MARKET SNAPSHOT
Stocks battle back
Big-cap tech stocks show signs of recovery
By Julie Rannazzisi, CBS MarketWatch
Last Update: 5:20 PM ET May 22, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- The major averages ended mildly lower but staged a vigorous rebound from session lows courtesy of a late-day turnaround in shares of big-cap tech stocks.
Buying interest emerged during the final hour of trading in shares of Cisco Systems, Intel and Sun Microsystems, pushing the Nasdaq 100 into positive territory following a bruising, 231-point sell-off earlier in the day.
Still, the late-day buying interest left many observers with more questions than answers.
"I'm not convinced. The Fed is still out there and I don't think there's anyone out there rushing to buy. If the market got a sense that the Fed's next move will be the last, that would be different," said Jay Suskind, director of trading at Ryan, Beck & Co.
Inside the tech arena, the Internet sector ended a touch higher while computer software and hardware issues lost the most ground. The broader market saw the largest losses in the biotech, oil service and brokerage sectors. The gold and utility stocks, which are viewed as a safe-haven areas, were again bid up amid the turmoil in the overall market. Also higher were bank and chemical stocks.
The Dow Industrials fell 84.30 points, or 0.8 percent, to 10,542.55 after falling as much as 257 points earlier in the day. (See 6-month chart of Dow and Nasdaq.)
Shares of General Motors, General Electric, Hewlett-Packard and International Paper led on the downside. Upside movers included McDonald's, J.P. Morgan, IBM and Exxon Mobil.
The Nasdaq Composite declined for the fourth straight session, erasing 26.16 points, or 0.8 percent, to 3,364.24 after falling as much as 218 points in intra-day dealings. The Nasdaq 100 index added 4.07 points, or 0.1 percent, to 3,264.71.
Earlier in the session, a breakdown in big-name tech stocks pushed the Nasdaq below key support levels, which unlocked a wave of selling.
"People have had a rude awakening to valuations and unfortunately more work may need to be done on the downside to get valuations at [more reasonable] levels," said Art Hogan, chief market strategist at Jefferies & Co.
But the continued low volume makes it impossible to convincingly say that a bottom has been formed with Monday's broad-based sell-off, according to Hogan. For that to occur, he believes we need to see capitulation -- which must take place on heavy volume.
"Right now we have a game with only one team showing up, which produces these big drops," Hogan added.
The Standard & Poor's 500 Index lost 0.4 percent while the Russell 2000 Index of small-capitalization stocks fell 1.7 percent.
Meanwhile, Banc of America Securities said Monday that it's reducing its recommended equity weighting to 70 percent from 75 percent and increasing its bond allocation by the same amount -- bringing the total to 30 percent.
Further, Banc of America is trimming its earnings-per-share estimates for S&P 500 companies by $1 each for 2000 and 2001. Banc of America estimates earnings per share of $57 for 2000 and of $61 for 2001.
Volume came in at 870 million on the NYSE and at 1.63 billion on the Nasdaq Stock Market. Breadth was extremely negative, with decliners outpacing advancers by 18 to 12 on the NYSE and by 28 to 12 on the Nasdaq.
Poor technical patterns
Technicians don't like what they see in the Nasdaq's price patterns. The Nasdaq breached its low of the year of 3,227 reached on April 17, plunging to 3,172 in intra-day dealings Monday.
"[With the] April 17 low violated, the next significant area of support for the Nasdaq can be found at 2,900," said Todd Gold, technical strategist at Gruntal & Co.
"The path of least resistance remains on the downside in the near to intermediate-term," Gold said.
Gold is also closely viewing the price action of the market leaders.
Shares of tech bellwether Cisco Systems, for example, fell to $50 in intra-day dealings Monday -- which Gold views as a crucial support level. That level, he added, corresponds to the 200-day moving average as well as a 62 percent retracement of the stock's gains from the October 1998 lows to the March 200 highs. Cisco managed to end in the plus column -- up 1 13/16 to 55 1/4 -- thanks to buying in the final hour of trading.
