Stocks Seen Sliding, Eroding Recent Rally
By Elizabeth Lazarowitz
NEW YORK (Reuters) - Stocks are expected to open lower on Tuesday, pausing for breath after clawing their way higher in recent sessions amid growing hopes for a quick resolution to the conflict in Afghanistan (news - web sites).
Stocks have risen as the hardline Taliban's rule crumbled after 45 days of unrelenting attacks by the United States and opposition Afghan forces.
U.S. progress in the war and a growing consensus that a rebound in the economy and corporate profits is on its way in the year ahead were giving the market support, said James Volk, co-director of institutional trading at D.A. Davidson & Co.
``But I think that the markets are probably a little overextended,'' Volk said, ``and we could get a little pullback, which is what we're looking at this morning.''
Monday's rally dragged the Dow Jones industrial average (^DJI - news) back into bull market territory, up more than 20 percent from a three-year low hit on Sept. 21. But traders were gearing up for a sluggish week, with many trading floors thinly staffed around the Thanksgiving holiday on Thursday.
Standard & Poor's 500 stock index futures for December were down 5.50 points at 1,148.60, while Nasdaq 100 futures for the same month were down 10 points at 1,618, pointing to a weaker start on Wall Street.
The few earnings reports trickling in were helping to give the market some direction.
Staples Inc. (Nasdaq:SPLS - news), the second-largest U.S. office-supply retailer, reported an 8 percent rise in third-quarter profits, in line with Wall Street's estimates, as store efficiencies and cost reductions helped offset the fallout from the Sept. 11 attacks and weak consumer confidence.
After Monday's close, analog and mixed-signal semiconductor company Semtech Corp. (Nasdaq:SMTC - news) reported a third-quarter profit and forecast a slight sequential rise in fourth-quarter sales from those in the just-completed period.
Electronic brokerage eSpeed Inc. (Nasdaq:ESPD - news) posted a narrower third-quarter loss on higher sales and said it expects to post an operating profit in the fourth quarter.
The flow of economic data is light in a week shortened by Thursday's holiday, but investors will take a look at the government's report on international trade, due at 8:30 a.m. (1330 GMT), and The Conference Board (news - web sites)'s index of leading indicators, set for release at 10 a.m. (1500 GMT).
Economists polled by Reuters on average estimated the U.S. trade deficit narrowed to $24.67 billion in September, while the index of leading indicators is expected to be flat in October after a 0.5 percent drop in the prior month.
In overseas trading, Tokyo stocks finished lower, breaking a four-session, 7 percent winning streak, with banks and high-tech exporters eroding recent gains as investors shifted focus back to Japan's weak economic fundamentals. The benchmark Nikkei average (^N225 - news) fell 1.42 percent.
European stock markets were also weaker, weighed down by technology and telecom stocks, and buffeted by a cautious outlook from Swiss financial powerhouse CS Group (CSGZn.VX). The blue-chip FTSE Eurotop 300 (^FTEU3 - news) was down 0.7 percent.
Stocks rose on Monday as Wall Street bet the war in Afghanistan would not drag out for years, with the Taliban's grip on the country crumbling as U.S. troops scoured the country for militant fugitive Osama bin Laden (news - web sites).
Upbeat corporate profit outlooks from companies such as No. 2 home-improvement retailer Lowe's Cos. Inc. (NYSE:LOW - news) also boosted optimism the U.S. economy is near a rebound.
The Dow (.DJI) climbed 109.47 points, or 1.11 percent, to end at 9,976.46, putting it more than 21 percent above its three-year low set on Sept. 21 and in bull-market territory, defined as at least a 20 percent gain from a recent low.
The Nasdaq Composite Index (^IXIC - news) rose 35.84 points, or 1.89 percent, to 1,934.42 -- its highest level since the Sept. 11 attacks on the United States. The tech-packed index has surged more than 35 percent since September.
The broader Standard & Poor's 500 Index (^SPX - news) gained 12.41 points, or 1.09 percent, to 1,151.06, up 19 percent since Sept. 21. |
