<FONT COLOR=BLUE>MARKET SNAPSHOT--4:24 Dow slammed by Kodak warning
Sellers also pounce on tech sector
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:24 PM ET Sep 26, 2000
NEW YORK (CBS.MW) - The Dow Industrials ended deep in the red on heavy volume Tuesday as a 24.6 percent drop in shares of Eastman Kodak following the company's profit warning put another chink in the market's armor.
The Nasdaq made repeated attempts to claw its way into positive territory but sellers had the last word each time. All tech sectors were in the red, with chip stocks the last to fall into the minus column in afternoon trading. Net and computer hardware stocks suffered the greatest damage.
The broad market saw positive action only in the oil and utility sectors - this year's star performers. The climb in oil stocks came even as November crude ended lower for the fourth straight session, shedding 11 cents to $31.46 - its lowest close since late August.
"We saw a selling climax and mini reversal on Friday and we're now testing the market's mettle. So far, we're failing this test," observed Al Goldman, chief strategist at A.G. Edwards.
"We're stuck in a range. What the market does one day it reverses the next," remarked Charles Pradilla, chief investment strategist at SG Cowen & Co.
The major averages, he said, need to digest the upcoming earnings news. And it needs to become clear that the U.S. economy is indeed heading for a soft landing in order to see sustainable advances.
"There are too many time bombs going off right now. The market is [still busy] correcting the excesses," Pradilla concluded.
The Dow Jones Industrials Average ($DJ) tumbled 175 points, or 1.6 percent, to 10,632 - just 17 points above its nadir Tuesday.
Kodak (EK) said third-quarter earnings will come in 20 to 25 cents short of the previously-expected range of $1.56 to $1.66 a share. The First Call estimate for third-quarter earnings pare share stood at $1.60. Slumping sales were unable to offset pressures from a rising dollar and increased raw material costs, among others. Shares dropped $14.38 to $44.63. The stock was hit by downgrades from PaineWebber and CS First Boston.
Microsoft (MSFT) added 1.5 percent to $61.88 and rose as high as $65.88. The upward jolt was sparked by a U.S. Supreme Court decision to send Microsoft's antitrust case back to a lower appeals court, which will delay efforts to break up the software giant.
Aside from Kodak, the Dow's downside leaders included Intel, IBM, Wal-Mart, Home Depot and DuPont. Moving higher were shares of Boeing, Coca-Cola and McDonald's.
Goldman believes the market is now oversold, with too much attention placed on the euro, earnings warnings and energy prices.
Tackling each of the market's chief worries these days, Goldman said: "The price of oil has topped out. The euro may not have bottomed out but it's close [to doing so] and it's also old news." He believes that, despite some high-profile misses announced over the past weeks, earnings growth will be solid - at 15 percent for 2000 and at 12 percent in 2001.
The Nasdaq Composite ($COMPQ) slumped 51 points, or 1.4 percent, to 3,689 while the Nasdaq 100 Index ($NDX) shaved 38 points, or 1.1 percent, to 3,583.
The Standard & Poor's 500 Index ($SPX) edged down 0.8 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks fell 1.1 percent.
Separately, trading was heated with 1.10 billion shares changing hands on the NYSE and 1.79 billion trading on the Nasdaq Stock Market. Breadth was negative, with losers outnumbering winners by 16 to 12 on the NYSE and by 26 to 14 on the Nasdaq.
Sector movers
Chip stocks slipped after attempting a recovery earlier in the session as Intel continued to sing the blues. The Philadelphia Semiconductor Index ($SOX) edged down 0.2 percent, falling for the fourth straight session, gaining 1.9 percent. Micron Technology (MU) climbed 7 percent to $50 and National Semiconductor (NSM) gained 4 percent to $41.69. But Intel (INTC) slumped $1.38 to $45.13.
