MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING FRIDAY APRIL 24, 1998 (1)
MARKET WATCH
Bay Street and Wall Street each lost ground Friday, as concern brewed on both sides of the border that stocks are overvalued relative to their anticipated earnings performance
Toronto stocks lost almost 1.5 percent of their value Friday as a steep drop in the gold and precious minerals index helped shave off much of the gains made earlier in the week. Stocks were also led lower by the financial services sector on concern corporate earnings are not robust enough to justify record high share prices.
The Toronto Stock Exchange 300 composite index fell 113.16 points, or 1.5%, to 7703.24, its biggest one-day decline since Jan. 22. For the week, the TSE 300 was down 61.51 points or 0.8%. About 104.9 million shares changed hands on the TSE, down from about 120.9 million shares traded on Thursday. So far this year, the TSE 300 has gained 15%. It touched a record intraday high of 7837.7 Thursday.
All 14 of the TSE 300's subindexes closed lower on the day, led by a 2 percent drop in the financial services sector and a 3.5 percent plunge in the gold index.
The gold sector retreated as gold stocks like Barrick Gold Corp. and Placer Dome Inc. fell as the price of bullion on the Comex division of the New York Mercantile Exchange slipped US$1.60 to US$312.90 an ounce. Barrick (abx/tse) lost $1 to $33 and Placer Dome (pdg/tse) fell $1.05 to $21.25.
"Whenever you have a fairly big move in gold lasting two to three days there's always a little bit of a setback," said Rolie Bradley, an institutional salesman at Maison Placements Canada.
The 2 percent drop in the heavily weighted financial services sector, which accounts for almost 25 percent of the overall market, was also a major factor.
The banking sector lost almost 5 percent on the week on a sell-off in banking stocks after it enjoyed a lengthy run the previous week on the back of bank merger rumors. The rumors were substantiated when Toronto-Dominion Bank and Canadian Imperial Bank of Commerce said last Friday they would merge pending government approval. A sell-off followed that announcement as investors sought profits from the healthy gains the banks stocks had notched on the earlier rumors.
Canadian Imperial Bank of Commerce (cm/tse) fell 95› to $49.60, Bank of Montreal (bmo/tse) lost $2.10 to $78.40 and Toronto Dominion Bank (td/tse) slipped $2 to $63.60. Royal Bank of Canada (ry/tse) fell $1.80 to $85.30 and Bank of Nova Scotia (bns/tse) slid 15› to $39.80. Declines by the major banks pulled the TSE financial services subindex 526 points lower this week.
The conglomerates sector fell 1.3 percent and the metals and minerals index dropped 1.34 percent on Friday.
Northern Telecom Inc. (ntl/tse) fell $2.30 to $87.90 after the company, which is 51.7% owned by BCE Inc., reported lower-than-expected revenue in its first quarter earlier this week, raising concern about full-year earnings. BCE shares (bce/tse) dropped 85› from record highs to $62.90, reducing the advance in the TSE's most heavily weighted stock to 6.4% this week.
Among industrials, Hummingbird Comm lost $2.60 to $48.65.
Other Canadian markets finished mixed.
The Montreal Exchange portfolio fell 54.89 points, or 1.4%, to 3860.55. It tumbled 52.04 points, or 1.3%, on the week.
The Vancouver Stock Exchange rose 0.16 of a point to 636.3. Trading was moderate on a volume of 23.1 million shares worth 18.9 million dollars, with 194 advances, 199 declines and 323 issues unchanged. For the week it fell 1.09 points or 0.2%. The VSE Mining Indicator closed down 2.15 at 505.95
The Alberta Stock Exchange Alberta Stock Exchange Combined Value Index gained 26.53 to: 2,306.46. Trading was moderate on a volume of 13.4 million shares worth 10.2 million dollars with 178 advances, 166 declines and 116 issues unchanged. The top five dollar volume issues were all oil stocks.
U.S. Markets
In a quiet, deliberate fashion, stocks in the U.S. fell throughout the day Friday, leaving the Dow down nearly 79 points, the Nasdaq off more than 12, and the S&P 500 lower by nearly a dozen points.
Despite two straight days of heavy selling, traders said there was no sense of panic, noting the somewhat modest level of trading volume Friday. Additionally, all major indices ended up from their worst levels of the session.
As was the case on Thursday, the selling was fairly broad-based, as evidenced by the breadth of the market. In NYSE trading, declining stocks whipped advancers by a 5-to-2 spread while 638 million shares were exchanged. In Nasdaq activity, 813 million shares traded hands while the breadth of the market favored declining issues by a 25-to-18 spread.
