MARKET SNAPSHOT
Shares turn higher
Mild advance for Dow, Nasdaq
By Julie Rannazzisi CBS MarketWatch
Last Update: 2:20 PM ET May 31, 2000
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NEW YORK (CBS.MW) -- The major market indexes turned higher in rangebound action Wednesday with strength in the chip, financial and retail sectors keeping the market's newfound optimism alive and well.
"A tug-of-war is currently taking place in the market," said Peter Boockvar, equity strategist at Miller, Tabak & Co.
On one side, Boockvar said, the softer-than-expected economic numbers Wednesday morning increased the market's expectation that the Fed's next rate hike may be the last. The data lifted interest-rate sensitive areas of the market such as retail and financials issues.
But a softer economy means that the growth rate of corporate earnings will slow as well, which is keeping the bulls skeptical.
Within technology, all sectors turned lower with the exception of chip and networking shares. In the broader market, oil service, retail and utility shares advanced while biotech, airline and gold issues slipped.
The Dow Industrials added 33 points, or 0.3 percent, to 10,560 at 2:11 p.m. (See 6-month chart.)
Upside leaders included Wal-Mart, Home Depot, American Express and Citigroup. But shares of Hewlett-Packard, IBM and McDonald's saw the largest losses.
The Nasdaq Composite gained 17 points, or 0.5 percent, to 3,476 while the Nasdaq 100 index rose 13 points, or 0.4 percent, to 3,427.
Todd Gold, technical strategist at Gruntal, said follow-through purchases -- with a close above 3,500 on the Nasdaq -- are needed to validate Tuesday's climb, Gold said. The Nasdaq rose to an intra-day high of 3,501.51 on Wednesday.
The Standard & Poor's 500 Index rose 0.7 percent while the Russell 2000 Index of small-capitalization stocks climbed 0.8 percent.
Volume came in at 637 million on the NYSE and at 1.04 billion on the Nasdaq Stock Market. Market breadth was mixed with advancers beating decliners by 17 to 11 on the NYSE and by 20 to 18 on the Nasdaq.
Watching the leaders
Market observers are watching the market action on the Nasdaq's leaders to determine the bull's resolve to take the Nasdaq higher on a more sustained basis.
Gold notes that the charge in the semiconductor group Tuesday helped push Intel above its short-term downtrend line. But other large Nasdaq components -- such as Oracle, Cisco Systems and Sun Microsystems -- have yet to take out their short-term downtrend lines, he continued. "Until they do, we maintain our negative bias on the COMP."
On Wednesday, the Philadelphia Semiconductor Index ($SOX: news, msgs) rose 1.1 percent, led by strength in LSI Logic (LSI: news, msgs), up 8.3 percent, or 4 1/16 to 54 1/16, on the heels of positive comments from Morgan Stanley Dean Witter. See Silicon Stocks.
Morgan Stanley analyst Mark Edelstone believes LSI Logic's business conditions remain very strong with orders -- driven by communications -- running at record levels. The analyst believes LSI has the ability to show an acceleration in revenue growth in the second-half of 2000 as the industry begins to decelerate.
Morgan Stanley also has positive comments on Atmel (ATML: news, msgs), which added 2 13/16 to 38 7/8. "With pricing power and rising demand across the board, we believe Atmel needs only to demonstrate the ability to execute," the brokerage said.
Performance in other market leaders was mixed, with Cisco (CSCO: news, msgs) off 5/8 to 59 1/4, Sun (SUNW: news, msgs) up 1 5/8 to 81 5/8 and Oracle (ORCL: news, msgs) flat at 74 3/16.
Shares of Dow-component Microsoft (MSFT: news, msgs) erased 3/4 to 62 5/8. Microsoft attorneys are slated to file their final brief Wednesday afternoon -- clearing the way for a remedy ruling. It's a widely foregone conclusion that U.S. District Court Judge Thomas Penfield Jackson will order a breakup of the software titan. Read the story.
And shares of Dow-component Hewlett-Packard (HWP: news, msgs) shed 3 5/16 to 121 3/16. H-P said Amazon.com will become one of its top five customers under a new deal to supply 90 percent of the company's (AMZN: news, msgs) technology infrastructure, including Internet servers and storage. Amazon founder and Chief Executive Officer Jeff Bezos and H-P Chief Executive Officer Carly Fiorina made the announcement at an analyst meeting Wednesday morning. See full story.
Specific issues
In merger news, Lucent Technologies confirmed Wednesday it's buying privately-held Chromatis Networks in a stock deal valued at $4.5 billion. The purchase will boost Lucent's optical networking business. The deal, announced in press reports earlier this week, was widely expected. See full story. The acquisition is expected to dilute Lucent's pro forma earnings per share for ongoing operations by about two cents in fiscal 2000 and roughly five cents in fiscal 2001. Lucent's stock shed 5/8 to 57 1/8.
In other specific issues, Fatbrain jumped 2, or 38 percent, to 7 1/4. Fatbrain (FATB: news, msgs) said late Tuesday that it expects first-quarter revenue to come in between $13.5 to $14 million, ahead of Wall Street's consensus estimate of $13.5 million. The company said strong growth in its B2B corporate programs was behind the better-than-expected sales figures. See related story.
Motorola (MOT: news, msgs) has agreed to outsource about $30 billion of electronics manufacturing to Singapore-based Flextronics International (FLEX: news, msgs) over the next five years. Motorola will also buy an equity instrument at a discount for an initial payment of $100 million. The instrument is convertible over time into 11 million shares of Flextronics' stock. See full story. Flextronics surged 9, or about 18 percent, to 59 1/16 while Motorola gained 2 to 98 7/16.
Intimate Brands reported Wednesday that May same-store sales rose 11 percent. Total sales for the four weeks ended May 27 rose to $362.7 million from $318 million in the same period a year earlier. The stock (IBI: news, msgs) shed 1/8 to 23.
Ask Jeeves (ASKJ: news, msgs) announced Wednesday that its president Ted Briscoe has resigned to become chief executive of privately-held Play Streaming Media Group. Read the story. The stock fell 1 13/16 to 19 13/16.
Treasury focus
Bond prices extended earlier gains, garnering momentum following the release of a spate of market-friendly economic data. The brunt of the gains were clustered in the long end of the curve.
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The 10-year Treasury note tacked on 1/2 to yield 6.31 percent while the 30-year bond rallied 24/32 to yield 6.04 percent. See Bond Report.
On the economic front, April new homes sales fell 5.8 percent to a 909,000 pace, less than the expected 935,000 rate. See full story.
Also released were April leading economic indicators, which rose 0.1 percent, and the Chicago Purchasing Managers index for May, which came in at 53.9 percent, lower compared to April's 56.5 percent reading. The prices paid index, meanwhile, fell to 64.4 percent from the previous 69.4 percent. See Economic Forecast, economic calendar and forecasts and historical economic data.
In the currency sector, dollar/yen gained 1.1 percent to 107.80 while euro/dollar gained 0.7 percent to 0.9357.
In the commodity market, July crude lost $1.02 to $29.33 while the Bridge CRB index fell 0.42 to 223.19. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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