MARKET TALK: VIX Is Back To Visit The 22 Mark
27 Feb 11:11
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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11:11 (Dow Jones) An update from the VIX watch: The CBOE's market volatility
index has eased 1.13 to 22.44 with stocks ahead, helped by Greenspan's
cautiously optimistic stance. This options fear gauge is now once again
approaching the 22 mark, which recently has preceded short-term stock-market
corrections. Since mid-November, VIX - which measures S&P 100 index option
prices to gauge investor sentiment - has flitted largely between 22 and 28;
over the past three months, VIX has edged back up (and stocks down) each time
VIX falls near the 22 mark. Many are watching to see if this trend holds. (KT)
11:03 (Dow Jones) Slumping retailer Gap's (GPS) $1 billion offering of
seven-year convertible notes are expected to have a coupon between 6% and 6
1/2% and a conversion premium between 22% and 25%. Announced Tuesday, the deal
is expected to price today. GPS off 4.2% at $12.98. (JD)
10:52 (Dow Jones) Moody's lowered Williams Communications Group's (WCG)
unsecured debt rating to Ca from Caa3, citing an expectation that the company
will convert a substantial portion of its debt into equity in a restructuring,
and leave bondholders with little recovery value. (JD)
10:45 (Dow Jones) Blue chips are starting to take off, led by a 5% jump in
Honeywell. Merck, United Tech, Boeing, Microsoft, and IBM all up better than a
dollar, and the losers are down mildly. We may be getting ahead of ourselves,
but the DJIA is just 80 points shy of the 10300 mark, where it last resided,
intraday, in early January. Prior to that, you have to go back to August of
last year to find that level. DJIA up 105 at 10219, Nasdaq Comp adds 22 to
1789, and S&P 500 up by 11 to 1120. Durables help, new home sales hard to
figure out, and Greenspan about as expected. (TG)
10:34(Dow Jones) July fed funds now said to be looking at around 80%-85%
chance of rate hike coming out of June FOMC. Odds are down vs. 100% late
Tuesday. Market saw similar odds Tuesday after consumer confidence, before
prices inched back to unchanged by the close. (SPC)
10:29 (Dow Jones) Nortel Networks' (NT) 3G wireless equipment pact with BT
Cellnet, which is now part of European wireless service provider MMO2 PLC
(OOM), might not be the only one at risk. HSBC Securities analyst Paul Howbold
believes Nortel's $1 billion 3G pact with Spain's Xfera will never be realized.
"Xfera remains in hibernation due to its failure to win 2G spectrum and its
fractious ownership structure," Howbold saya. NT up 1.6% at $5.19. (BED)
10:15 (Dow Jones) There is reason to suspect that the new home sales data may
have been unduly affected by seasonal factors. Surprisingly, the only region of
the country where sales increased was the Northeast, where the seasonal effects
tend to be greatest. Meanwhile sales in the South were down 22%, which may
reflect unusually severe weather compared to milder winter weather in the
Northeast. (JM)
10:11 (Dow Jones) Housing sales plunge and Greenspan's prepared remarks,
cutting GDP forecast for '02 to 2.5%-3% growth range, are giving 2-year Tsy a
bounce, yield down 5 BP to 3.0%, 10-year yield down 2 BP to 4.91%. (JNP)
10:07 (Dow Jones) New home sales fell by 14.8% to 823,000 at an annual rate
in January from an upward revised 966,000. Existing home sales had been
reported up 16.2% to a 6.04 million annual rate. New home sales are reported at
contract, while existing home sales are reported at close, so, there may be a
timing difference. The January decline was the largest one-month decline since
Jan. 1994. There may be a grater seasonal effect on new home sales than
existing home sales because of the timing. (JM)
10:03 (Dow Jones) Credit crunch worriers aren't getting much support from
Greenspan, who says "shocks to the overall economicsystem are...less likely to
create cascading credit failure." (MSD)
10:00 (Dow Jones) Greenspan foresees a fairly modest economic rebound
compared to past recoveries. There are no inflation pressures, but rising
joblessness may hinder consumer spending. The Fed chairman also sees a gradual
rebound in capital spending. Sounds a lot like what economists were looking
for. (MSD)
9:54 (Dow Jones) Look for Greenspan to deliver a largely upbeat message on
the economy's prospects, leavened with some words of caution about the still
significant risks that remain in place. In all, it should be pretty much a
replay of the Jan. 24 address. (MSD)
9:51 (Dow Jones) Keefe Bruyette & Woods insurance analyst Jeffrey Thompson
says Arthur J. Gallagher (AJG) likely won't restate its earnings or
significantly reclassify its assets, based on conversations with executives. J.
Patrick Gallagher, the insurer's chief executive, said Tuesday the firm plans
to provide greater disclosure of limited partnership investments, including
off-balance sheet debt. "Such disclosure may draw scrutiny, as the breadth of
the $75 million of invested assets will likely confuse investors," Thompson
said. "Investments range from hedge funds to real estate development projects
in Florida to clean coal production and low-income housing." (CUB)
9:40 (Dow Jones) Two analysts issued upbeat notes on UPS following an
investor conference, where the package delivery company said 1Q EPS would be at
the high end of previous guidance but 2Q EPS would meet or trail analysts'
estimates. Merrill's Vincent Chin likes UPS's cost-control focus, the growth
potential of its logistics business and reorganized sales-force. James
Winchester of Lazard Freres says, "UPS is poised for earnings and free cash
flow acceleration." UPS flat at $58.35 early. (SON)
9:36 (Dow Jones) Treasurys always get choppy on Greenspan days. Bondtalk's
Tony Crescenzi says the front-month bond futures contract "has averaged an
absolute changeof 33/32 on the first day of Greenspan's testimony." But he's
not looking for much of a reaction today, largely because few expect any sort
of rate changes in the next six months. (MSD)
9:32 (Dow Jones) Nymex crude seen opening unchanged to 10 cents a barrel
higher after DOE/EIA data contradicted API data to show a drawdown in crude oil
stocks of 2.5 million bbl. Crude prices finished lower on Access but IPE Brent
futures have rallied in response to the supportive DOE report, leading some
analysts and traders to call the U.S. market higher. Others weren't so sure,
though. "It's very confusing," one analyst says. April crude, down 14c at
$21.27 on Access, faces resistance at $21.50-$21.75; support is set at
$20.15-$20.20. (MXF)
9:25 (Dow Jones) Stock futures held gains brought on by the strong durable
goods report, with Wall Street looking at a nicely higher open. The 10 o'clock
hour brings the next test: new home sales reading and start of Greenspan talk.
S&Ps closed up 6, DJIA futures add 50, and Nasdaq tacks on about 20. (TG)
9:20 (Dow Jones) Income-tax refunds are soaring this year, according to John
Youngdahl, economist at Goldman Sachs. "Income-tax refunds are up 17.3% on
year-year basis through Feb. 22," says Youngdahl. He sees these refunds as an
important supplement to disposable income to support consumer spending. (JM)
9:15 (Dow Jones) Goldman Sachs analyst Richard Strauss cuts his 1Q estimates
for Merrill Lynch (MER) and Lehman Brothers (LEH), but raises Morgan Stanley
(MWD). The analyst says even though brokerage stock prices have fallen, he's
not inclined to become more bullish on the sector - because their underlying
business environment has become more depressed. (LC)
(END) DOW JONES NEWS 02-27-02
11:11 AM |
