MARKET SNAPSHOT
Microsoft edges down; P&G slides
Dow takes a hit; Nasdaq also retreats
By Julie Rannazzisi CBS MarketWatch
Last Update: 6:10 PM ET Jun 8, 2000
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NEW YORK (CBS.MW) -- The Dow Industrials ended deep in negative territory Thursday, held down by heavy losses in Procter & Gamble -- which warned of an earnings shortfall. Selling in financial stocks also weighed on the broader market.
The Nasdaq remained in the tightest of ranges throughout most of the session, settling at slightly lower levels as investors showed some caution ahead of Friday's producer price index. A survey of economists conducted by CBS MarketWatch.com predicts a 0.2 increase overall with a 0.1 percent rise at the core. Read PPI Preview.
Moreover, some of investors' optimism waned as profit-takers emerged in Microsoft shares after buyers took the stock to levels not seen since early May immediately after the open.
"The Nasdaq is bumping up against resistance right now," said Peter Coolidge, senior equity trader at Brean Murray & Co.
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"This is a market that has gone from the bottom of its trading range to the top at lightening speed and it's consolidating at these levels," echoed Scott Bleier, chief investment strategist at Prime Charter.
Outside of technology, most sectors were lower Thursday, with the exception of oil service shares, which registered nifty gains. The biggest losers included bank, brokerage and retail stocks. Inside the tech arena, chip and networking stocks advanced while software issues backpedaled.
The Dow Industrials dropped 144.14 points, or 1.3 percent, to 10,668.72.
The blue-chip barometer's downside movers included Procter & Gamble, Honeywell, United Technologies and AT&T while Hewlett-Packard, International Paper and Johnson & Johnson moved higher.
Microsoft (MSFT: news, msgs) lost 1 11/16 to 68 13/16. U.S. District Judge Thomas Penfield Jackson ordered after the close Wednesday that Microsoft be split into two separate companies -- one centered on the Windows operating system and the other based on its application software businesses -- to remedy antitrust violations. Microsoft vowed to appeal. See full story.
"This is an unwarranted and unjustified intrusion into the marketplace," Microsoft chief executive Steve Ballmer told a news conference in Rotterdam. See related story.
Shares of Linux-related companies, Microsoft's rivals, also lost ground. Red Hat (RHAT: news, msgs) fell 1 1/2 to 23 1/4, Canadian-based Corel (CORL: news, msgs) shed 7/32 to 5 1/32 and VA Linux Systems (LNUX: news, msgs) dropped 1 1/64 to 36 47/64.
Separately, Corel announced late Thursday that it will cut about 320 jobs, or 21 percent of its workforce, as part of a plan to trim costs by about $40 million a year. See full story.
Today on CBS MarketWatch
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Updated:
6/8/2000 4:14:50 PM ET
In the meantime, Procter & Gamble (PG: news, msgs) lost 5 1/8, or 8.3 percent, to 56 3/4 after warning of an earnings shortfall. P&G said it expects to report flat earnings in the fourth quarter of 55 cents a share, well below the First Call estimate of 64 cents a share. Further, the consumer giant's chief executive officer Durk Jaeger stepped down and was replaced by Alan Lafley, president of the global beauty and North America divisions. See full story. P&G warned on March 7 that it would miss third-quarter earnings, causing a 30 percent drop in the stock and a 374-point plunge in the Dow Industrials that day.
The Nasdaq Composite lost 13.70 points, or 0.4 percent, to 3,825.56 while the Nasdaq 100 index erased 28.70 points, or 0.8 percent, to 3,707.31.
"The Nasdaq is consolidating under resistance at 4,000," said Todd Gold, technical strategist at Gruntal & Co.
A friendly producer price index Friday could be the catalyst to take the Nasdaq above that level, Gold said. And if the market manages to hold even in the face of an unfriendly number, it would be an extremely bullish signal, he continued.
"The market continues to agonize over every number and there are legitimate fears out there that Wall Street may have jumped the gun in expecting a soft landing for the U.S. economy," Bleier said. "We don't have enough economic evidence yet to say that a soft landing is underway."
Still, Bleier continued, there are many pockets of strength out there, with nibbling in many second-tier Internet names, which is very encouraging.
The Standard & Poor's 500 Index slipped 0.7 percent while the Russell 2000 Index of small-capitalization stocks inched down 0.4 percent.
Volume came in at 847 million on the NYSE and at 1.39 billion on the Nasdaq Stock Market. Losers beat winners by 16 to 13 on the NYSE and by 21 to 18 on the Nasdaq.
Sector movers
The chip sector was one of the upside movers in the technology arena with the Philadelphia Semiconductor Index ($SOX: news, msgs) up 1.2 percent.
