NEW YORK, May 24 (Reuters) - U.S. stocks were seen bouncing at the open on Wednesday from a sell-off that drove the Nasdaq composite index to its lowest level this year, but there was little to cheer Wall Street except for a blockbuster airline merger.
``I think we are entitled to some sort of a technical rally,'' said James Volk, co-director of institutional trading at D.A. Davidson & Co. ``But I don't think there is anything on the horizon that would change the psychology. Investors are still worried about interest rate increases. Investors are still worried about technology valuations.''
With more than an hour to go before the market opened, the Standard & Poor's 500 index futures for June rose 6.40 points to 1,388.90 while the Nasdaq 100 index futures gained 22.65 points, to 3,035.15.
There was nothing major on the docket of economic data on Wednesday. The market was awaiting Thursday's release of first-quarter gross domestic product figures for any warning signs that the economy is overheating.
Investors have been on alert since last week when the Federal Reserve took up borrowing costs by an aggressive 50 basis points and indicated still more hikes to come.
Wall Street could listen to Federal Reserve Board Gov. Edward Gramlich, who testifies on predatory lending practices before the U.S. House of Representatives' Banking Committee at 9:30 a.m. EDT (1330 GMT).
``I think the market is in a severely oversold condition,'' said Thom Brown, managing director of Rutherford Brown and Catherwood. ``We are due for a little bounce. We are seeing very light volume on these sell-offs which means we could get a reasonable bounce for a day or so. The sell-off in high price-to-earnings ratio issues is really serious. I don't think it is over.''
The airline sector could see some action on Wednesday after UAL Corp. (NYSE:UAL - news), parent of the world's No. 1 airline United Airlines, confirmed an agreement to buy long-struggling US Airways Group Inc. (NYSE:U - news) for $4.3 billion. US Airways, the sixth-largest U.S. airline, was changing hands at 49-1/2 in pre-market trading after closing at 25-15/16 in the previous session.
UAL closed at 60-1/16.
On Tuesday, technology weakness shoved the Nasdaq composite index (^IXIC - news) down for the fifth straight session, losing 199.66 points, or 5.93 percent, to 3,164.55, with the semiconductor sector the biggest culprit.
The Nasdaq's close was its lowest since it finished at 3,156 on Nov. 10, 1999.
The technology downdraft also dragged down the Dow Jones industrial average (^DJI - news), which gave up 120.28 points, or 1.14 percent, to 10,422.27. The 30-stock index is now off 9.35 percent for the year and technically in a ``correction'' mode as it has fallen more than 10 percent from its Jan. 14 high of 11,722.98.
Broader measures of the market ended lower too, with the Standard & Poor's 500 index (^SPX - news) down 26.86 points, or 1.92 percent, to 1,373.86 and the Wilshire 5000 index (^TMW - news) off 2.19 percent.
Among stocks in the news, Novell Inc. (NasdaqNM:NOVL - news) on Tuesday reported fiscal second-quarter results that came in barely above diminished expectations as falling sales to big distributors cut into revenue at the maker of business management software. Its stock closed at 9-3/4 ahead of the news.
Engineering, construction and coal company Fluor Corp. (NYSE:FLR - news) on Tuesday reported earnings that came in ahead of Wall Street expectations, and said it could post modest earnings growth for the full year despite weak coal markets. The company's stock closed at 34-6/16 ahead of the news.
Southwestern Bell (NYSE:SBC - news) says it will file complaints on Wednesday with the Federal Communications Commission (FCC) and the Texas Public Utilities Commission against Time Warner Inc (NYSE:TWX - news), the New York Times said.
Bond prices sagged. The 10-year U.S. Treasury note fell 6/32, pushing the yield up to 6.45 percent from Tuesday's close of 6.43 percent. The 30-year bond was off 7/32, with the yield at 6.18 percent from Tuesday's close of 6.17 percent. |