The Dow Jones Industrial Average flirted briefly with higher levels in the morning but only rose as high as 9,160.03. The index tumbled as low as 9,021.02 mid-afternoon before bouncing in the last 75 minutes of trading. Still, the blue-chip index ended the session off 78.71 points at 9,064.62, its third straight decline. About 639.2 million shares changed hands on the Big Board, down from about 658.7 million shares traded on Thursday. The Dow finished the week down 1.1%. The Dow Transportation Index finished off 73.07 points at 3,558.02 and slid 3.5% for the week.
The Nasdaq Composite Index rose as high as 1,891.57 in the first hour of trading but soon succumbed to ardent selling for the second straight day. The tech-wrought index fell as low as 1,860.83 before closing with a loss of 12.43 points at 1,868.96. For a week that began with three straight record-setting gains, the Nasdaq ended up 0.13%.
The S&P 500 declined 11.68 to 1,107.90 and slid 1.3% for the week. The Russell 2000 Index tumbled 4.63 to 480.32 and finished the week 1.4% in arrears.
Bond prices closed up more than 1/2 point, sending the yield on the benchmark security back to 5.94%. Traders said a technical bounce off the 6% level contributed to the rise, as did the dollar's ability to maintain its strength versus the yen after the latest fiscal stimulus package was released by the Japanese.
J.P. Morgan Securities Inc. advised clients to reduce their holdings of stocks because earnings would not grow as fast as some investors expect.
Technology Stocks
Tech stocks were among the best performers Friday, relative to other major industry groups. The Morgan Stanley High Tech Index (MSH) closed up 6.94 to 572.81, with the Philadelphia Semiconductor Index (SOX) up 4 to 321.20. However, the Nasdaq 100 Index (NDX), a measure of the sector's biggest names, fell 8.44 to 1250.14.
Hewlett-Packard (HWP) rose 8 1/8 to 74 3/4 after Prudential Securities raised its rating on the Dow component to "buy" from "hold."
Dell Computer (DELL) rose 1 1/16 to 76 5/16 but HP's gains failed to inspire other PC makers. Dow component IBM (IBM) closed off 1/8 to 117 3/8.
Gateway (GTW), which rose sharply in after-hours trading Thursday on news it would replace USF&G Corp. (FG) in the Standard & Poor's 500 Index, gained 15/16 to 58 3/16.
Internet stocks mounted a comeback after a week of some heavy losses for the group's bigger names.
Infoseek (SEEK) helped reverse some of the negativity, rising 2 9/16 to 31. Late Thursday, the search-engine firm reported a loss of 5 cents per share in the first quarter, a nickel better than expectations. Additionally, Amazon.com (AMZN) rose 3 7/8 to 84 7/8, while America Online (AOL) gained 3 1/4 to 74 1/2, and Yahoo! (YHOO) rose 2 9/16 to 114 3/4.
Secondary Internet names, however, continued to face selling pressure. K-Tel International (KTEL) dumped another 9 1/2 to 26 3/4; DoubleClick (DCLK) lost 2 1/2 to 35 5/8; Market Guide (MARG) slid 1 1/16 to 10 7/16; CyberShop International (CYSP) fell 1 1/4 to 16; and USWeb (USWB) closed down 1 7/8 to 27 1/4.
Open Market (OMKT) fell 2 to 18 after reporting a first-quarter loss of 18 cents per share, 3 cents shy of expectations.
Hampering tech proxies was Microsoft (MSFT), which fell 2 5/16 to 92 1/8 on word that the company is being investigated for allegedly trying to sway Netscape Corp. (NSCP) into marketing Internet browsers for only non-Windows operating systems. Netscape closed up 1 1/4 to 25 11/16.
Other big software makers were mixed, although Computer Associates (CA) rose 1 to 60.
Among smaller names, i2 Technologies (ITWO) plunged 3 1/4 to 69 1/8 although it reported first-quarter earnings of a dime, a penny ahead of expectations.
Conversely, Avant! (AVNT) jumped 6 to 24 7/8 amid rumors that a judge gave it a favorable ruling in its contentious legal battle with Cadence Design Systems (CDN), which rose 1/16 to 34 7/8.
Business Objects (BOBJY) doubled expectations, reporting first-quarter earnings of 8 cents per share. The stock climbed 3 1/2 to 18 3/8.
Best Software (BEST) climbed 1 1/2 to 20 1/4 after reporting first-quarter earnings of 17 cents per share, a nickel ahead of expectations.
Chip giant Intel (INTC) also weighed on tech indices, sliding 1 3/16 to 82 1/16. The rest of the chip sector was mixed, although SGS-Thomson Microelectronics (STM) fell 4 3/16 to 85 13/16.
Xilinx Inc. (XLNX) rose 4 to 46 3/4, after the company reported fourth-quarter earnings of 39 cents, 3 cents ahead of estimates. The programmable-logic chip maker also said it will buy back as many as 3 million common shares. Conversely, chip-equipment maker Cymer (CYMI) fell 1 11/16 to 23 9/16 after company officials indicated second-quarter earnings could disappoint. The company's first-quarter earnings of 9 cents per share were in line with estimates. CFM Technologies (CFMT) warned that its second quarter loss will be wider than the 24-cent shortfall analysts were expecting; its shares fell 17/8 to 11 5/8.