Intel (INTC: news, msgs) succumbed to profit-taking in afternoon dealings, adding to Wednesday's loss, which came on the heels of an analyst downgrade. The stock shed 2 3/4 to 130. Chase H&Q upgraded both Advanced Micro Devices (AMD: news, msgs) and Atmel (ATML: news, msgs) to a "strong buy" from a "buy" rating. AMD ended flat at 87 while Atmel rose 2 1/4 to 42 9/16.
Hardware stocks moved higher, helped by a nifty advance in shares of Hewlett-Packard (HWP: news, msgs), up 3 5/16 to 125 7/8. The Goldman Sachs Computer Hardware Index ($GHA: news, msgs) added 0.3 percent.
Shares of Qualcomm (QCOM: news, msgs) put on 2 3/4 to 77 7/16. The stock was bolstered by reports that it has signed series of research and development pacts that would allow eight Chinese telecommunications companies to license Qualcomm's CDMA technology. The stock is a component of Merrill Lynch's Broadband Holdrs (BDH: news, msgs), which added 0.7 percent.
Consumer stocks moved lower on the P&G warning and took the Morgan Stanley Consumer Index ($CMR: news, msgs) down 0.5 percent. Downside movers included Gillette (G: news, msgs), off 3/4 to 34 1/8, Clorox (CLX: news, msgs), down 5/8 to 41 3/16, and Dial Corp. (DL: news, msgs), which fell 1/16 to 14.
Kimberly-Clark (KMB: news, msgs) shed 7/16 to 58 1/4. The company said Thursday that it's "comfortable" with analysts' consensus estimates for the second-quarter and full-year 2000. First Call expects earnings-per-share of 80 cents for the second-quarter. See story.
Bank and brokerage stocks retreated on Thursday, relinquishing most of Wednesday's smart gains. The AMEX Securities Broker/Dealer Index ($XBD: news, msgs) lost 2.6 percent while the Standard & Poor's Bank Index ($BIX: news, msgs) fell 2.1 percent.
Gold said the sector is seeing some consolidation after its recent healthy run-up. "I don't think the upside is over for financials. They're just running into resistance and taking a breather after the recent move."
The sloppy performance in financial stocks weighed on Dow, with Citigroup (C: news, msgs) down 1 7/8 to 64 1/2, J.P. Morgan (JPM: news, msgs) off 4 3/8 to 132 3/4 and American Express (AXP: news, msgs) down 1 3/8 to 55 1/16.
Retail stocks moved lower, with the S&P Retail Index ($RLX: news, msgs) slipping 1.2 percent. Circuit City (CC: news, msgs) was among the downside movers, shedding 7/8 to 37 7/16. Salomon Smith Barney lowered its fiscal year 2001 earnings-per-share estimate to $1.90 from $1.97 and lowered its price target to $38 from $55. See Rating Revisions.
Shares of Lands' End fell 12.3 percent, or 4 3/16 to 29 15/16 after the catalog retailer said Thursday that its sales from the first half of fiscal 2001 will be flat, rather than showing an expected low-single-digit increase. While Lands' End is not a component of the retail index, the news put a damper on the sector. Read the story.
See After Hours for post-market trading activity.
Treasury focus
Long-dated Treasurys recovered late in the session but buyers remained cautious ahead of the PPI. The 10-year Treasury note edged up 3/32 to yield 6.13 percent while the 30-year bond climbed 1/4 to yield 5.89 percent. See Bond Report.
The Treasury market has been unable to rally in recent sessions due to an inundation of corporate supply. In addition, recent Fedspeak has suggested the central bank isn't as close to the end of its tightening cycle as the market believes.
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In economic news, Thursday saw the release of initial claims, which rose 20,000 to 309,000 in the latest week. Moreover, import prices rose 0.6 percent in May. View Economic Forecast, economic calendar and forecasts and historical economic data.
In the currency market, the euro's climb against the dollar following the European Central Bank's 50-basis-point rate hike was short-lived. The fledgling currency, in fact, was quick to erase its gains, falling 0.6 percent to 0.9548. The pair rose to an intra-day high of 0.9700, a level not seen since April 5.
The ECB surprised markets Thursday with its decision to raise short-term rates to 4 1/4 percent from 3 3/4 percent. The euro -- which has been badly beaten down in recent months -- ran up in recent sessions on intervention fears and rate hike expectations. Dollar/yen rose 0.4 percent to 105.82 in recent dealings.
In the commodity market, July crude lost 17 cents to $29.78 while the Bridge CRB index climbed 1.02 to 224.21. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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