Buying loses steam as ISM index dips
by Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 10:18 AM ET Oct. 1, 2002
[a massive FannyMae fakeout here]
[the hangman's rope is now 10 inches, rather than 14 inches]
NEW YORK (CBS.MW) -- Buyers lost interest in stocks Tuesday after a key gauge of the factory sector slipped in September to a level that suggests contraction
The Institute of Supply Management Index slipped to 49.5 percent in September from August's 50.5 percent. Readings below the 50-percent mark showcase a contracting factory sector. Economists polled by CBS.MarketWatch.com had expected the index to come in at 50.4 percent.
Within the index, the new orders component edged up to 50.2 percent from 49.7 percent while the production and employment sub-indexes fell from the prior month.
On Monday, the regional Chicago Purchasing Managers Index also slid below the 50-percent mark, igniting worries about the health of the factory sector.
Tuesday also saw the release of August construction spending, which fell 0.4 percent, more than expectations for a 0.1 percent decline. See full story and check economic calendar and forecasts.
The Dow Jones Industrial Average ($INDU: news, chart, profile) edged up 23 points, or 0.3 percent, to 7,615.
The Nasdaq Composite ($COMPQ: news, chart, profile) shed 9 points, or 0.7 percent, to 1,163 and the Nasdaq 100 Index ($NDX: news, chart, profile) lost 5 points, or 0.6 percent, to 827.
The Standard & Poor's 500 Index ($SPX: news, chart, profile) edged down 0.1 percent while the Russell 2000 Index ($RUT: news, chart, profile) of small-capitalization stocks shed 1.3 percent.
J.P. Morgan Securities issued a bearish note on stocks entitled "still expensive, still over-owned." The firm has a year-end 2003 target for the S&P 500 of 800 -- about 2 percent below current levels -- on belief the earnings outlook will remain weak.
"Even after three years of a bear market and some multiple contraction, we think equity valuations remain stretched. We believe that further multiple contraction is likely. The U.S. macro backdrop remains weak, with few signs of a sustained recovery in the making," J.P. Morgan told clients. The firm feels that the consumer is at risk because of weak labor market conditions and also pointed to high leverage in large pockets of the corporate sector.
Volume came in at 262 million on the NYSE and at 314 million on the Nasdaq Stock Market. Market breadth was negative, with decliners outpacing advancers by 16 to 12 on the NYSE and by 17 to 9 on the Nasdaq.
Fannie shares rally; Nabors slides
Shares of Fannie Mae (FNM: news, chart, profile) jumped over 7 percent after telling investors that it narrowed the duration gap on its mortgage portfolio to minus 10 months as of Sept 30th from minus 14 months in August. The duration gap, which measures the mismatch between the maturity of Fannie's assets and liabilities, had ballooned due to sliding long-term rates, which has ignited a rash of mortgage prepayments. In mid-September, news that Fannie's duration gap had reached its widest level in the company's history sparked a wave of selling in the stock as investors worried about Fannie's interest rate risk.
Nabors Industries (NBR: news, chart, profile) slid 1.7 percent after warning that third-quarter earnings would fall short of expectations since projected increases in North American gas-related activity have yet to materialize. Still, the oil service group mustered gains, with Halliburton up 2.6 percent and Schlumberger up 1.6 percent.
Salomon Smith Barney lowered its rating on Target (TGT: news, chart, profile) to an "in-line" from an "outperform" on worries about the outlook for its third and fourth quarters given the steady stream of below plan weekly sales. Shares of Target edged up 0.1 percent.
Pepsi Bottling Group (PBG: news, chart, profile) climbed 6.7 percent after registering in-line third-quarter earnings. Looking ahead, the beverage bottling company upped the lower end of its full-year earnings outlook by a penny a share.
In the drug group, Forest Labs (FRX: news, chart, profile) jumped 6 percent after telling investors late Monday it would surpass fiscal second-quarter profit expectations by "at least" 30 percent thanks to strong sales of its antidepressants, Celexa and Lexapro. See Biotech Stocks story.
Treasurys in huge sell-off
Government bonds backtracked substantially after a heady rally on Monday that took the yield on a 2-year note below the target fed funds rate.
The 10-year Treasury note fell 21/32 to yield ($TNX: news, chart, profile) 3.675 percent and the 30-year government bond tumbled 1 1/8 to yield ($TYX: news, chart, profile) 4.74 percent. See Bond Report.
In the currency sector, the dollar rose 0.7 percent to 122.52 yen while the euro edged up 0.1 percent to 98.64 cents. |
