MARKET TALK: Housing Holds Up, But Off Peaks
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
10:04 (Dow Jones) New home sales were up 1.7% in June to an annual rate of
922,000, but that was mainly because new home sales in May were revised down
from 928,000 to 907,000. Bottom line: home sales, both new and existing, are
holding up at fairly high level, but are now off their peaks. (JM)
9:54 (Dow Jones) Stocks weaken slightly more after soft sentiment data,
showing decline. GM, Intel, Alcoa and Exxon lead DJIA lower, while Merck and
Disney up. Biotechs, drugs move up. JDS off 15% at $8.06, VeriSign up a
similar amount, at $53.64. DJIA down 53 at 10402, Nasdaq off 5 at 2018, and
S&P 500 eases 2 to 1200. (TG)
9:48 (Dow Jones) Junk bond mutual funds had a $21.6 million inflow during
the week ended July 25, reversing a $16M outflow suffered the week before,
according to AMG Data Services. (JD)
9:38 (Dow Jones) A pair of activist investors has picked up support from
other minority holders in their drive to get Monarch Services (MAHI) to
liquidate. Monarch officials say they have no plan to sell the company or
its "Girl's Life" magazine for pre-teen girls. The company plans to develop
a newly purchased property and restaurant into an entertainment center based
on the theme of the magazine. "They've given no indication that they know
anything about running these other businesses," said investor Wendie
Wachtel, a 2.5% shareholder. (RO)
9:33 (Dow Jones) Nymex crude futures expected to open 20-30 cents a barrel
lower as traders continue to take profits on gains made in wake of latest
OPEC output cut announcement. Sentiment remains bearish despite OPEC move,
with traders likely to take a wait-and-see attitude until next week's
inventory data, analysts say. With market grappling for new direction, "it's
not going to be an easy couple of weeks," analyst says. Sept. crude, down
30c at $26.43 overnight, has support at $26.05-$26.20; resistance is seen at
$26.90-$27.10. (MXF)
9:29 (Dow Jones) Finished digesting that GDP report yet? Good, because the
big data for the day is out within the hour. Consumer sentiment for July
should come in at about 93.5. That's better than June's 92.6 but a shade off
the mid-month reading of 93.7. New home sales expected to have fallen by
0.3%. Both are vital in that they're among the few things that have held up
OK (housing) or have shown signs of recovery (sentiment). For the
doomsday-scenario backers, it's the consumer that's going to cave. (TG).
9:17 (Dow Jones) An early look at next Friday's U.S. employment report: HSBC
analysts expect a 120K drop in July payrolls (vs. June's -114K) as job
shedding doesn't appear to have run its full course. The unemployment rate
should rise to 4.6% from 4.5% (with a risk of 4.7%). Avg hourly earnings
should stay benign at +0.3%. (NK)
9:13 (Dow Jones) August Fed funds up 1 BP, showing 25 BP cut at August FOMC
still fully priced in. Trader says contract also showing about 12.5% odds of
a half-point cut, which is just slightly up. October Fed funds also up,
signaling 35% likelihood of 25 BP cut at October FOMC, assuming the Fed
eases by 25 BP in August, trader says. Chances of October cut are up by
about 10%. (SPC)
9:09 (Dow Jones) J.P. Morgan Chase & Co.'s (JPM) 2Q shortfall, as well as
the likely continuation of a challenging operating environment well into the
2H of the year, prompted UBS Warburg analyst Diane Glossman to shave her EPS
estimates by about 50 cents a piece, to $2.63 for '01 and $3.35 for '02. She
also lowered her 12-month price target to $49, or 14.5 times her revised
2002 estimate. "The company has the ability to mitigate some of this
slowness through further expense cuts and share repurchase, although not all
of it," Glossman said. (TAS)
8:57 (Dow Jones) Looking for a company to get behind in the turbulent
telecom equipment sector? W.R. Hambrecht suggests Advanced Fibre
Communications (AFCI), which reported Thursday "a characteristically solid
and workmanlike" 2Q. The firm says AFC has distanced itself from its
competitors with an outlook for modest sequential growth and profitability,
meriting a significant valuation premium. So Hambrecht raises its price
target to $27, implying a P/E multiple in the mid-40s on estimates. AFCI
closed Thursday at $22.38. (GS)
8:49 (Dow Jones) The continued contraction in inventories - down $26.9
billion in the second quarter - is cause for optimism regarding growth in
future quarters, says Barclays Capital economist Henry Willmore. (MSD)
8:45 (Dow Jones) Interesting point from Anderson & Strudwick's Kent Engelke:
By his calculation, in 13 months JDS Uniphase (JDSU) has fired about 81% of
its workforce, roughly the same amount as the stock's 93% decline. "So much
for the concept that firing people should increase shareholder value," he
says. (TG)
8:40 (Dow Jones) Real final sales - GDP less the change in inventories -
also rose at the same 0.7% rate as GDP in 2Q. That means the change in
inventories was completely neutral in 2Q after being a big drag in 1Q. It
may be a signal that, as Greenspan said last week, the worst of the
inventory correction is past. (JM)
8:37 (Dow Jones) The PCE deflator slowed to 1.7% annual rate in 2Q from 3.2%
in 1Q. This is the inflation measure the Fed watches most closely and the
Fed is likely to be relieved and uninhibited. (JM)
8:35 (Dow Jones) Tsys gain across the yield curve after weaker-than-expected
GDP, sensing chance of more Fed rate cuts than previously thought. 10-year
up 4/32 since GDP data, up 6/32 on session yielding 5.12%, with 2-year yield
down 1 BP since report at 3.90%, price up 2/32 on session and since report.
(JNP)
8:33 (Dow Jones) GDP grew at a 0.7% annual rate in 2Q and was revised up to
a 1.3% rate in 1Q from 1.2%. Growth in all of 2000 was revised down to a
4.1% rate from 5.0%. Bottom line, slower growth seems in order with
perceptions of reality. (JM)
8:29 (Dow Jones) Buyers returned to Wall Street Thursday - despite another
indication, this time from Hewlett-Packard (HWP), that a tech recovery won't
occur anytime this year - and pushed the Nasdaq above the psychologically
important 2000 level. But the length of their visit will be tested by the
$50 billion yearly loss posted by JDS Uniphase (JDSU) and our first look |
