morning sl
today's warm-up:
NEW YORK (Reuters) - Stocks are set to open lower on Monday as investors brace for a bleak corporate earnings season amid worries Wall Street got ahead of itself in rallying over recent months.
Also putting a damper on sentiment, analysts said, was Wall Street powerhouse Merrill Lynch's rejigging its recommended asset allocation for the U.S. market by cutting back on stocks. Merrill warned equity valuations in the United States now ``seem extreme.''
On Friday, U.S. stocks fell, with the blue-chip Dow dropping below the key 10,000 level, after a downbeat speech by U.S. Federal Reserve Chairman Alan Greenspan and a slew of dismal corporate news dimmed investors' hopes for a quick economic turnaround.
Stocks are expected to fall modestly at the opening bell on Monday, based on losses in equity-index futures. The Standard & Poor's 500 (.SPX) December contract lost 4.10 points to 1,143.70, the Nasdaq 100 contact shed 15.50 points to 1,631 and Dow futures fell 30 points to 9,958.
The Wall Street rally from three-year lows hit 10 days after the Sept. 11 attacks on the United States carried the tech-laden Nasdaq Composite (.IXIC) up nearly 45 percent. The blue-chip Dow Jones Industrial average (.DJI) and the broad Standard & Poor's 500 (.SPX), gained more than 22 percent and 19 percent, respectively.
``Futures are weak, and we had a weak Friday. The basic problem of the stock market is this three-month rally and the overbought conditions,'' said Larry Wachtel, market analyst at Prudential Securities.
``Meanwhile, there was the Alan Greenspan statement and also Merrill Lynch took their valuation down ... That had some influence on European activity,'' he said.
Merrill's chief U.S. strategist, Richard Bernstein, also told clients he was raising exposure to bonds and leaving the cash portion unchanged. Merrill's new allocation recommends a portfolio with 50 percent in stocks, down from 60 percent, and 30 percent in bonds, up from 20 percent, and 20 percent in cash, unchanged from before.
The earnings season heats up in earnest this week, with results expected from marquee tech firms such as chipmaker Intel Corp. (NasdaqNM:INTC - news) and software powerhouse Microsoft Corp. (NasdaqNM:MSFT - news), as well as a slew of banks and car companies.
Investors are hoping Corporate America will dish out some positive predictions for the months ahead. Recent economic data may have been offering hints of improvement, but earnings for the current quarter are expected to be the worst in a decade -- down 22 percent.
On Friday, the blue-chip Dow closed below 10,000 for the first time since Dec. 20, falling 80.33 points, or 0.8 percent, to 9,987.53. The Nasdaq Composite fell 24.78 points, or 1.21 percent, to 2,022.46. The S&P lost 10.95 points, or 0.95 percent, to 1,145.60.
Outside the United States on Monday, European bourses were trading near session lows at midday, weighed down by techs such as Nokia after Greenspan warned the economic outlook remained murky.
``Greenspan seems to have succeeded in curbing some of the more ambitious expectations for a U.S. recovery,'' said Alia Baig, head of European equities at AXA Investment Management in London.
At 1225 GMT the Eurotop 300 index (.FTEU3) of Europe's top 300 blue chips was off 1.48 percent while the narrower Euro Stoxx 50 index (.STOXX50E) shed 2.1 percent.
Japanese stock markets were closed on Monday for a holiday and trading will resume on Tuesday. On Friday, the Nikkei average (.N225) sank for a fourth straight session, dropping 0.92 percent to 10,441.59.
In corporate news, Fannie Mae (NYSE:FNM - news), the No. 1 U.S. home loan financing company, posted a 24 percent rise in quarterly operating profits as customers bought more mortgages in the low interest rate environment. Shares closed at $78.05 on Friday.
Raytheon Co. (NYSE:RTN - news), the defense contractor, announced it will sell its aircraft integration business to L-3 Communications Holdings Inc. (NYSE:LLL - news) for $1.13 billion. Raytheon closed at $32.02 Friday while L-3 finished at $89.01.
Newmont Mining Corp. (NYSE:NEM - news) said on Monday Australia's Foreign Investment Review Board had cleared its A$4.35 billion (US$2.25 billion) bid for Normandy Mining Ltd. (Australia:NDY.AX - news), in the latest battle with South Africa's AngloGold for control of Australia's largest gold miner. Newmont shares closed at $19.69 Friday.
United Technologies Corp. (NYSE:UTX - news), whose products range from engines to elevators, late on Friday affirmed Wall Street's fourth-quarter and 2002 financial targets and said its president and chief operating officer would retire. United Technologies, a Dow index stock, closed at $63.84 Friday. |
