Nasdaq recovers; Dow smacked
Oil spike weighs on old-economy stocks
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:24 PM ET Sep 20, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Buyers of tech stocks emerged with a vengeance late in the session Wednesday, helping the index to shake off its doldrums. Big-name stocks scored the biggest wins, with Internet, biotech and computer hardware shares pacing the advance.
Though Dow stocks relinquished a good chunk their steep losses, the blue-chip barometer remained deep in the red as rising oil prices, a faltering euro and a steady stream of profit warnings kept buyers on the defensive.
October crude oil futures ended up 39 cents to $36.90 and reached an intraday peak of $37.80 after the American Petroleum Institute reported late Tuesday that crude oil inventories fell 2.035 million barrels in the week ended Sept. 15 -- about 3 million short of analysts' expectations. Read the full story. Oil and oil service shares saw their early gains evaporate as crude prices came well off session highs.
Higher energy costs have been cited as reason for profit shortfalls by a number of old-economy companies recently and has heavily weighed on investor psychology.
"I don't see a catalyst for the market to go higher. It's very dicey out there," said Joe Liro, equity strategist at Stone & McCarthy Research Associates.
The market's reaction to third-quarter earnings will depend on the sustainability of those results in the fourth quarter and beyond, Liro commented.
Inside the tech sector, chip stocks regained their composure after a tough morning and the Philadelphia Semiconductor Index ($SOX: news, msgs) edged up 0.2 percent following an 8.1-percent rally Tuesday. Intel (INTC: news, msgs) took the group higher with its 4.5 percent climb.
The Dow Jones Industrials Average ($DJ: news, msgs) shaved 101 points, or 0.9 percent, to 10,687 and fell 222 points at its nadir Wednesday.
"We're seeing more of the same: pressure from oil prices and the falling euro," said Peter Boockvar, equity strategist at Miller, Tabak & Co. Third-quarter earnings may very well push the market out of its doldrums but, right now, people are discouraged, he added.
The heaviest losses were seen in shares of Philip Morris, American Express, AT&T, Coca-Cola, United Technologies and Hewlett-Packard.
The Dow's frontrunners included Boeing and Intel.
Boeing gained $2.88 to $59.63. The company (BA: news, msgs) said it expects higher cash flow -- more than $4 billion for full-year 2000 compared to previous estimates of $3 to $4 billion. See full story.
Meanwhile, United Technologies (UTX: news, msgs) said it will meet Wall Street's third-quarter and full-year consensus estimates despite the soft euro and a cooler-than-normal summer in many U.S. regions, which affected it Carrier unit. Moreover, the Dow-component said it sees earnings-per-share increasing by 15 percent in 2001. Shares slipped $1.88 to $60.75, giving up earlier gains.
The Nasdaq Composite ($COMPQ: news, msgs) added 31 points, or 0.8 percent, to 3,897 while the Nasdaq 100 Index ($NDX: news, msgs) rose 34 points, or 0.9 percent, to 3,790.
"The nearest resistance on the Nasdaq is at 4,000, and it would have to breach that level in order to rebuild the confidence," said Robert Dickey, chief technical analyst at Dain Rauscher Wessels. Otherwise, any upside should be chalked up as a bounce within a pullback, until a few more days can help to clear up the direction.
Among the big-cap tech stocks seeing some good action Wednesday: Intel, up 4.6 percent to $63.13; Dell Computer, up 5.7 percent to $38.38; Sun Microsystems, up 1.6 percent to $119.75 and Cisco Systems, up 1.6 percent to $63.
The Standard & Poor's 500 Index ($SPX: news, msgs) gave up 0.6 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks shed 0.4 percent.
Separately, volume was healthy at 1.10 billion on the NYSE and at 1.78 billion on the Nasdaq Stock Market. Market breadth was sloppy, with losers outnumbering winners by 17 to 11 on the NYSE and by 24 to 17 on the Nasdaq.
