in taking center stage. If the nation's unemployment rate dips below 4 percent, some are expecting markets to lurch in adjustment on concerns the Federal Reserve will move up its rate tightening schedule.
The U.S. Department of Labor is slated to release jobs data for March. Non-farm payrolls are expected to rise by 375,000 thousand, according to survey conducted by CBS MarketWatch.com. The unemployment rate is expected to drop 0.1 percent to 4.0 percent.
On Thursday, the major averages staged a nice rebound Thursday, led by the tech sector, in a calm trading session that encouraged buyers to step up to the plate.
Within the market, biotech shares plowed ahead in a second day of heavy buying, lending additional support to the Nasdaq and Russell 2000 indexes. Brokerage, oil service and retail shares also gained ground while drug and bank stocks backpedaled. In the tech arena, networking, Internet and computer software shares held on to decent gains.
While observers believe the general picture for the tech sector remains an extremely positive, observers expect volatile price action over the next weeks as the major averages attempt to put in a definitive bottom.
"Stocks are attempting to define the boundaries of their trading ranges," said Scott Bleier, chief strategist at Prime Charter. The market, he said, will spend the next few months digesting the tremendous gains witnessed since October 1999.
"We'll see a market in a basing process as opposed to a trending market," Bleier said. Higher-quality stocks, he continued, have more potential to trend higher compared to second-tier names.
The Dow Industrials gained 80.35 points, or 0.7 percent, to 11,114.27, led by gains in Wal-Mart, Hewlett-Packard, Home Depot and AT&T. Coca-Cola, McDonald's and Merck were among the Dow's biggest losers.
The Nasdaq Composite tacked on 98.34 points, or 2.4 percent, to 4,267.56 after rising as much as 155 points in intra-day dealings. (See 6-month chart of Dow and Nasdaq.)
"The market hit a short-term bottom on Tuesday, and now the recovery is beginning. After a big crash there is still much stock debris flying about until confidence builds to some degree," said Robert Dickey, chief technical analyst at Dain Rauscher Wessels. The market is establishing a wide range, he added, which will be in place for most of the next few months.
Still, though Dickey believes tech stocks will bounce in the near-term, he expects further selling pressure to emerge later on. "It's the traditional part of the year when these stocks underperform, and this year will be normal in that respect. The best performers will be the value stocks, drugs, foods, healthcare, some financials, and especially the energy stocks," he said.
The market will take baby steps, said Todd Gold, technical strategist at Gruntal & Co. A close above the previous session's intra-day high -- a feat that hasn't been achieved in nearly two weeks -- is the first step needed to improve the Nasdaq's technical picture. On Thursday, the Nasdaq was unable to end above Wednesday's intra-day high of 4,286.
Separately, TrimTabs.com reported outflows of $2.0 billion for equity funds that invest primarily in U.S. stocks during the week ended April 5 compared with inflows of $5.2 billion during the previous week. All
equity funds had outflows of $1.8 billion over the same period compared to inflows of $5.1 billion during the prior week. Bond funds, meanwhile, registered outflows of $0.8 billion vs. outflows of $1.7 billion the previous week.
The Standard & Poor's 500 Index advanced 0.9 percent while the Russell 2000 Index of small-capitalization stocks jumped 2.8 percent.
Volume stood at 1.00 billion on the NYSE and at 1.75 billion on the Nasdaq Stock Market. Market breadth was positive with advancers outnumbering decliners by 19 to 11 on the Big Board and by 28 to 14 on the Nasdaq.
Goldman Sachs released a "Super Seven" technology list for stocks that will perform well in periods of extreme volatility like the present. The list includes Cisco Systems (CSCO: news, msgs), Dell Computer (DELL: news, msgs), EMC Corp. (EMC: news, msgs), Oracle Corp. (ORCL: news, msgs), PMC-Sierra (PMCS: news, msgs), Teradyne (TER: news, msgs) and First Data Corp. (FDC: news, msgs).
"During this period of extreme volatility we recommend that investors remain focused on those larger cap technology names that we continue to have high conviction in the fundamentals," Goldman said.
These companies, Goldman said, will be the driving forces behind increased reliability, availability and scalability over the Internet.
Shares of most of the stocks mentioned by Goldman rose, led by Teradyne, up 9 1/4 to 96 1/4, PMC-Sierra, up 14 3/16 to 185, and FDC Corp., up 2 5/8 to 45 3/8. Dell lost 2 23/64 to 51 9/16 while Cisco shed 5/16 to 71 13/16.