The computer hardware sector was hurt by a profit warning from Lexmark International (LXK). The company said that third-quarter earnings will come in at 45 to 50 cents a share, less than the 60 cents anticipated by First Call. And fourth-quarter earnings are likely to check in at 55 to 65 cents per share versus the Wall Street estimate of 80 cents a share. Lexmark blamed the shortfall on the reduced forecast of inkjet cartridge sales and weakness in European currencies. Shares plunged $13.88, or 26 percent, to $38.13. Dow-component Hewlett-Packard (HWP), slipped 50 cents below Monday's official NYSE close to $100.81. The Goldman Sachs Computer Hardware Index ($GHA) subtracted 2.0 percent. SG Cowen reiterated its "strong buy" recommendation on H-P, viewing any weakness from the Lexmark warning as a buying opportunity.
Internet issues took a hit Tuesday, with Merrill's Internet Holdrs (HHH) off 2.3 percent. The greatest struggles were seen in shares of Priceline.com, down 11 percent to $18.25, and CMGI, off 7.5 percent to $30.38. Business-to-business stocks were also under the gun, led by a 17 percent plunge in shares of Internet Capital Group (ICGE) and a 12.5 drop in VerticalNet (VNTR). See related Pulse item.
The retail sector came under additional pressure on Tuesday following a profit warning from Guess (GES) after the close on Monday. The company said it expects third-quarter earnings-per-share of 35 to 38 cents, well below the First Call consensus estimate of 44 cents a share. Guess said extraordinary competition hurt sales and said the fourth quarter is also at risk. The S&P Retail Index ($RLX), of which Guess is not a component, however, declined 3.2 percent. Among other decliners in the group were shares of Home Depot (HD), off 2.9 percent to $53.06, J.C. Penney (JCP), down 2.1 percent to $11.81, and Wal-Mart (WMT), off 1.9 percent to $48.06.
"Retailers are now more publicly noting the deleterious impact that high energy costs are having on consumer spending," said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. In its weekly sales update, for example, Wal-Mart said sales may have been impacted by higher gasoline prices and the fear of higher winter heating costs with customer frequency visits falling.
Earnings news
Micron Electronics (MUEI) posted fourth-quarter earnings of 24 cents a share, handily beating the First call estimate of 9 cents a share. The company earned 14 cents in the year-ago quarter. But the stock fell 75 cents to $11.63.
Palm (PALM) climbed 6.8 percent to $55.81. The company said late Monday that it earned 4 cents a share versus the 2 cents made in the year-ago quarter. First Call had estimated the company to make 2 cents a share.
Cabletron Systems (CS) gave up $1.38 to $32.13 after a nice run-up on Monday ahead of its earnings report. The company revealed late Monday that it made a penny a share in the second quarter versus an expected loss of a penny a share, per First Call.
National Discount Brokers (NDB) reported a first-quarter loss from operations of 6 cents a share, less than the First Call estimate of a loss of 8 cents a share. The stock shed 50 cents to $31.50. Among other online brokers, Ameritrade (AMTD) slumped 25 cents to $17.25 and E-Trade (EGRP) fell 38 cents to $17.75. The Amex Securities Broker/Dealer Index ($XBD) declined 2.0 percent while the S&P Bank Index ($BIX) edged down 0.5 percent.
Treasury focus
Government issues chiseled out a gain as equities weakened substantially.
The 10-year bond added 9/32 to yield ($TNX) 5.81 percent while the 30-year Treasury bond gained 15/32 to yield ($TYX) 5.855 percent.
The day's dose of economic news came in the form of September consumer confidence, which rose to 141.9 versus the 140.8 level reported in August. Expectations for the September figure stood at 141.6.
"The small rise in the index probably reflects the rise in stock prices through August. Hence, there is a good chance of a small decline next month. The trend in consumer confidence remains more or less flat -- there is no sign of the concern about the economic outlook evident in industrial surveys," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Wednesday will see the release of August durable goods orders, seen rising by 2.4 percent, according to a survey of economists conducted by CBS MarketWatch.com .View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency sector, euro/dollar showed more signs of stabilizing after its recent freefall, climbing 0.9 percent to 0.8818. Expectations that the European Central Bank will again intervene to bolster the embattled currency kept the shorts at bay. Dollar/yen, meanwhile, lost 0.2 percent to 107.57.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
