N A R K E T .. S N A P S H O T -- Warnings keep scaring the buyers
Merrill's bad news to weigh; Fed meeting to begin
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 8:35 AM ET Jun 26, 2001
NEW YORK (CBS.MW) -- The drumbeat of earnings warnings keeps getting louder and has done a good job at keeping buyers in hibernation.
The futures markets are pointing to a sharply lower start for shares Tuesday, just as a two-day Fed meeting commences. Hopes that the central bank will maintain a steady diet of 50-basis-point eases have increased over the past couple of weeks, as economic data stubbornly shows no signs of a turnaround.
The Fed's decision is expected to hit the tape Wednesday afternoon. Key for the market will be what the nation's interest-rate setters have to say about economic conditions in their statement. Market players expect the central bank to maintain a so-called bias to ease.
September S&P 500 futures slipped a heady 11.50 points, or 0.9 percent, and were trading about 14.50 points below fair value. Nasdaq futures fell 39.00 points, or 2.2 percent.
Merrill Lynch saw its sharers tumble 8.2 percent in pre-market action.
The brokerage (MER) warned that weak market conditions will cause it to post lower-than-expected revenues and earnings in the second quarter.
Earnings per share are now seen coming in between 52 and 57 cents vs. the 82 cents that had been expected by First Call/Thomson Financial. Merrill said the past four weeks have been the weakest of the quarter, with second-quarter net revenues now expected to be roughly 15 percent lower vs. the first-quarter.
Merrill was impacted by a slump in equity trading revenues following reduced trading volumes and the impact of decimalization on spreads. Debt trading revenues were also weaker than expected, the firm said. Going forward, Merrill said the outlook for third-quarter revenues remains weak, adding that it's continuing with cost-cutting initiatives. The brokerage expressed confidence that it would meet stated 2003 targets.
Other brokers dropped in tandem, with Lehman Brothers off $2.15 to $74.70 in the pre-market.
Dow stock International Paper (IP) informed investors after the close Monday that it will slash about 3,000 jobs to decrease costs and to better align resources with the company's core businesses.
Treasury focus
Treasury investors also stayed cautious and prices were yet to gain mileage on expected weakness in the equity market.
The 10-year Treasury note edged up 2/32 to yield ($TNX) 5.12 percent while the 30-year government bond slipped 1/32 to yield ($TYX) 5.59 percent.
Tuesday's economic plate is a full one. May durable goods orders rose 2.9 percent vs. the 0.1 percent drop that had been expected by economists surveyed by CBS MarketWatch.com. Excluding transportation orders, durables rose 2.7 percent.
Still ahead on the data front: June consumer confidence, seen coming in at 114.4, and May new home sales, expected at 905,000. View Economic Preview and economic calendar and forecasts.
In the currency segment, dollar/yen inched down 0.1 percent to 123.75 while euro/dollar rose 0.4 percent to 0.8620.
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