Yahoo shares lost 11 9/16, nearly 7 percent, to 154. After the close Wednesday, the company (YHOO: news, msgs) checked in with a profit from operations of 10 cents a share, a penny ahead of the First Call estimate. The company earned 3 cents a share during the same period last year. See related story.
In addition, Yahoo named a new chief financial officer, Susan Decker, who will join from Donaldson, Lufkin & Jenrette, where she was global head of research.
B2B stocks had another positive session with Merrill Lynch's B2B Holdrs (BHH: news, msgs) gaining 4.4 percent, led by ImageX.com (IMGX: news, msgs), up 2 5/16 to 12 7/8, and QRS Corp. (QRSI: news, msgs), up 13 to 60. Meanwhile, Merrill's Broadband Holdrs (BDH: news, msgs), a basket of 20 stocks, began trading Thursday on the Amex. The index added 1.5 percent.
Merrill's Biotech Holdrs (BBH: news, msgs) climbed 4.1 percent, led by Celera Genomics, up 25 to 140. The company (CRA: news, msgs) has completed sequencing of the human genome, a breakthrough that opens the door to precise understanding of what causes diseases of all kinds. See Biotech Report. SG Cowen upgraded the stock to a "strong buy" from a "buy" rating.
The Celera news propelled the biotech sector, with nice gains in shares of Protein Design Labs (PDLI: news, msgs), up 35 7/8 to 110 and Millennium Pharmaceutical (MLNM: news, msgs), up 30 17/64 to 173 5/8.
In other news, worldwide sales of semiconductors totaled $14.6 billion in February, up a nice 33 percent from year-ago levels, the Semiconductor Industry Association said Thursday.
"The year-to-year growth of semiconductor sales indicates a strong 2000 for the chip industry," said SIA President, George Scalise. See full story. The Philadelphia Semicondutor Index rose 1.9 percent.
Shares of EBay (EBAY: news, msgs) rose 16 1/16 to 182. Salomon Smith Barney initiated coverage of the company with a "buy" rating and set a $225 price target. See Rating Revisions.
Another online auctioneer got a boost from an analyst's call Thursday. The ADSs of U.K.-based QXL.com (QXLC: news, msgs) jumped 29 43/64 to 51 63/64 after SG Cowen & Co. initiated coverage of the company with a "strong buy" rating and set a post-split $330 24-month price target. Read the Ratings Game for more.
Shares of PriceLine.com (PCLN: news, msgs) put on 5 3/16 to 77 1/8. Salomon started coverage of the company with a "buy" rating and set a $130 price target.
In earnings news, Alcoa (AA: news, msgs) checked in with first-quarter earnings of 95 cents a share, 4 cents ahead of the First Call estimate. Shares rose 1 3/4 to 70 15/16. See full story.
Shares of Tellabs (TLAB: news, msgs) fell 2 7/8 to 58 1/8. The company said late Wednesday that it expects earnings from operations between 25 to 27 cents a share in the first quarter compared to the First Call estimate of 30 cents a share. See full story.
Peregrine Systems shares (PRGN: news, msgs) dropped 21 1/4 to 36 3/4. The company announced late Wednesday that it will purchase software maker Harbinger (HRBC: news, msgs). Under the terms of a deal, Peregrine will issue 36 million new shares in exchange for all of Harbinger's outstanding stock.
See full story. Shares of Harbinger added 2 7/16 to 26 9/16.
Shares of Salon.com (SALN: news, msgs) plunged 23/32 to 3 11/32 after the company said it expects to post a loss of 35 cents to 42 cents per share. That compares to the First Call estimate of a loss of 33 cents per share.
See After Hours for post-market trading activity.
In the bond market, prices backpedaled as a stable stock market removed the safe-haven bid from Treasurys.
The 10-year Treasury note fell 12/32 to yield 5.93 percent and the 30-year bond lost 6/32 to yield 5.80 percent. See Bond Report.
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On the economic front, Thursday saw the release of weekly initial claims, which fell 6,000 to 260,000, a 26-year low. February wholesale inventories rose 0.7 percent.
The week's economic kingpin -- the employment report -- will be unleashed Friday morning. Non-farm payrolls are expected to have risen by 375,000 in March while the unemployment rate is expected to have edged down to 4.0 percent from the previous 4.1 percent, according to a survey conducted by CBS MarketWatch.com. Closely-watched average hourly earnings are seen rising by 0.4 percent. View economic calendar and forecasts and historical economic data.
In currency markets, dollar/yen lost 0.2 percent to 104.66 while euro/dollar edged down 0.2 percent to 0.9584.
In the commodity arena, May crude fell 14 cents to $25.69 while the Bridge CRB index lost 1.50 to 210.72. See Futures Movers and view latest commodity prices.
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