Better bid holds in pre-open
Yahoo, AOL higher, another downgrade impacts GE
By Emily Church, CBS.MarketWatch.com
Last Update: 8:10 AM ET Oct 10, 2002
LONDON (CBS.MW) - AOL Time Warner and Yahoo shares were each bumping up to $11 in the pre-open on Thursday, lending support to the broader market after Yahoo's surprise strength in online ad sales in the third quarter.
The Nasdaq 100 tracker (QQQ) was up 0.8 percent with Cisco Systems (CSCO) a few ticks higher in light volume at $9.39 and Microsoft (MSFT) flat at $44. The S&P 500 'spiders' (SPY) was up 0.5 percent.
Still, with another downgrade surfacing on bellwether General Electric (GE) and European markets losing earlier gains and flittering around the unchanged market, the support for the market looked thin.
Merrill Lynch dropped GE to a 'neutral' from a 'buy' - becoming the second major broker this week to telegraph concerns on profits growth at the company. Merrill cut its 2003 earnings per share forecast to $1.65 from $1.70.
Shares were below the $22 New York close in euro trading at $21.60 - leading anemic volumes in U.S. shares in Frankfurt. The stock traded down to $21.55 on Instinet.
GE reports its third quarter on Friday. "The fourth quarter appears equally if not more challenging," Merrill told clients overnight.
Among other trends: German financial stocks were rebounding with Commerzbank (803200) rising as much as 12 percent after its CEO told a German newspaper that the bank's third quarter "are not bad against the backdrop of the catastrophic state of capital markets." Deutsche Bank (DB) rose 4 percent.
The turn in European financials was not widely expected after credit rating agency Moody's downgraded JP Morgan Chase (JPM) on Wednesday. JP Morgan shares were unchanged on the New York ECNs. Overnight, S&P lowered its outlook on German insurer Allianz (AZ) (840400) after lowering ratings on its Dresdner bank.
Still leading German financial industry figures have been trying to beat back market talk of a liquidity crisis in German banking for the past two days. Also, on Tuesday, the head of the ECB termed the financial system in Europe "solid."
Dutch bank ABN Amro (ABN) rose 3 percent after affirming its 2002 earnings forecast and dividend plans on Thursday.
AOL: You Yahoo too?
AOL Time Warner (AOL) traded at $11 on Instinet, up 26 cents, and had been marked in London at $10.85, dealers at Madoff Securities said. The stock was seen gaining on Yahoo's third quarter results and outlook, released after the close Wednesday.
Yahoo CEO Terry Semel told analysts on the conference call that Yahoo managed to grow its core online advertising business from the second quarter because the company was taking market share away from competitors.
Yahoo (YHOO) was also at $11, above its $9.98 New York.
UBS Warburg noted that Yahoo's net revenue of $248.8 million for the quarter as well topped its estimates, but the broker kept a 'hold' cap on the stock, telling clients it's "looking for one more quarter to affirm potential strength in roll out of high speed access, continued market share gains in non search-related marketing services and premium services."
JP Morgan Securities, noting the implicit stabilization of online ad sales in Yahoo's numbers, said the results "support our long term positive stance on both the online media sector and the prospects for a recovery in AOL's advertising and commerce revenue stream."
Results: NET BJ COST
Shares of Network Associates (NET) were unchanged on Instinet at $8.60 after the software company reported third quarter pro forma earnings that exceeded expectations, and indicated that fourth-quarter results would top current estimates, as the completion of the McAfee.com acquisition allows the company to leverage new growth opportunities.
BJ Wholesale (BJ) was not capturing speculative trade ahead of 8 a.m. Eastern after the retailer warned fiscal third and fourth quarter results would fall short of expectations, citing waning consumer confidence and macro-economic uncertainty.
Shares of Costco Wholesale (COST) rose 25 cents on Instinet to $30.60 after the retailer reported fiscal fourth quarter earnings that topped expectations even as revenue fell a bit shy.
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