MARKET SNAPSHOT
Dow ekes out a gain
Investors unload big-cap techs
By Julie Rannazzisi, CBS MarketWatch
Last Update: 4:19 PM ET May 8, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- A vigorous sell-off in big-cap tech stocks took the Nasdaq sharply lower Monday in the lightest volume day of the year.
The negative psychology that enveloped the market was fueled by selling in networking behemoth Cisco Systems. A negative cover story in Barron's citing the company's sky-high valuation caused the tech bellwether (CSCO: news, msgs) to lose 5, or 7.4 percent, to 62 3/4. See full story.
"Volume has tailed off quite a bit and there appears to be a real lack of interest in the market with no sense of urgency to buy," remarked Donald Selkin, chief market strategist at Joseph Gunnar.
"Nobody wants to make a big commitment in either direction. We're in a wait-and-see mode until the Fed's decision on interest rates [on May 16]," he added.
In the tech arena, chip, Internet and computer software companies took a hit Monday. In the broader market, biotech stocks slipped while oil service, bank and utility shares rose. The retail sector continued to suffer while drug stocks got a boost from a brokerage upgrade of Pfizer.
The Dow Industrials added 25.77 points, or 0.2 percent, to 10,603.63, helped by its financial components. The blue-chip barometer remained within a razor-thin range throughout the session.
Upside leaders included J.P. Morgan, American Express, Coca-Cola and Walt Disney. Downside leaders were Boeing, AT&T, Intel and United Technologies.
The Nasdaq Composite dropped 147.44 points, or 3.9 percent, to 3,669.38. The Nasdaq 100 index tumbled 166.76 points, or 4.5 percent, to 3,521.60.
The Standard & Poor's 500 Index fell 0.6 percent while the Russell 2000 Index of small-capitalization stocks lost 2.5 percent.
Volume ended at its lowest level for the year on both the Nasdaq and the NYSE. A total of only 788 million shares traded on the NYSE while 1.13 billion changed hands on the Nasdaq Stock Market. Market breadth was negative, with losers outnumbering winners by 17 to 12 on the NYSE and by 26 to 14 on the Nasdaq.
Looking for direction
Big-cap tech stocks took a beating Monday, with shares of Sun Microsystems, Oracle, Dell, Texas Instruments, EMC and Intel all sharply lower.
"The Barron's article made investors take a step back and reconsider the valuations of big-cap technology stocks, which have been relatively insulated by the Nasdaq's [recent] downdraft," said Peter Boockvar, equity strategist at Miller, Tabak & Co.
The depth and length of the selling in big-cap tech remains to be seen, Boockvar said. A negative article like the one in Barron's, he continued, may have had more of an impact Monday because it hit an already nervous market.
The market, Selkin said, needs a positive catalyst. And that catalyst could come this week with three tech bellwethers -- Cisco, Dell Computer and Applied Materials -- set to report quarterly results. Cisco will report third-quarter earnings after the close Tuesday and is expected to earn 13 cents a share, according to First Call. See Earnings Preview.
"Investors are still jockeying around attempting to find direction," opined Sam Stovall, senior investment strategist at S&P 500.
In the near-term, Stovall believes the weakness in technology may persist because of high valuations and seasonal factors -- the tech sector tends to languish during the summer months -- more than concerns about rising interest rates and the possibility of a more aggressive Fed.
"I believe technology will continue to be the ouperformer six to 12 months down the road," Stovall said, noting that in 1994 -- when the Fed tightened aggressively -- five of the top ten performing sectors were in the tech arena.
Meanwhile, Trim Tabs reported that U.S. equity funds saw inflows of $1.5 billion in the three days ending May 4, for a monthly rate of $11.3 billion. And equities received an injection of $267 million in the first four days in May -- the slowest start for a month since an outflow of $1.9 billion at the beginning of August 1999, Trim Tabs said. The small size of inflows denotes an increase in caution, Trim Tabs added.
