MARKET SNAPSHOT
Techs hold on to gains; Dow sags
Cisco, Intel climb buoys Nasdaq
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 3:03 PM ET Aug 9, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Tech investors were reassured by Cisco Systems' earnings release and kept the Nasdaq firmly in the plus column Wednesday. The Dow Industrials sagged but came well off session lows as Intel and General Electric saw 4-percent gains.
"Cisco has consistently showed us numbers that are slightly better-than-expected," said Joe Liro, market analyst at Stone & McCarthy Research Associates. The news out there is good, he said.
The market has also concluded from the recent batch of favorable economic news that the Fed is on the sidelines for the time being, Liro said.
"But the economic numbers going forward need to be friendly to keep the market where it is since it already has a very rosy scenario priced in," he added.
Within the broad market, retail stocks were the hardest hit. Checking in with milder losses were transportation, bank and utility shares. And paper and biotech stocks advanced while oil and oil service shares climbed in the wake of a rally in crude oil futures. Inside technology, chip and networking stocks advanced but came well off earlier highs. On the downside were computer software stocks.
The Dow Jones Industrials Average ($DJ: news, msgs) broke its seven-day winning streak, slipping 12 points, or 0.1 percent, to 10,964 at 3:00 p.m. The blue-chip gauge was down as much as 84 points in intra-day dealings.
Keeping the Dow in the red were losses in shares of Wal-Mart, which shed 6.3 percent, J.P. Morgan, Boeing and McDonald's. On the upside were shares of Intel, with a 3.5 percent climb, Exxon Mobil and 3M..
The Nasdaq Composite ($COMPQ: news, msgs) gained 43 points, or 1.1 percent, to 3,892 while the Nasdaq 100 Index ($NDX: news, msgs) advanced by 54 points, or 1.5 percent, to 3,741.
With a backdrop of economic data supportive of a soft landing and a positive profit report from Cisco, the market certainly has a lot of good news to chew on, Liro said. But the Nasdaq isn't getting a great deal of mileage out of the news, he noted.
Tech stocks still have high valuations relative to their growth rates, Liro said. "You can't see those multiples get richer if earnings growth [is expected] to slow going forward. That's the hurdle here."
"We're having fairly affirmative action Wednesday," said Bryan Piskorowski, market analyst at Prudential Securities.
By virtue of the advance on the Nasdaq, the market is pricing in the effect of no rate hike on the Fed's part on Aug. 22, Piskorowski added. But August tends to be a sleepy month, he said, and it's hard to be confident that the market will head north without bumps along the road.
The Standard & Poor's 500 Index ($SPX: news, msgs) added 0.2 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks edged up 0.1 percent.
Volume stood at 822 million on the NYSE and at 1.20 billion on the Nasdaq Stock Market. Market breadth deteriorated, with decliners outnumbering advancers by 14 to 13 on the NYSE and by 20 to 19 on the Nasdaq.
Sector movers
Cisco Systems (CSCO: news, msgs) put on 3 1/2, or 5.3 percent, to 69, boosting the Amex Networking Index ($NWX: news, msgs) by 2.8 percent. After the close Tuesday, Cisco posted fiscal fourth-quarter earnings of 16 cents a share, beating the First Call estimate by 1 cent. Revenue rose 61 percent to $5.72 billion compared with $3.56 billion for the same period last year. See full story. Separately, Cisco announced its No. 2 executive Don Listwin will step down. No immediate replacement was named.
In merger news, Phone.com (PHCM: news, msgs) and Software.com (SWCM: news, msgs) announced a merger agreement reportedly valued at around $6.4 billion Wednesday and said they hired Cisco executive vice president Don Listwin to become the new company's president and chief executive. See full story. Phone.com and Software.com shareholders will each own approximately 50 percent of the combined company. Software.com climbed 35 1/4, or 32.7 percent, to 143 while Phone.com rose 15 15/16, or about 20 percent, to 94. Software.com is part of Merrill Lynch's Internet Infrastructure Holdrs (IIH: news, msgs), which put on 3.9 percent.
Many chip and chip equipment stocks saw significant gains Wednesday, leading the Philadelphia Semiconductor Index ($SOX: news, msgs) up 2.7 percent. Among the chip makers, giant Intel (INTC: news, msgs) added 3.3 percent to 63 11/16 while Advanced Micro Devices (AMD: news, msgs) gained 2.4 percent to 62 3/4. Within the chip equipment segment, Kulicke & Soffa Industries (KLIC: news, msgs) rose for the first time since issuing a profit warning last Thursday. The stock added 3/8 to 15 13/16. Applied Materials (AMAT: news, msgs), up 2 11/16 to 73 1/4, is set to reveal its third-quarter earnings after the close Wednesday. First Call estimates earnings-per-share of 68 cents for the quarter.
