<FONT COLOR=BLUE>MARKET SNAPSHOT--11:22 PM--Nasdaq moves lower
Buying fizzles out; chip stocks drop
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 11:22 AM ET Oct 16, 2000
NEW YORK (CBS.MW) - The Dow Industrials held on to modest gains Monday while early Nasdaq gains were quick to fizzle as chip stocks took another beating ahead of some key earnings reports this week, including Intel's on Tuesday.
In the tech arena, chip stocks backpedaled significantly as a 9.8 percent drop in shares of Intel took the Philadelphia Semiconductor Index ($SOX) off 5.2 percent. Gains in the Internet and computer hardware segments weren't sufficient to counter the chip dumping.
Inside the broad market, oil and oil service shares sputtered as oil prices declined for a second straight session. November crude, in fact, erased 69 cents to $34.30. Bank stocks also came under pressure, but other areas of the market advanced, including retail, drug, utility, paper and biotech issues.
"While opinions differ on whether or not a capitulation occurred [last week], we are instead focused on the outperformance of the Nasdaq as an early sign that a preliminary stabilization is beginning to take shape," said Brain Belski, fundamental market strategist at US Bancorp Piper Jaffray.
Additionally, with two weeks to go before the end of the mutual fund tax year, Belski believes the bulk of the tax loss selling has already taken place.
"Most disappointing positions have already been dumped during the market's recent freefall in preparation for picking up new [stocks] that are expected to report solid earnings during the current crunch," Belski commented.
The Dow Jones Industrials Average ($DJ) added 11 points, or 0.1 percent, to 10,203, reversing the bulk of its earlier gains.
The Nasdaq Composite ($COMPQ) lost 41 points, or 1.2 percent, to 3,375 while the Nasdaq 100 Index ($NDX) lost 70 points, or 2.1 percent, to 3,207.
The Standard & Poor's 500 Index ($SPX) gave up 0.4 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks gained 0.3 percent.
Volume stood at 330 million on the NYSE and at 634 million in the Nasdaq Stock Market. Market breadth was mixed, with advancers matching decliners on the NYSE while winners beat losers marginally, by 18 to 16, on the Nasdaq.
Separately, Trim Tabs said U.S. equity funds lost about $9.5 billion in the three days ending Oct. 12 for a monthly rate of negative $69.7 billion. Aggressive growth funds witnessed outflows of $1.7 billion while $4.8 billion flowed out of growth funds. Tech funds saw outflows of $198 million - well below the record $437 million registered in the period ended Aug. 3, Trim Tabs said.
In the meantime, Trim Tabs has turned bullish, using the record outflows from equity funds as a contrary indicator. Further, corporate investors have been net buyers over the past few weeks as cash takeovers and buybacks have exceeded new offerings.
Deluge of earnings
An onslaught of earnings reports will hit the tape this week, with fifteen Dow companies set to report. It'll also be a big week for technology, with many heavyweights - including IBM, America Online, Texas Instruments, Microsoft, Intel, EMC, Apple Computer, EBay and Sun Microsystems -- unleashing their results.
The impact of all the negative pre-announcements for the third quarter was relatively mild, according to earnings compiler First Call said. In fact, expectations for S&P 500 earnings growth currently stand at 15.9 percent, down only modestly from the 18.8 percent anticipated at the start of the third quarter.
The real problem for the market, however, is what the recent steam of negative pre-announcements implies about fourth-quarter results and beyond, First Call said. Expected earnings growth for the S&P 500 technology sector has already been cut from 31 percent on Sept. 1 to the current 25 percent, far more than usual at this stage, First Call notes.
Sector movers
The oil sector got a dose of merger news, with Chevron confirming its purchase of Texaco in a $35.7 billion deal. Under the terms of the deal, Texaco shareholders will receive 0.77 shares of Chevron common stock for each Texaco share, which represents an 18-percent premium. Texaco (TX) gained $1.19 to $56.31 while Chevron (CHV) lost $3.88 to $80.38. Oil and oil service shares retreated, mirroring declines in oil prices for a second consecutive session following a spike on Thursday. The Philadelphia Oil Service Index ($OSX) lost 2.7 percent on Monday.
A couple of earnings reports emerged in the financial arena Monday in a week that'll be dense with releases in the sector. Financial stocks declined Monday, led by brokerage shares, as the Amex Securities Broker/Dealer Index ($XBD) lost 0.9 percent while the S&P Bank Index ($BIX) erased 0.5 percent.
In the meantime, Merrill Lynch's Judah Kraushaar had some cautious comments on the financial group, suggesting that investors remain exceedingly cautious on the sector and not build positions aggressively unless they are geared for the long term.
Downside risks to earnings relate to credit costs, reduced market-sensitive and spread-related revenues, possible hits on private equity stakes and reduced bank credit, Kraushaar said. Earnings estimates for 2000 and 2001 were lowered on Goldman Sachs, Lehman Brothers, Morgan Stanley Dean Witter and Citigroup.
In earnings news, Bank of America (BAC) posted a profit from operations of $1.31 a share in the third-quarter, surpassing the First Call estimate of $1.29 a share and the $1.23 earned in the year-ago quarter. The stock shed $1.19 to $45.38. And the Bank of New York (BK) reported third-quarter earnings of 49 cents a share, matching the First Call estimate and ahead of the 42 cents a share made in the year-ago period. The stock added $1.19 to $52.31.
In other earnings news, Continental Airlines (CAL) posted a third-quarter profit from operations of $2.24, beating the First Call estimate of $2.19 a share and ahead of the $1.44 earned in the year-ago quarter. The company rose 38 cents to $42.88. The Amex Airline Index ($XAL) shed 0.2 percent, erasing earlier gains, ahead of a busy reporting week for the group.
Treasury focus
Government prices slipped into the minus column for a second consecutive session. The 10-year Treasury note erased 5/32 to yield ($TNX) 5.75 percent while the 30-year bond have up 2/32 to yield ($TYX) 5.82 percent.
Fed Chair Alan Greenspan spoke early Monday on financial markets to an Atlanta Fed conference via video but made no reference to interest rates or the stock market. The Fed Chief will appear at the Cato Institute on Thursday to speak on monetary policy.
There will be lots of economic data to chew on this week, providing the market with information on the state of the U.S. economy. The highlights include the release of the September consumer price index, industrial production, capacity utilization, the August trade gap, September housing starts and the October Philadelphia Fed Index.
Monday saw the second-tier release of business inventories, which rose 0.7 percent in August. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, the dollar strengthened against both the yen and the euro. Dollar/yen gained 0.4 percent to 108.09 while euro/dollar dropped 1.0 percent to 0.8473. The latter has fallen for the fourth straight session and is now hovering over 1 percent below Sept. 21's closing level - the day before the joint intervention effort by the European Central Bank, Federal Reserve and Bank of Japan to prop up the fledgling currency.
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