<FONT COLOR=BLUE>MARKET SNAPSHOT--%:26 PM--Nasdaq ends at 4-month lows
Biotech, chip and Net stocks slide
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 5:24 PM ET Oct 2, 2000
NEW YORK (CBS.MW) - It was another dismal day for the Nasdaq Composite Monday as a drop in Internet and biotech stocks pushed the downtrodden index to its lowest closing level since May 31.
"Many of the big Nasdaq stocks, such as Dell Computer, Microsoft, WorldCom and Intel, are rolling over," said Donald Selkin, chief market strategist at Joseph Gunnar.
Selkin believes solid earnings numbers in the third quarter may help to resurrect the major averages from their doldrums.
"The market is still in 'reactive mode,' a trend that will bring only more volatility as the fourth quarter unfolds," commented Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
"The third quarter earnings season will actually surprise some as to its prowess [since] the fundamental warnings of the past three to six months have potentially made analysts and companies alike more conservative in their expectations going forward," Belski continued.
Inside technology, all sectors ended in the red, with chip and Internet issues -- led by the business-to-business segment -- pacing the decline. The broader market saw the steepest losses in the biotech sector while financial and utility shares plowed ahead. Oil shares also enjoyed an upswing Monday, buttressed by a $1.34 jump in crude oil futures to $32.18. A Central America hurricane sparked fears of a possible disruption in Gulf of Mexico production.
The financials and utilities have been among the best performing sectors in 2000. The latter has outperformed the market by over 50 percent, according to Lehman Brothers' Jeffrey Applegate. This, he noted, is a complete about face from last year, when the two groups were among the worst performers.
This massive sector rotation, Applegate continued, has led to fairly sizeable valuation shifts, with healthcare, energy, utilities and consumer staples the most expensive groups on a price/earnings-to-growth basis. Technology was sixth on the roster.
The Dow Jones Industrials Average ($DJ) gained 49.21 points, or 0.5 percent, to 10,700.13 after rising as much as 71 points at its intra-day peak.
Moving higher were shares of American Express, Coca-Cola, General Motors, Exxon Mobil, IBM and J.P. Morgan.
Capping further gains in the Dow were losses in shares of Boeing, Intel, International Paper, Alcoa and Wal-Mart.
Boeing (BA) shaved 9.4 percent, or $6.06 to $58.44 after seeing its shares cut to a "neutral" rating from an "outperform" by Lehman Brothers. In a note to clients, Lehman said the stock is fully valued on aggressive earnings-per-share estimates, adding that the loss of Boeing's 30-year 747 monopoly adds risk to the company's earnings outlook.
Caterpillar (CAT) ended up 50 cents from its official NYSE close to $34.25 even after it warned late Friday that third-quarter earnings would be roughly 15 percent below the Wall Street consensus estimate of 68 cents a share due to euro and pound weakness, higher energy costs, and severe price pressures, among others. But Caterpillar confirmed its outlook for 2000, which was unveiled in July.
IBM was among the blue-chip barometer's frontrunners, adding 4.6 percent to $117.81. Sanford Bernstein said Big Blue might introduce its new mainframe computer Tuesday with material shipments to begin in the fourth quarter.
The Nasdaq Composite ($COMPQ) lost 103.92 points, or 2.8 percent, to 3,568.90 while the Nasdaq 100 Index ($NDX) shaved 112.64 points, or 3.2 percent, to 3,457.97.
The Standard & Poor's 500 Index ($SPX) was off 0.28 point while the Russell 2000 Index ($RUT) of small-capitalization stocks gave up 1.9 percent.
Volume came in at 1.03 billion on the NYSE and at 1.78 billion on the Nasdaq Stock Market. Breadth was negative, with losers pouncing on winners by 17 to 13 on the NYSE and by 27 to 14 on the Nasdaq.
Earnings outlook
As of Friday, third-quarter profit warnings totaled 257, up 25 percent from last year's levels, according to First Call. Still, though warnings were more numerous than usual, the magnitude of the downward revisions was fairly modest, the earnings compiler noted. Expectations for third-quarter earnings currently stand at 16.3 percent, down from the 18.1 percent expected on July 1.
The week's earnings news will be punctuated by reports from Micron Technology, Pepsico, Nautica, Net2Phone and Alcoa.
