MARKET TALK: Wealth Effect Still Looks Good
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
11:50 (Dow Jones) Greenspan believes the amount of capital gain in real
estate that has been extracted is small. Unrealized capital gains still
rising means wealth effect remains overwhelmingly positive. (JM)
11:45 (Dow Jones) August Fed funds down 1/2 BP as Greenspan Q&A continues.
Futures analyst says 25 BP cut still expected at August FOMC, but there's
"not much more built in beyond that." (SPC)
11:40 (Dow Jones) Greenspan says his economic outlook "does pre-suppose the
resurrection of measured productivity growth." (MSD)
11:38 (Dow Jones) Long-end Treasurys aren't getting much of a pick-up after
Greenspan's assertion that supply, not inflation, is behind their reluctance
to rally this year. Clearly Greenspan wants long rates to be lower to help
stimulate business and mortgage borrowing, and he's willing to dismiss
inflation fears as a reason that long-term rates are high. But can't make
the ultimate promise that would spark a rally: a promise that debt reduction
will continue indefinitely. (SV)
11:32 (Dow Jones) Greenspan remains optimistic on the role of new home
construction. Environment for construction is good and labor force is still
growing, fueling demand for housing - unlike Japan and Europe. (JM)
11:27 (Dow Jones) Two days before JDS Uniphase (JDSU) reports its fiscal 4Q
results, David Jackson, analyst at Morgan Stanley, cut his revenue targets
for JDS' fiscal 1Q and 2Q quarters, citing the drop in Nortel Networks' (NT)
long-haul optical systems business in the June quarter, and Nortel's
inventory of optical components. Jackson expects JDS to post 1Q revenue of
$400 million, down from company guidance of $450 million. He also lowered
his 2Q revenue estimate by $50 million to $400 million. Meanwhile, SG Cowen
suggested JDS' stock could suffer if Furukawa Electric sells some of its
stake in JDS to fund its share of the purchase of Lucent's (LU) optical
fiber business. (BED)
11:20 (Dow Jones) Softness in commodity prices is more a reflection of slack
industrial activity rather than the level of liquidity in the economy, and
there's little worry of deflation, Greenspan told senators. (MSD)
11:10 (Dow Jones) Score one for the new economy paradigm. Greenspan
reiterated his belief technological changes are boosting the underlying rate
of productivity and growth, and that those trends should continue even after
this difficult adjustment period. (MSD)
11:08 (Dow Jones) Sen. Bunning tells Greenspan that "I don't think we would
be having the problems we are now having if the Fed had acted sooner,"
adding that the last cut should have been 50 basis points, not 25. (JCC)
11:02 (Dow Jones) Standard & Poor's Lucent (LU) analyst Bruce Hyman has
recorded a voice mail message saying S&P will be issuing a statement on
Lucent later in the day. No indication whether this will involve any kind of
action or just an affirmation following earnings report. (CSE)
11:00 (Dow Jones) In response to probing from Sen. Sarbanes, Greenspan said
regarding monetary policy, "at the end of the day it does seem to be
effective" and that it's hard to sort out the effect of changes in short
term interest rates. (MSD)
10:56 (Dow Jones) Notify Technology (NTFY) received $4.5 million in proceeds
after completing a private placement of preferred stock and warrants. The
company said the proceeds from the financing enabled it to meet the net
tangible asset requirement set by Nasdaq for the continued listing of the
company's securities on the Nasdaq SmallCap Market. To maintain the listing,
Notify Tech must show minimum net tangible assets of $4.5 million in an SEC
filing, and its revised balance sheet, after the financing, showed about
$5.4 million of current assets. (CD)
10:47 (Dow Jones) More on Agere (AGRA)/Lucent (LU). Lucent says it might
hold a secondary offering of Agere shares if it's in the best interest of
its own shareholders, but keep one thing in mind: Investors didn't like
Agere at the time of the IPO, bidding down the stock out of the gate, and,
since that time Agere has announced its own profit warning. Also, many
Lucent shareholders had been counting on getting Agere stock - seeing the
potential in that unit as better than that of the parent. If the full
spinoff is shelved, investors might pour out of Lucent and just buy Agere
shares. (RJH)
10:39 (Dow Jones) Merrill's senior global debt strategist, Karim Basta,
switches his view for first time in two years on global inflation-protected
securities to bearish relative to nominal bonds. Cites dramatic change in
outlook for global inflation in last three months with "rapidly
deteriorating global economic climate" and commodities markets giving key
signals of declines in future inflation as indication inflation-protected
bonds may no longer outperform nominals. (JNP)
10:31 (Dow Jones) J.P. Morgan initiated coverage of Network Associates
(NETA) with a buy rating, in another sign the Internet security software
company has put a dark winter behind it. Analyst Sterling Auty praised the
company's new management team, and predicted a return to profitablity in the
3Q and 20% long-term growth. Auty put a $19 price target on the stock, which
recently traded at $13.91, up 7 cents. (RR)
10:22 (Dow Jones) Stocks deteriorating. Technicals take center stage -
Nasdaq right at pretty good support, DJIA close below 10400 could be an
issue. Just three Dow names closed higher Monday, and only three are higher
Tuesday - Honeywell, McDonald's, and Intel. Telecoms, biotechs hit,
insurance names hold up OK. Greenspan Q&A shortly. DJIA off 73 at 10351,
Nasdaq Comp eases 14 to 1974, and S&P 500 drops 6 to 1182. (TG)
10:13 (Dow Jones) Note to dollar bulls: Don't despair the softer USD versus
the majors today, says a trader. It's "no problem to have a correction" as
USD's astronomical price has been "punitive." A more economical currency
just sets the greenback up for a steady move higher. (JEN)
10:09 (Dow Jones) With the FDA approval of Mylan Laboratories' (MYL) generic
Taxol, UBS Warburg analyst Steve Valiquette has a better feel for the
competitive landscape for the generic anticancer therapy. He is boosting his
generic Taxol sales estimates of Ivax (IVX), the first in the field, which
has enjoyed several months of selling the only generic on the market. He
added $25 million in sales a year to $275 million for 2001 and to $325
million for 2002. "Due to higher paclitaxel sales, coupled with accretion
from Lab Chile in the second half of 2001, we are raising our
earnings-per-share estimates by a dime annually to $1.10 in 2001 and $1.30
in 2002," he says. He also set a new price target at $47, up from $40.
Shares up 2.3%. (BMM)
10:01 (Dow Jones) Greenspan's prepared remarks to the Senate Banking
Committee are identical to those delivered last week before a House panel.
(FL)
9:58 (Dow Jones) It probably won't get the attention that another of his
price-target calls on Amazon (AMZN) did - think $400 - but Merrill's Henry
Blodget cut his objective on the shares to "about $20" from $20-$25. Cuts
long-term revenue growth to 15%-20% from 20%, but says potential catalysts
include seasonally strong 4Q and revenue re-acceleration beyond 4Q. Says
cash position fine. Shares off 20% at $12.68. (TG)
9:53 (Dow Jones) When Greenspan goes before the Senate Banking Committee
this morning, he's not likely to change the message of last week. But he may
well face tougher questioning from the likes of Sen. Sarbanes, D-Md., and
Sen. Bunning, R-Ky., both critics of Fed conduct. The structure of the
committee may allow them more time to draw the chairman out. (MSD)
(END) DOW JONES NEWS 07-24-01
11:51 AM
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