MARKET TALK: Might Be OK To Short This Dull Market
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
11:12 (Dow Jones) Lehman technician Jeff deGraaf is well aware of the "never
short a dull market" axiom, but says the application is more precise on
tests and bottoms than in struggling markets like this one at resistance.
The failing momentum developing over past few days is pushing a little
harder, and "virtually all of our intermediate technical indicators suggest
a weak environment for the next several weeks, and we are playing
accordingly." (TG)
11:04 (Dow Jones) HSBC thinks the Fed will only go 25 BP on Tuesday based on
the better economic data and less favorable inflation data. (MSD)
10:50 (Dow Jones) On an average weighted basis, Fed funds futures are
pricing a 57.5% chance of a 50 BP cut on Tuesday, down from 73% on
Wednesday, says Poser Global Market Strategies. (MSD)
10:42 (Dow Jones) There are thousands of potential acquisition targets among
the current crop of private, venture-backed firms, but most will probably
end up out of business, according to VentureWire. Of the 2,507
capital-hungry firms in VentureWire's data base, "a relatively small
proportion have already closed their doors, while the rest are tightening
their belts, trolling for capital, adjusting expectations, and quite often
looking for an acquirer at fire-sale prices," says VentureWire publisher
Brian O'Connell. In the first third of 2001, M&A activity among private,
VC-backed companies slid 28% to 347 deals. (JAW)
10:30 (Dow Jones) Here's an unabashed recommendation from Merrill Lynch.
Universal Compression Holdings (UCO), a natural gas services company, is a
"great buying opportunity" following shares' 20% decline over the past week,
says analyst Kevin Simpson. "The strong growth fundamentals that underlie
our buy recommendation remain very much intact," Simmons says. (KJT)
10:22 (Dow Jones) With quote of about 95.71 to 95.72, economist says May Fed
funds pricing in roughly 70% to 75% chance Fed cuts by 50 BP next week. July
Fed funds at 96.05 to 96.04 said to be looking at about 15% of another 25 BP
by July vs. about 30% before Michigan number. (SPC)
10:19 (Dow Jones) Investors have to be happy with the latest rumor
concerning the fate of Schering Plough (SGP). The stock climbed over 7%
following a report in Business Week that Merck (MRK) is looking to acquire
the pharmaceutical company. Schering denies company is for sale. (SPJ)
10:10 (Dow Jones) You could almost see this coming. Stocks taking hit after
Street digests sentiment numbers and the impact the cheery results may have
on Fed policy. DJIA now off 63 at 10846, Nasdaq off 10 at 2119, and S&P 500
off 2 at 1252. (TG)
10:03 (Dow Jones) EUR/USD has now seen new lows for the day at $0.8747. The
yen is firm on the EUR/JPY cross at Y106.90, as cross-trading dominates the
market. USD/JPY is at Y122.10; EUR/USD at $0.8755. (JRH)
9:58 (Dow Jones) Stocks getting moderate lift from decent reading on
sentiment. DJIA up 3, Nasdaq up 9, S&P 500 up 4. Watch to see if stocks
reverse, though, as this is further evidence that Tuesday may be it for Fed.
Of course, most folks would see that as good news. (TG)
9:54 (Dow Jones) The smiles are coming back. The Univ. of Michigan Consumer
Confidence Index rose to 92.6 vs. 88.4 in April. Current conditions stood at
102.1 mid-May vs. 98.0 the prior month, and expectations were at 86.5 after
82.2 in April. (MSD)
9:48 (Dow Jones) Lehman Brothers (LEH) has gotten another vote of confidence
from analysts. On Friday, Jim Mitchell of Putnam Lovell Securities lowered
2001 and 2002 earnings per share estimates for brokerages, including Lehman,
but he expects Lehman will hold up better than expectations, given
meaningful market share gains. On Monday Merrill Lynch analyst Judah
Kraushaar lowered estimates on the brokers as well, but left Lehman
unchanged, saying it was a special case because of its market share gains.
(CWM)
9:40 (Dow Jones) In his annual meeting with analysts on Thursday, IBM chief
executive Lou Gerstner said the company's largest single business, services,
makes it more recession proof than competitors. The characterization was a
little too upbeat for Kevin McCarthy, of Credit Suisse First Boston. "We
continue to believe IBM will not emerge unscathed from the current worldwide
slump in Information Technology spending," McCarthy says. (KJT)
9:36 (Dow Jones) Unemployment is up, and there are now some unofficial, yet
practical, signs that these people will have a tough time finding new jobs.
The Washington Post Co.'s (WPO) flagship newspaper saw a 26% decline in help
wanted ads over the first three months of this year, and expects a 38% drop
for April and the first week of May compared to last year, according to the
paper. (RJH)
9:32 (Dow Jones) Clarence Chandran's resignation as chief operating officer
of Nortel Networks (NT) for medical reasons won't likely come as a big
surprise, since he is already on medical leave. But the decision by John
Roth, Nortel's CEO, to retire next April is a different story. With Nortel
struggling to overcome a major slowdown in its network equipment business,
the departure of Chandran and Roth "creates uncertainty, during a time when
you want leadership and you want certainty," says Mike Urlocker, analyst at
UBS Warburg. Roth wasn't available for comment, but in an internal e-mail to
employees, Roth said the company "expects to have more than enough time to
identify a new CEO and to manage the transition" before he retires in April
2002. (BED)
9:28 (Dow Jones) Lehman says the retail sales and PPI data increase the
chance of a 25 BP cut, compared to the 50 BP everyone's currently looking
for Tuesday. (MSD)
9:26 (Dow Jones) Merrill Lynch pared back its J.P. Morgan Chase (JPM) '01
and '02 EPS forecasts to $3.40 and $4.70 from $3.55 and $4.80, respectively,
given continuing revenue pressures. Still, it reiterated its short-term and
long-term buy ratings on the shares. "The environment remains tough, but
merger execution and cost-cutting are key positives," says analyst Judah
Kraushaar, noting that JPM is one of the most "undervalued" stocks the firm
follows. (TAS)
9:21 (Dow Jones) Junk bond inflows hit another 3-month high this week, at
$556 million, said AMG Data Services. Investors credited Fed rate cuts and
the recovery in stocks. But whether it will continue is unclear, says
Federated Investors fund manager Mark Durbiano, adding, "the short-term
economic picture will dictate." (RTB)
9:17 (Dow Jones) The Nasdaq Composite Index may close above 2200 in the
coming days, but then faces an almost Herculean effort to get past 2300, one
technical analyst says. The index, which closed Thursday at 2128, faces
resistance at levels of failed rallies past, says Michael Krauss of JP
Morgan Securities. These points include 2244, which was the early March
high; 2252, the January low; 2256, which is a retracement of 50% of this
year's drop; and 2260, the high point of a former range. (KJT)
9:04 (Dow Jones) Producer food prices rose by 0.6%. They have been up
sharply this year and this is a pressure that should pass to CPI quickly.
Energy prices were only up 0.1%. That's because sharp increases for gasoline
and fuel oil were offset by large decline in natural gas prices. Natural gas
has since risen. Core prices rose mainly because computer prices were up
1.5% after being down 5.9% in March. (TG)
(END) DOW JONES NEWS 05-11-01 |