Separately, Trim Tabs said market liquidity turned negative due to the $7.5 billion in new offerings and the $1 billion in outflows from U.S. equity funds over the five days ended Sept. 28. And new offerings aren't about to let up, with another $7.5 billion or so scheduled for this week, according to CommScan. Trim Tabs remains cautiously bearish on the market even after four straight weeks of lower stock prices.
"Fund redemptions are not yet big enough to signal a sentiment reversal often seen at the end of a down leg. However, stock buybacks and new cash takeovers are improving and those are often early indicators [of a turnaround]," Trim Tabs said.
Sector movers
Biotech stocks suffered the largest setback on Monday, with the Amex Biotech Index ($BTK) off a steamy 7.5 percent. A drop in shares of MedImmune was among the culprits as the stock contended with a downgrade from Banc of America Securities to a "market performer" from a "buy" rating. The firm also cut its 2001 earnings-per-share estimates to 75 cents from 86 cents and to 98 cents a share from $1.15 in 2002. Shares (MEDI) tumbled 26.5 percent, or $20.50 to $56.75.
Computer hardware stocks fumbled after witnessing a short-lived recovery early in the session following Friday's bloodletting. But Apple Computer's profit warning late Thursday continued to weigh on sentiment and the Goldman Sachs Computer Hardware Index ($GHA) ended off 0.6 percent. Apple Computer (AAPL) shed $1.50 to $24.25, Dell Computer (DELL) lost $1.56 to $29.25 and Hewlett-Packard (HWP) stumbled by $3.19 to $93.81.
But Gateway (GTW) managed a 53-cent gain to $48.78 and Compaq (CPQ) gained 49 cents to $28.29. Banc of America Securities analyst Kurtis King said Friday's sell-off in the PC group could represent a bottom. "The shift to positive information flow in the coming weeks should lead to a rebound for the well-positioned names," the analyst told clients. Compaq and Gateway, he said, look like the best near-term PC trades.
In the latest merger news enveloping the financial sector, FleetBoston Financial Corp (FBF) announced Sunday it's acquiring Summit Bancorp (SUB) in a stock deal worth $7 billion in order to gain a greater foothold in New Jersey and in the metropolitan New York area. FleetBoston fell 50 cents to $38.50 while Summit added $3.75 to $38.13. Financial stocks recovered nicely after trading lower early in the session. The S&P Bank Index ($BIX) gained 1.4 percent while the Amex Securities Broker/Dealer Index ($XBD) added 1.0 percent.
In earnings news in the retail sector, Walgreen said its fourth-quarter profit from operations came in at 19 cents a share, in line with the First Call consensus estimate. Shares (WAG) fell 81 cents to $37.13. And Great Atlantic & Pacific Tea said second-quarter losses amounted to 14 cents a share versus the First Call estimate of a 16-cent loss. The stock (GAP) was off 50 cents to $10.56 Both stocks are components of the S&P Retail Index ($RLX), which gave up 2.4 percent.
See for post-market trading activity.
Treasury focus
Long-dated Treasurys slid, with the 30-year bond bearing the brunt of the selling pressure. The 10-year bond fell 1/8 to yield ($TNX) 5.83 percent while the 30-year Treasury bond fumbled 22/32 to yield ($TYX) 5.925 percent. .
The Federal Reserve will meet on Tuesday to decide the fate of short-term interest rates. But the upcoming meeting hasn't kept Wall Streeters awake at night with virtually no one anticipating a change to the current fed funds rate target of 6 1/2 percent. The central bank hasn't tweaked short-term rates since its rare 50-basis-point hike on May 16.
"The Fed's [recent] public comments point to the likelihood that they will vote to maintain their bias toward higher interest rates when they meet again on Tuesday," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co.
"This should not be too surprising in light of the fact that the U.S. economy has only recently begun to slow from the torrid pace seen in recent quarters. The Fed would probably like to see at least two quarters of moderate growth before sounding the all-clear on monetary policy," Crescenzi concluded.
On tap on the economic front Monday was the September National Association of Purchasing Management Index, which came in at 49.9 percent, little changed from the August reading of 49.5 percent. The prices paid component rose to 58.1 percent from the previous reading of 56.2 percent.
Also out: August construction spending, which rose 1.4 percent, well ahead of the consensus forecast.
Tuesday will see the release of August new homes sales, seen coming in at 901,000. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the dollar saw its value rise against both the yen and the euro. In recent dealings, dollar/yen edged up 0.7 percent to 108.84 while euro/dollar gave up 0.9 percent to 0.8762.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