The day's movers
Biotech stocks were among the groups sustaining the Nasdaq's gains late in the session. The Nasdaq Biotech Index ($IXBT: news, msgs) shot up 2.2 percent. Merrill Lynch released a positive note on Biogen (BGEN: news, msgs), saying the stock has performed poorly over the past 6 months and now represents an attractive value. Shares rose $3.31 to $59.94. Amgen (AMGN: news, msgs) climbed $3.05 to $68.73.
Net stocks perked up after struggling earlier in the day on the heels of earnings concerns. The Goldman Sachs Internet Index ($GIN: news, msgs) managed a 0.6 percent gains while Merrill Lynch's Internet Holdrs (HHH: news, msgs) up 0.3 percent, driven by smart advances in shares of EBay (EBAY: news, msgs), up 16.6 percent to $76.56.
The telecom sector is having a shabby day indeed, with Merrill Lynch's Telecom Holdrs (TTH: news, msgs) off 3.5 percent. Sprint (FON: news, msgs) fumbled, shedding 5.1 percent, or $1.44 to $26.81.
Sprint said its third-quarter profit from operations will come in at 45 to 47 cents a share, short of First Call's 49-cent-a-share estimate. Additionally, Sprint said its PCS unit (PCS: news, msgs) won't add as many customers as expected. PCS lost 16 percent, or $6.19 to $34.63.
In earnings news, Lehman Brothers (LEH: news, msgs) posted third-quarter earnings of $3.37 a share, handily surpassing the First Call estimate of $2.75 a share and the $2.20 earned in the year-ago quarter. The company also announced a 2-for-1 stock split. Shares rose $3.19 to $147.88 after rallying 7.3 percent on Tuesday.
Goldman Sachs (GS: news, msgs), off 56 cents to $119.38, erased earlier gains. The company enjoyed a rally thanks to better-than-projected quarterly results on Tuesday. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) eased 1.2 percent while bank stocks came under some profit-taking and the S&P Bank Index ($BIX: news, msgs) shaved 2.0 percent.
Utility stocks have taken their lumps this week, with the Dow Jones Utilities Average ($UTIL: news, msgs) off 2.5 percent. The index, however, is up a heady 32 percent this year and the group has been among the best-performing ones in the market this year.
"People are trying to figure out where the group goes from here," said Paul Fremont, managing director at Jefferies & Co., of the sloppy action in utility stocks this week.
"On an interest-rate basis, the group is fairly valued. But on a price-to-earnings basis, these stocks are still cheap," Fremont commented. "Electricity prices have been strong and prospects for the group are decent."
On the merger front, ADC Telecommunications (ADCT: news, msgs) announced Wednesday it's snapping up privately-held Broadband Access Systems, a developer of cutting-edge Internet access technology, in a $2.25 billion stock deal. The transaction will lower fourth-quarter earnings by 2 cents and fiscal 2000 profit by 7 to 8 cents a share. See related story. ADC fell $3 to $31.88.
Treasury focus
Long-dated government issues slid, with the Fed's Beige Book report on economic conditions putting additional pressure on the fixed-income arena.
The central bank said economic growth, while still solid, has moderated from its breakneck pace. The Fed said climbing oil prices remain the biggest risk to economic prosperity going forward. See full story. Moreover, the central bank said reports of wage increases are widespread.
The 10-year Treasury was off 5/32 to yield ($TNX: news, msgs) 5.875 percent and the 30-year Treasury bond erased 14/32 to yield ($TYX: news, msgs) 5.95 percent. See Bond Report.
On the economic front, Wednesday saw the release of the July trade numbers, which registered a record deficit of $31.9 billion versus the expected $31.3 billion. The U.S. posted a shortfall of $29.8 billion in June. The numbers had only a mildly negative effect on currency prices while fixed-income prices shrugged off the data. See full story. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, the dollar sagged against the yen but gained more ground against the euro, which touched a new low of 0.8440. In recent dealings, dollar/yen (C_JPY: news, msgs) slipped 0.4 percent to 106.54 while euro/dollar (C_EUR: news, msgs) erased 0.4 percent to 0.8481. |