Should the $50 level be penetrated by Cisco, Gold added, the next support level would be at $45. If Cisco can hold $45 and rebound significantly from that area in the coming months, he believes the networking giant will be the leader in the Nasdaq's next move higher.
Separately, Trim Tabs said inflows slowed as equity funds took in about $1.7 billion in the three days ending May 18 for a monthly rate of $13.2 billion. Technology funds lost $34 million though small-cap funds had a small inflow.
Specific movers
OnDisplay (ONDS: news, msgs) added 7/8 to 54 1/8. Vignette announced Monday that it'll buy OnDisplay for $69.22 a share in a deal valued at $1.7 billion. The purchase will allow Vignette to add XML -- or extensible markup language -- capabilities to its e-business platforms. Vignette (VIGN: news, msgs) fell 8 15/16, or 20 percent, to 34 7/8. Read the story.
Merrill Lynch's Internet Infrastructure Holdrs (IIH: news, msgs), of which Vignette is a component, fell a heady 3.2 percent and is down 46.6 percent since it began trading in late February.
Business-to-business companies also lost ground with Merrill's B2B Holdrs (BHH: news, msgs) off 2.1 percent. Downside leaders included Ventro Corp (VNTR: news, msgs), down 1 3/4 to 19 5/16, and CheckFree Holdings, down 3 3/4 to 42 1/8.
Active Software (ASWX: news, msgs) lost 15/16 to 32 1/16. WebMethods is buying ActiveSoftware for about $45.85 per share in a stock deal valued at $1.3 billion in a bid to grow its reach in the business-to-business software category. WebMethods (WEBM: news, msgs) lost 15 to 72. See full story.
Shares of brokerage stocks took a beating Monday, with the AMEX Securities Broker/Dealer index ($XBD: news, msgs) off 2.4 percent. E-Trade (EGRP: news, msgs) was especially hard it, losing 2 7/8, or 15 percent, to 16 1/2. Ameritrade (AMTD: news, msgs) fell 1 3/16, or 8.6 percent, to 12 9/16. Both companies reached fresh 52-week lows. See related story.
In other news, IBM (IBM: news, msgs) announced Monday new Web servers powered by the world's first production microchips made of silicon-on-insulator transistors and copper wiring. The silicon insulation can increase performance up to 30 percent. See full story. The Dow-component shed 2 9/16 to 109.
General Motors (GM: news, msgs) remained the Dow's downside leader, falling 9 9/16, or 11 percent, to 77 3/8. The automaker is issuing more shares of Hughes Electronics (GMH: news, msgs), its satellite subsidiary, to GM stockholders. See full story. Analyst Saul Rubin at UBS Warburg noted that more than half of GM's stock was tendered in exchange for the tracking stock of its Hughes subsidiary, which was "substantially" more than expected." See Market Pulse.
Treasury focus
Government issues gained significant ground Monday, underpinned by the weakness in U.S. equity markets.
The 10-year Treasury note gained 14/32 to yield 6.45 percent and the 30-year bond inched up 3/32 to yield 6.20 percent. See Bond Report.
Regional market
coverage
North America
Europe
Asia
ADR Report
Currency rates
Intl' Indexes
Long-dated issues have been under the gun in recent weeks due to the market's heightened inflation worries while the short end has been held hostage by the Fed's tightening actions.
There's no economic news on tap for Monday. The week will be an excruciatingly light one on the data front, with only the revised gross domestic product and personal income and consumption numbers on tap. See economic calendar and forecasts and historical economic data.
In currency markets, dollar/yen lost 0.1 percent to 106.95 while euro/dollar rose 0.7 percent to 0.9030.
In the commodity market, June crude fell $1.28 to $28.61 while the Bridge CRB index climbed 0.48 to 223.83. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
