<FONT COLOR=BLUE>MARKET SNAPSHOT--Cautious trade on oil, earnings watch
Nasdaq defies rest of major indices to post modest gain
By Greg Morcroft & Rachel Koning, CBS.MarketWatch.com
Last Update: 10:32 AM ET Sep 18, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - U.S. stock indices had trouble finding their legs Monday morning, as concerns about a strong dollar and decade-high oil prices weighed on earnings expectations.
The Dow Jones Industrial Average ($DJ: news, msgs) shed 38 points or 0.3 percent, to 10,891.02. The Nasdaq Composite ($COMPQ: news, msgs) rose 6 or 0.1 percent at 3,840.91.
Elsewhere, the Russell 2000 ($RUT: news, msgs) lost 2.05 or 0.4 percent at 528.83, while the S&P 500 ($SPX: news, msgs) gave up 1.50 or 0.1 percent to 1,464.31.
Earnings worries are being driven by the dollar's continued strength and concern the Fed has orchestrated its much-desired economic slowdown, which could plague earnings into the end of the year.
"There's good news out there, but investors are adjusting to the slowdown in the economy," said Alan Skrainka, chief market strategist at Edward Jones.
On Monday, the dollar did ease back slightly against its major world counterparts, last down 0.3 percent against the yen at 106.84 yen, with euro/dollar recently up 0.2 percent at 85.46 cents.
The Federal Reserve, meanwhile, probably won't raise interest rates again when it next meets Oct. 3. That expectation among Fed watchers stems in part from the several-months lag that typically follows a Fed policy move. The central bank's series of rate hikes, which has brought its target-lending rate to a near-decade-high 6.5 percent, are still filtering into the economy at this point.
Oil prices, which cooled some on Monday in London after hitting $36 per barrel in New York Friday, are also weighing on the market.
Trouble for stocks overseas lent a negative tone for the U.S. open as well.
European markets were lower by mid- morning trade on Monday, led by tech stocks on concern continued high oil prices will slow economic growth and hit company profits.
South Korea's stock market plunged 10 percent before it was halted for trade on Monday, pummeled by Ford's decision to cancel its planned takeover of debt-laden Daewoo Group.
It wasn't looking any better elsewhere in Asia, with Tokyo down 1 percent, Taipei 2 percent and 4 percent for Hong Kong. They were all depressed by the Nasdaq's 2 percent dive on Friday.
Selective stocks
Abbot Laboratories (ABT: news, msgs) was trading at $45.63, down $2.44. It had climbed in Instinet pre-market trading. Late Friday, the company announced that it received accelerated approval from the Food and Drug Administration to market Kaletra, its antiretroviral treatment of HIV infection
Triarc (TRY: news, msgs) said it has agreed to sell Snapple to Cadbury Schweppes for $1.45 billion. Cadbury will pay Triarc $910 million in cash and assume $420 million in debt. The transaction is expected to close in the fourth quarter. As a result of the sale, Triarc will withdraw its IPO offering of Snapple. Triarc was recently up $3.31 at $27.56.
Elsewhere, Dresdner Bank (DRSRY: news, msgs), Germany's third-largest bank, said it would buy U.S. investment bank Wasserstein Perella & Co for 1.6 billion euros in stock, strengthening its position in mergers and acquisitions services.
British Telecom (BTY: news, msgs)confirmed Sunday it is in talks with its global joint venture partner AT&T (T: news, msgs) about changes to its alliance, including possible spin-offs and mergers.
"These discussions include exploring ways of broadening and strengthening the scope of the relationship between BT and AT&T in business services," the group said in a statement.
Bond market
Selling woes for longer-dated Treasury securities continued early Monday.
A 30-year bond ($TYX: news, msgs) fell 11/32 at 104 17/32. Its yield stood at 5.92 percent, or a gain of 2 basis points from Friday. A benchmark 10-year Treasury note ($TNX: news, msgs) lost 9/32 at 99 1/32, with its yield at 5.88 percent, a gain of 4 basis points from Friday's close.
A Monday morning speech by the nation's chief policymaker - Fed Chairman Alan Greenspan - offered no clues on the fate of interest rates. Greenspan addressed regulatory issues for a banking group. Read more.
Separately, San Francisco Fed President Robert Parry, who votes on policy this year, told Barron's the United States can probably grow by 5 percent each year without spawning inflation. See full story.
Earnings and data watch
Investors won't have lots of economic data to chew on this week. August housing starts and building permits will be out. Also on tap: the July trade data, the Philadelphia Fed Index for September and the August Treasury budget statement.
Meanwhile, the real question for the market isn't how well third-quarter earnings will fare but how much they will slow in the fourth quarter, earnings compiler First Call said.
The number of negative pre-announcements thus far stands at 136 versus the 129 registered at this same stage during the third quarter last year and the 98 seen during the second quarter of 2000. Still, though many more large companies have pre-announced this quarter, the shortfall amount has remained relatively small, according to First Call.
Earnings growth for S&P 500 companies are expected to come in at 17.3 percent in the third quarter, down from the 18.8 percent projected on July 1. First Call notes that earnings growth will drop more in the fourth quarter than in the previous two quarters.
Among the companies reporting: Cyberian Outpost, Circuit City, Jabil Circuit, Progress Software, Lennar, Goldman Sachs, FedEx, Engage, Bed Bath & Beyond, Dean Foods, Lehman Brothers, CMGI, Liberate Technologies, ConAgra, Morgan Stanley Dean Witter and Texas Industries.
Greg Morcroft is New York news editor of CBS.MarketWatch.com.
Rachel Koning is a reporter for CBS.MarketWatch.com. |
