Market Snapshot
Big-cap tech stocks advance
Modest buying surfaces
No policy hints from Greenspan speech
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 2:28 PM ET Jun 13, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) -- Buyers showed up in big-cap technology stocks, helping the Nasdaq 100 score decent gains in afternoon trading Tuesday. Blue-chip issues also turned positive after a volatile morning, led higher by a rebound in the retail and drug sectors.
The buying remained on the cautious side, however, as evidence that the U.S. economy is slowing has spawned worries about corporate earnings going forward. Further, the market is also walking on eggshells as it wades through earnings pre-announcements.
"People are more worried about avoiding the next landmine than putting new money to work," said David Powers, senior technology analyst at Edward Jones. The risk reward, he said, just isn't there with no real catalyst to move the market at present.
In the meantime, Alan Greenspan spoke to the New York Association for Business Economics Tuesday, but made no mention of monetary policy. The Fed Chair said there's evidence of an improvement in the growth rate of structural productivity. Further, he believes there's room for greater productivity advances, particularly in the Internet and e-commerce arenas. Read the story.
In the broader market, the defensive drug sector climbed while oil service stocks rose in tandem with crude oil prices -- which reached three-month highs. On the downside were bank, airline and paper stocks. Retail stocks recovered, interrupting a three-day losing streak. The sector has been hard hit in recent months on mounting concerns that consumer spending will decelerate as the economy slows and hurt companies' bottom lines.
In the tech arena, computer hardware and Internet shares were the hardest hit while software, chip and networking issues posted modest gains.
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Updated:
6/13/2000 12:56:50 PM ET
The Dow Industrials gained 44 points, or 0.4 percent, to 10,608 at 2:25 p.m.
Johnson & Johnson, Merck, Wal-Mart and Home Depot paced the advance while Hewlett-Packard, Caterpillar and DuPont led on the downside.
Shares of Hewlett-Packard (HWP: news, msgs) fell 7 1/2, or 6 percent, to 118 1/2. Sanford Bernstein lowered its rating on the company to a "market perform" from an "outperform." The drop weighed on the Goldman Sachs Computer Hardware Index ($GHA: news, msgs), which fell 2 percent. See Hardware Stocks.
The Nasdaq Composite added 13 points, or 0.4 percent, to 3,781 while the Nasdaq 100 index jumped 52 points, or 1.4 percent, to 3,690, propelled by gains in shares of Cisco Systems (CSCO: news, msgs), up 1 7/8 to 64, and Intel (INTC: news, msgs), up 3 15/16 to 129.
While a cooler U.S. economy means that the Fed can afford to stay on the sidelines -- a relief for investors -- that positive news is a double-edged sword for stocks as tamer growth means that corporate profits won't shine quite as brightly.
"These are the weeks of confession and the firms that have sinned are receiving their penance. As we head into July, the firms that have been good will give the market a lift with their better-than-expected reports," said Joe Liro, market analyst at Stone & McCarthy Research Associates.
While Liro expects some upside as the second-quarter earnings season commences, he doesn't believe it will be very powerful. For a sustained upward move, he said, technology and financial stocks need to lead the way. And right now, that leadership isn't emerging.
"Technology does well for a few days and then we get rotation out of the sector," Liro said.
The Standard & Poor's 500 Index added 1.1 percent while the Russell 2000 Index of small-capitalization stocks fell 0.7 percent.
Separately, volume came in at 635 million on the NYSE and at 913 million on the Nasdaq Stock Market. Market breadth was negative, with losers beating winners by 15 to 14 on the NYSE and by 23 to 15 on the Nasdaq.
Inside the retail sales
More evidence of a less-than-enthusiastic consumer emerged Tuesday, as May retail sales fell 0.3 percent compared to the expected 0.1 percent rise. Excluding the volatile autos component, retail sales were flat. And April retail sales were downwardly revised to show a 0.6 percent decline from the previously reported 0.2 percent fall. See full story and view Economic Preview, economic calendar and forecasts and historical economic data.
The decline in retail sales was pronounced in durable goods, where sales fell 1 percent. On the other hand, non-durable goods sales rose 0.2 percent.
"Durable goods have now declined for three consecutive months, the first time that has happened since the spring of 1990 -- prior to the recession starting in July. Their softness supports the view that previous rate hikes are working and almost certainty puts the Fed on hold [at the] June 28 [FOMC meeting]," said David Orr, chief economist at First Union.
