DJ MARKET TALK: Fed May Go 75 BP, But Do Nothing Early (doh)
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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MARKET TALK can be found using code N/DJMT
1:43 (Dow Jones) There's no question Fed needs to do "at least 50 BP,
possibly 75 BP" rate cut, but other economic data showing some signs of
stabilization could sway Fed from doing inter-meeting move and instead do 75
BP at May meeting, says Banc One head of research, Dana Johnson. (SPC)
1:39 (Dow Jones) Volatility associated with Bank of America's (BAC) options
escalated Friday, noted paul Foster, 1010WallStreet.com's option strategist.
This indicates investors expect the stock to be volatile as many worry about
its loan exposure to Pacific Gas & Electric, the troubled California utility
and unit of PG&E Corp. (PCG) that filed for bankruptcy. With BankAmerica
down $2.45 to $49.40, the implied volatility of the April 45 puts jumped
from about 46% Thursday to about 75% most recently. (KXT)
1:27 (Dow Jones) Motorola (MOT) down 20% to new lows on heavy trading amid
concerns about its FY01 outlook when it reports 1Q Tuesday. CSFB warns that
because of "continued weakness in the company's key businesses" its expects
the consensus FY EPS target to be sharply reduced. CSFB says "worst case"
scenario is breakeven EPS for year on revenue of $34B-$34.5B. The current
First Call estimates are EPS of 14c on revenue of $36.9B. (MLP)
1:22 (Dow Jones) Here's a study the Market Talk staff would have liked to be
a part of. Deutsche Banc surveyed 130 bars and 1,300 beer taps in Manhattan
to gauge which brewer dominates the lucrative tap business. The winner? The
self-proclaimed "King Of Beers," Anheuser-Busch (BUD), concludes beverage
analyst Marc Greenberg. A-B's Budweiser and Bud Light brands, the survey
says, lead all other domestic brands with 50% tap penetration. Coors Light
has 18% and Miller Lite has 7%. Why is all this important? More than
one-fourth of total beer sales and 46% of retail profits come from such
"on-premise" channels. (CEG)
1:17 (Dow Jones) Thursday's announcement of vendor financing valued at $25M
to California competitive telecom carrier Pac-West (PACW) is "a validation
of the company's business model," says UBS Warburg analyst Glenn Waldorf.
But uncertainty surrounding the policy of reciprocal compensation to
start-up carriers will pressure the stock, he adds. Waldorf rates Pac-West
at hold. (CBN)
1:10 (Dow Jones) Implied volatility associated with Motorola (MOT) spiked
Friday - a sign investors expect a big move. The company will report
earnings next Tuesday and at least one analyst had said he expected Motorola
to miss reduced estimates. Volatility associated with the at-the-money April
12.50 puts jumped to 100% from about 67% Thursday. (KXT)
1:07 (Dow Jones) June S&Ps continue to come off of lows. "We really
recovered fast," one floor trader says. "You can see people wanted to bid it
up." June S&Ps still sharply lower, but only a few points from where they
were trading prior to the PG&E news. (DMC)
1:00 (Dow Jones) Greenspan, delivering a speech at a conference organized by
the Fed, avoids any discussion of what steps the central bank might take in
the next few months to keep the economy out of a recession. He confines his
remarks to the need for better financial education in an increasingly
high-tech economy. (FL)
12:57 (Dow Jones) Record outflows from U.S. stock funds are expected for
March. After getting by February with a modest net inflow of $1.3 billion,
such funds are likely to face hefty outflows, which TrimTabs.com estimates
as $22.1 billion and Merrill Lynch sees as in "the low teens." "It appears
that investors have started to finally give up on this battered market,"
Merrill analyst John Lloyd says. (YXH)
12:49 (Dow Jones) June S&Ps fell to limit down level of 1128.00, 27 points
lower, putting a 10-minute trading curb in effect. Market moved to limit
down as PG&E's Pacific Gas unit said it filed for bankruptcy. (DMC)
12:46 (Dow Jones) Stocks bouncing back slightly after setting new lows
around the time that Pacific Gas & Electric's Chapter 11 news broke.
Nonetheless, the mood is still quite different from Thursday. Every DJIA
component but Johnson & Johnson, Philip Morris and Wal-Mart is in the red.
DJIA losing 159 at 9758, and Nasdaq Composite off 53 at 1731. (GS)
12:40 (Dow Jones) PG&E's beleagured Pacific Gas unit files for Chapter 11 in
California. The company said it is taking this action in light of its
unreimbursed energy costs, which are now increasing by more than $300
million per month, "continuing CPUC decisions that economically disadvantage
the company, and the now unmistakable fact that negotiations with Governor
Gray Davis and his representatives are going nowhere." PG&E remains halted
on the NYSE. (GS)
12:31 (Dow Jones) Stock futures are quiet at midday, waiting for comments
out of Greenspan. "It seems that people are still afraid to get in the long
side without any conviction, but they still want a bottom," one trader says.
(DMC)
12:26 (Dow Jones) Bear Stearns senior economist Wayne Angell giving better
than 50% odds the Fed will cut interest rates before its May 15 meeting.
That's down from the 80% odds Angell gave for a cut before the Fed's last
meeting - a prophecy that caused a stir, lifted stocks, but didn't pan out.
Angell, a former Fed governor, feels the Fed should cut by 100 basis points,
but would settle for 50. (KJT)
12:18 (Dow Jones) Shares of French software company Infovista (IVTA) are
falling 36% Friday after it made cautious comments about the U.S. market.
The company said the U.S. economic slowdown has resulted in a lengthening of
the order cycle and the delayed signing of a few customer contracts. The
company said it has experienced growth in its European revenue and newer
international units, but it wasn't sufficient to offset delays in the U.S.
market. (CAL)
12:05 (Dow Jones) Is technology the sore spot for the S&P 500 Index in 2000
and so far this year? The S&P 500 has fallen 13% as of April 5, but without
technology and communications, it would be down 6%, according to Merrill
Lynch's derivatives team. Tech stocks have lagged drastically this year -
down 25% year to date - while communications stocks have held up, falling
just 1%, according to a Merrill note. (KXT)
11:56 (Dow Jones) Henry Paulson Jr., the chairman and chief executive of
Goldman Sachs Group (GS) weighed in on the SEC's Regulation Fair Disclosure
at the firm's annual meeting in New York on Friday. When asked how he felt
about the rule, which prohibits companies from sharing important information
with only a select few, Paulson responded that it was "well-intended" but
has had a negative effect by contributing to market volatility. "There is
not the free flow of information," he said. (CWM)
11:49 (Dow Jones) As Silicon Valley Bancshares (SIVB) continues to bounce
back (while other banks flag), an option investor opened a bullish position
by selling just out-of-the-money May 20 puts. The bank had jumped 19% since
Wednesday after it announced a share buyback and stood by 1Q estimates that
would meet or beat consensus. With stock at $21.50, the investor sold May 20
puts for about $200 a contract, either not expecting the stock to fall below
$20 by mid-May or willing to buy stock at that price. At the CBOE, 2,000
contracts traded, compared with open interest of 613. (KXT)
11:43 (Dow Jones) The Nasdaq Composite, now around 1736, failed to test
short-term breakout resistance at 1776.11 earlier this morning, a sign that
the index is likely to back down into 1600 handle. The 1675-1670 support
band could be particularly active. If 1776.11 resistance is decisively taken
out, it's reasonable to look for 1950 by next week. (SC)
(END) DOW JONES NEWS 04-06-01
01:43 PM
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