The broad market saw the most powerful gains in the oil and oil service segments in the wake of another decline in inventories, which boosted crude oil futures Wednesday. The Philadelphia Oil Service Index ($OSX: news, msgs) climbed 2.4 percent, led by a 3.1 percent gain in shares of Baker Hughes (BHI: news, msgs) and a 3.4 percent rise in shares of Halliburton (HAL: news, msgs). And the CBOE Oil Index ($OIX: news, msgs) advanced 1.1 percent, with Dow-component Exxon Mobil (XOM: news, msgs) up 1 21/64 to 82 1/8.
September crude climbed $1.01 to $30.13 and reached an intra-day high of $30.22, a level not seen since July 20. In the meantime, the Bridge CRB index slipped 0.06 to 218.84. The American Petroleum Institute reported late Tuesday another surprising drop in crude supplies, which fell by 2.144 million barrels in the latest week after a 9-million-barrel drop the week before, bringing total inventories to 24-year lows. See related story.
In the meantime, a number of retailers unleashed their results Wednesday, but sellers invaded the retail sector following Tuesday's smart advance. The S&P Retail Index ($RLX: news, msgs) slipped 2.9 percent on Wednesday.
Wal-Mart (WMT: news, msgs) checked in with a second-quarter profit of 36 cents a share, matching the First Call estimate. The Dow-component made 28 cents a share in the year-ago period. Totals sales checked in at $46.1 billion - a 20-percent increase over the same quarter last year. During the company's conference call, Wal-Mart executives said the First Call consensus of 33 cents in earnings per share for the third quarter was too rich given an accounting shift announced last quarter The stock slipped 3 1/2 to 54 1/8. Read full story.
Federated Dept. Stores (FD: news, msgs) posted second-quarter earnings of 30 cents a share, beating the First Call estimate of 26 cents a shares but short of the 61 cents a share earned in the same quarter last year. Shares lost 1/8 to 25 1/4.
And Polo Ralph Lauren Corp. posted a first-quarter profit of 25 cents a share, surpassing the First Call estimate by a penny. The company made 14 cents in the year-ago period. The stock (RL: news, msgs) trimmed 1/2 to 18 5/16.
Late Tuesday Abercrombie & Fitch (ANF: news, msgs) checked in with a second-quarter profit of 21 cents a share, which was 2 cents above the First Call estimate. The company earned 17 cents in the year-ago period. The stock was one of the winners within the retail segment Wednesday, gaining 1 1/16 to 21.
Drug stocks retreated, with the Amex Pharmaceutical Index ($DRG: news, msgs) off 1.3 percent. Shares of Eli Lilly (LLY: news, msgs) were halted in mid-afternoon dealings on the heels of an appeals court ruling that reversed a lower court double patenting ruling involving Prozac. The lawsuit against Lilly was brought on by Barr Laboratories (BRL: news, msgs), which was also halted.
Treasury focus
Fixed-income securities recovered on the heels of a soothing Beige Book report.
The 10-year Treasury note climbed 1/8 to yield ($TNX: news, msgs) 5.94 and the 30-year bond added 2/32 to yield ($TYX: news, msgs) 5.72 percent. See Bond Report.
No economic data is set for release on Wednesday, with the week's remaining big news -- the July retail sales report and the producer price index -- due out on Friday.
Meanwhile, the Federal Reserve's Beige Book report on economic conditions was released, showing a slowdown in consumer spending. The central bank said the economy remained healthy, though a cooling was seen in consumer spending, construction and manufacturing, which kept inflation under wraps. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the greenback weakened against the yen for a second straight session. Markets are bracing for a rate hike from the Bank of Japan on Friday when it meets to decide the fate of short-term interest rates.
But the battle between the BOJ and the government over monetary policy continues. In fact, Japanese government officials and the central bank are at odds with the BOJ on when to end the zero-rate interest policy, which is in place since Feb. 1999. The BOJ believes recent positive economic data suggests it's time to end the zero-rate policy while the government is of the view that a tightening at this juncture would be premature and squash the first feeble signs of economic recovery. See related story.
In recent trading, dollar/yen shed 0.6 percent to 107.88 while euro/dollar fell 0.6 percent to 0.8969. See latest currency rates.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