However, Orr believes the Fed is not off the table for later rate hikes as the slow second-quarter in durable goods follows a very robust first quarter.
"If we thought next few months will look like this it would be easy to argue the economy is slowing sharply and that the Fed is done [on the tightening front]. But we have long expected sales to slow in the spring due to the end of the tax refund season. The real question is the extent of the rebound in June and July," observed Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Sector movers
The S&P Retail Index ($RLX: news, msgs) added 0.8 percent, relinquishing earlier losses. Gains in shares of Best Buy, up 3/16 to 59 3/16, helped the sector. The company (BBY: news, msgs) registered first-quarter earnings of 34 cents a share, matching the First Call consensus estimate. The company made 22 cents a share in the year-ago period.
And Pier 1 Imports (PIR: news, msgs), which is not a component of the retail index, posted first-quarter earnings of 17 cents a share, beating the First Call estimate of 16 cents a share. The company earned 13 cents in the year-ago period. Separately, the company announced the launch of its Web site, pier1.com. The stock lost 5/16 to 8 13/16, erasing earlier gains. See full story.
Consumer stocks put on a mixed performance, with the Morgan Stanley Consumer Index ($CMR: news, msgs) up 0.7 percent.
PaineWebber initiated coverage on a slew of stocks: Clorox (CLX: news, msgs) with a "buy" rating; Colgate-Palmolive (CL: news, msgs) and Dial (DL: news, msgs) with a "neutral" rating and Procter & Gamble (PG: news, msgs) with an "attractive" rating. Clorox climbed 2 7/8, or 7 percent, o 43 3/8 while other stocks in the group were marginally lower.
Bank stocks backpedaled, with the Standard & Poor's Bank Index ($BIX: news, msgs) off 1.1 percent and the Philadelphia/KBW Bank Index ($BKX: news, msgs) down 0.7 percent. (See 1-year chart.)
In the brokerage arena, Deutsche Banc Alex. Brown initiated coverage on Goldman Sachs (GS: news, msgs) and J.P. Morgan (JPM: news, msgs) with a "buy" rating. Goldman added 3/4 to 84 1/16 while J.P. Morgan lost 1 1/2 to 128 1/8.
Individual movers
In specific issues, Citrix Systems recovered, gaining 1 3/4 to 24. On Monday, the company (CTXS: news, msgs) plunged 46 percent after warning of an earnings shortfall.
Shares of Solectron (SLR: news, msgs) added 11/16 to 37 3/4. The company reported after the close a profit from operations of 21 cents a share in the third-quarter, matching the First Call consensus estimate. The company made 16 cents a share in the year-ago period. See full story.
Broadcom (BRCM: news, msgs) announced it's acquiring Innovent Systems, which will allow it to expand its presence in the wireless space. Broadcom will issue about 3.0 million Class A common shares in exchange for all Innovent?s outstanding shares in a deal valued at about $440 million. See full story. The stock gained 3 1/4 to 149 15/16.
Meanwhile, the market continues to punish companies that can't meet Wall Street's estimates. Shares of NBC Internet (NBCI: news, msgs) plunged 9 1/2, or 38 percent, to 15 1/8. Late Monday, the company warned that second-quarter results will be lower than expected due to a soft advertising market for Internet companies and expenses related to recent acquisitions. First Call expected a loss of 70 cents per share. See full story.
Shares of Kemet (KEM: news, msgs) added 4 3/16 to 33 3/8 after the company said it would top Wall Street estimates by at least 50 percent in the first quarter. First Call had expected earning-per-share of 49 cents a share.
See full story.
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In the bond market, the long end -- particularly the 30-year bond -- took a beating as investors unwound flattening curve trades with a vengeance. The rest of the Treasury curve, meanwhile, remained near flat levels.
Fixed-income prices were unable to derive much solace from the morning's weaker-than-expected economic data.
The 10-year Treasury note lost 5/32 to yield 6.10 percent while the 30-year bond tumbled 29/32 to yield 5.93 percent. See Bond Report.
In the currency arena, dollar/yen slipped 0.1 percent to 106.78 while euro/dollar added 0.9 percent to 0.9619.
In the commodity arena, June crude tacked on 94 cents to $32.68 while the Bridge CRB index tacked on 0.36 to 224.94. View latest commodity prices.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com.
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