<FONT COLOR=BLUE>MARKET SNAPSHOT--Nasdaq stages impressive comeback
Dow in the red in choppy activity
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 2:38 PM ET Oct 9, 2000
NEW YORK (CBS.MW) - Tech stocks staged a huge comeback Monday in a day of remarkable swings and swoons. The Nasdaq saw triple-digit losses early in the session as a selling spree enveloped the tech arena before bottom fishers emerged around midday to rescue the market.
"Without volume to accompany it, the morning sell-off didn't seem as heavy, even with triple-digit losses," said Ned Collins, head of trading at Daiwa Securities.
"I don't think Monday's activity will mean much, though. We need to see how the market fares when all the players are back Tuesday," Collins added. "We need time to repair [the damage.] September and October have historically been hard months for the market."
While Collins sees more downside to the market - he thinks more nervous players need to be shaken out - he also believes the year will end on an upswing. The demand side of the economy is still strong, he notes, as evidenced by recent economic data.
Inside the tech sector, Internet, networking and software shares paced the Nasdaq's rebound while the semis were the last to fight their way back into positive territory. Within the Nets, business-to-business shares were on a roll.
The broad market, meanwhile, saw the largest losses in the financial, airline and biotech sectors while retail, chemical, utility, oil and oil service companies gained ground. On Monday, November crude futures rose 51 cents to $31.37.
The Dow Jones Industrials Average ($DJ) was off 6 points, or 0.1 percent, to 10,590.
Moving on the downside were shares of AT&T and Boeing, Intel, General Motors, Microsoft, United Technologies and Procter & Gamble. Keeping losses in check were gains in shares of Alcoa, DuPont, Eastman Kodak, Hewlett-Packard and Philip Morris.
The Nasdaq Composite ($COMPQ) climbed 6 points, or 0.2 percent, to 3,367 after falling as much as 128 points at its nadir on Monday. The Nasdaq 100 Index ($NDX), meanwhile, added 34 points, or 1.0 percent, to 3,346.
"Over the past weeks we've been in pre-announcement purgatory," remarked David Powers, senior technology analyst at Edward Jones.
"It'll be hard to move higher before seeing the actual earnings figures from companies," Powers said. In addition, he believes both oil prices and the euro need to stabilize in order to regain the market's confidence.
The companies that haven't pre-announced, Powers continued, need to present solid results and give rosy guidelines for the fourth quarter. The silver lining, he said, is that the market hasn't yet heard the good news from companies but has been dwelling on the bad.
The Standard & Poor's 500 Index ($SPX) subtracted 0.1 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks shed 0.6 percent.
Volume was light at 545 million on the NYSE and at 1.09 billion on the Nasdaq Stock Market. Market breadth was again negative, with decliners leading advancers by 15 to 11 on the NYSE and by 24 to 13 on the Nasdaq.
Separately, Trim Tabs said U.S. equity funds saw inflows of $8.7 billion in the three days ended Oct. 5 -- with the bulk of the inflows taking place on Thursday. Dissecting those inflows, aggressive growth funds took in $3.1 billion while growth and income funds saw inflows of $2.4 billion.
Trim Tabs notes that many new offerings are in the pipeline and believes the potential overhang is one reason the stock market hasn't been able to get out of its own way. While the expected wave of issuance, coupled with unrelenting pressure from year-end tax selling by mutual funds, will weigh down the market in the short-term, Trim Tabs expects the tax selling to slow by the end of the week and remove some pressure.
Earnings watch
The market will likely receive a healthy dose of both reality and clarity over the next two weeks as the third-quarter earnings season heats up dramatically, according to Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
While several high growth areas are experiencing slower growth rates, Belski said it has more to do with the normal maturation process that every company or economy goes through.
"Almost everyone has decided that the third-quarter earnings season will be bad. But we find it interesting that areas like technology and telecom have not displayed the type of drastic downward earnings revisions that one may think considering the beating they have received in recent weeks," Belski said.
With many analysts having become very conservative over the past months, the magnitude and frequency of upward surprises may catch people off guard, he concluded.
This week will see the third-quarter earnings season begin in earnest. Three Dow components are on tap to unleash their quarterly results -- International Paper, General Motors and General Electric. As of Friday, the number of negative pre-announcements stood at 351, up 25 percent from the same time last year, according to First Call. Expectations for third-quarter growth in S&P 500 companies now stand at 15.9 percent versus the 18.8 percent growth rate expected on July 1, the earnings compiler added.
Sector movers
Chip stocks chiseled out a gain in tandem with the recovery in the broader market. The Philly Semiconductor Index ($SOX) was up 0.1 percent following a 6.1 percent fall last week. Among the chip stocks reporting this week are Motorola, Advanced Micro Devices, PMC Sierra, KLA-Tencor and Lam Research. The only downside movers within this group were PMC-Sierra (PMCS), off $1.94 to $197.13, and Motorola (MOT), down 75 cents to $27.
Powers said Motorola's earnings this week will be key as the company's a proxy for both the wireless and chip sectors - two areas of the market that have been under significant pressure of late.
Among the upside movers, Advanced Micro Devices (AMD) rose 69 cents to $22.69 while bellwether Intel (INTC) gained $1.25 to $38.69.
Meanwhile, Dataquest, a unit of Gartner Group, said the worldwide semiconductor industry in on track to post revenue in excess of $231.6 billion in 2000 - a 37-percent increase over 1999's revenue. Every major component category is reaching double-digit growth this year, Dataquest added, with the memory segment witnessing the most rapid rate of growth.
Electronic Data Systems climbed $5.63, or 13.8 percent, to $46.13. The company (EDS) was awarded an Intranet contract from the Navy Marine Corps valued at $6.9 billion over an eight-year period. The company enjoyed upgrades from both Merrill Lynch and CS First Boston.
Among EDS' competitors, Computer Sciences (CSC) erased $7.88, or 10.5 percent, to $69.19, General Dynamics (GD) edged down 56 cents to $59.88 while IBM (IBM) added 38 cents to $116.38.
The S&P Retail Index ($RLX) recovered a touch, adding 1.0 percent after falling 3.5 percent last week. But profit warnings continued to trickle in. Williams-Sonoma (WSM) said Monday that third-quarter earnings will come in at 4 to 6 cents a share, much less than the First Call estimate of 18 cents a share. The shortfall was blamed on lower-than-expected sales from catalogs, higher advertising costs and depressed margins. The stock lost $1.81 to $26.88 and was slapped with downgrades from Merrill, Bear Stearns, Prudential Securities, Deutsche Banc Alex. Brown and Stephens Inc.
Economic focus
The bond market was closed in observance of the Columbus Day Holiday. On Friday, the 10-year Treasury note ended up 14/32 to yield ($TNX) 5.80 percent while the 30-year bond put on 24/32 to close at a yield ($TYX) of 5.845 percent.
On the economic front, the week's highlights include the release of the September producer price index and retail sales report, both slated to hit the market on Friday. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen lost 0.1 percent to 108.77 while euro/dollar edged down 0.1 percent to 0.8672.
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