Sector movers
Shares of business-to-business companies lost ground with Merrill Lynch's B2B Holdrs (BHH: news, msgs) off 5.8 percent, led by declines in Ariba, off 6 to 70, and Commerce One, off 4 13/16 to 51 1/16.
Shares of Pfizer rose 1 9/16 to 46 3/16. The company was upgraded to a "buy" from "neutral" by Lehman Brothers based on high expectations of its combination with Warner-Lambert. See Rating Revisions. Pfizer was one of the upside leaders of the AMEX Pharmaceutical Index, which climbed 2.6 percent.
Downgrades in shares of Georgia-Pacific and Weyerhaeuser put a mild damper on the paper sector Monday, with the Philadelphia Forest and Paper Products Index off 0.4 percent. UBS Warburg cut both companies to a "hold" from a "buy" rating. Shares of Georgia-Pacific (GP: news, msgs) fell 7/16 to 39 9/16 while Weyerhaeuser (WY: news, msgs) shed 1/4 to 54 3/16.
Flows out of Nasdaq stocks benefited the financial sector Monday as bank stocks, led by the regionals, climbed. The brokerage sector also climbed, albeit by a more modest amount. The rise came even as the bond market sold off vigorously. See related story.
In specific issues, Intel shares couldn't benefit from news that its two new intelligent network devices will handle online business-to-business transactions at speeds up to 150 times faster than previously possible. See full story. The stock (INTC: news, msgs) fell 5 3/4 to 117 5/8.
Shares of Verio (VRIO: news, msgs) surged 22 3/8, or 62.3 percent, to 58 5/16. Japan's NTT Communications Corp. will purchase the 90-percent stake of Verio that it does not already own for about $5.5 billion in cash. See full story.
Shares of Ancor Communications (ANCR: news, msgs) tacked on 7 to 38 3/16 following news that it's being purchased by QLogic (QLGC: news, msgs) in a $1.7 billion deal. See full story. QLogic will pay about $52.72 per share for Ancor, a premium of 69 percent over the company's closing price on Friday. Shares of QLogic fell 25 3/16 to 74 3/4.
Shares of Microsoft lost 1 5/16 to 69 13/16 following news that the software giant is ready to give a counterproposal to the government's call for a company breakup which would include opening access to parts of the Windows code, according to the Washington Post. See full story.
In earnings news, Medarex (MEDX: news, msgs) said it lost 13 cents in the first quarter, less than the expected loss of 15 cents a share, per First Call. The company lost 3 cents a share in the same period last year. See full story. The stock fell 5 39/64 to 57 1/8.
May Dept. Stores (MAY: news, msgs) posted a first-quarter profit of 35 cents a share, matching the First Call estimate. The company earned 34 cents a share during the same period last year. The stock inched up 3/8 to 28 3/4.
See After Hours for post-market trading activity.
Bond focus
Bond prices fell sharply, erasing the small gains posted out of the gate as supply and Fed jitters held down prices.
The Treasury market had a dreadful performance last week as yields backed up substantially. In fact, yields on the 10-year rose 29 basis points while the 30-year climbed by 23 basis points.
The 10-year Treasury note lost 14/32 to yield 6.57 percent and the 30-year bond fell 26/32 to yield 6.25 percent. See Bond Report.
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Intl' Indexes
There are no economic releases on tap Monday with the week's most market-moving numbers -- April retail sales and the producer price index -- to be unleashed on Thursday and Friday.
On Tuesday, March wholesale inventories will be out. View economic calendar and forecasts and historical economic data.
In currency markets, the euro regained some ground against the dollar, adding 0.1 percent to 0.8971. The market is on alert for intervention to sustain the fledgling currency on the part of the European Central Bank. The dollar rose 0.2 percent to 109.01.
In the commodity arena, June crude added 80 cents to $28.09 while the Bridge CRB index edged down 0.36 to 215.72. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