Pixar Animation Studios (PIXR) was up 3 9/16 to 44 5/16. On Thursday, the company blew out expectations that it would break even, reporting first quarter earnings of 8 cents per share.
FORE Systems (FORE) climbed 2 1/2 to 19 7/8 after reporting quarterly profits of 13 cents per share, 2 cents ahead of expectations.
Applied Voice Technology (AVTC) also beat the Street by 2 cents, reporting quarterly profits of 32 cents per share, and its stock rose 4 15/16 to 43.
Avid Technology (AVID) reported first-quarter earnings of 31 cents a share, 4 cents ahead of projections, but its shares fell 1 1/4 to 41 3/8.
Sync Research (SYNX) climbed 1 to 3 1/8 although its first-quarter loss of 19 cents per share was 6 cents wider than expectations. However, the company made positive comments about prospects for the second quarter.
Innova (INVA) fell 2 7/16 to 17 after posting first-quarter earnings late Thursday of 10 cents per share, in line with expectations.
The initial public offering of local-telephone-service provider US LEC Corp. (CLEC) rose 9 3/16 from its initial price of $15.
Motorola (MOT) rose 1 5/16 to 57 9/16, but most of technology's bellwether names posted only fractional moves.
Active Issues
Outside of Hewlett-Packard, the only positive influences on the Dow were AT&T (T) and United Technologies (UTX), which both rose marginally.
Leading the downturn was 3M (MMM), which slid 1 15/16 to 92 5/16, Merck (MRK), down 3 11/16 to 116 11/16, and Sears (S), off 1 13/16 to 57 9/16.
Discussion of marketing alliances among major airlines failed to generate positive momentum, as the AMEX Airline Index (XAL) was off 17.92 points to 758.86. American Airlines parent AMR Corp. (AMR) said it will link its frequent flier program with that of US Airways Group (U). However, AMR fell 3 3/16 to 152 1/16 and US Airways closed off 3 1/2 to 73 1/2. Delta Air Lines (DAL) confirmed it has been in similar talks with UAL's (UAL) United Airlines (UAL), but no deal has come to fruition. Delta shares dropped 3 to 117 3/8, while UAL fell 15/16 to 89 5/8. Elsewhere in the group, Northwest Airlines (NWAC) fell 1 3/4 to 54 3/4.
Financial stocks were in retreat again, sending the Philadelphia KBW Banking Index (BKX) down 13.24 to 870.90. Leading the decliners were Merrill Lynch (MER), down 3 1/4 to 86 5/8, Bankers Trust (BT), which slid 2 3/16 to 129 5/8, and Chase Manhattan Bank (CMB), which fell 2 3/8 to 134 1/8. Dow members J.P. Morgan (JPM) fell 1 3/4 to 135 5/8 and American Express (AXP) slid 1 3/16 to 101 7/8.
Merrill Lynch & Co. may be planning to use stock to buy a large European securities firm, an analyst said.
Drug stocks were mixed but the AMEX Pharmaceutical Index (DRG) slid 4.26 to 625.28. In addition to Merck, declines were suffered by Warner-Lambert (WLA), off 1 1/4 to 184 1/8, while Bristol-Myers Squibb (BMY) and American Home Products (AHP) each fell more than $2.
However, Vivus Inc. (VVUS) rose 1 1/4 to 12 3/4 on expectations that the company's male-impotence treatment would benefit from a "coattail" effect from Pfizer's new impotence pill, Viagra. Pfizer (PFE), meanwhile, added another 2 1/4 to 117 5/8.
Word that an FDA panel has recommended approval for PLC Systems' (PLC) heart laser treatment helped lift shares of competitors Eclipse Surgical Technologies (ESTI), up 1 3/4 to 13, and CardioGenesis (CGCP), up 1 1/4 to 7 7/8. Trade in PLC Systems shares was halted throughout the day.
Premier Laser Systems (PLSIA) gained 29/32 to 7 21/32 after announcing it is in discussions with several dental products distributors, including Henry Schein (HSIC), which fell fractionally.
Among stocks in the news, Corrections Corp. of America (CCA) fell 1 13/16 to 24 7/8 on word that its shareholders have filed a lawsuit protesting its planned merger with CCA Prison Realty (PZN), which fell fractionally.
Dollar Tree Stores (DLTR) rose 3 1/2 to 53 5/8. The variety-store chain was reiterated "strong buy" by Salomon Smith Barney. Thursday, it beat the Street by a nickel, reporting first-quarter earnings of 16 cents per share.
Fair, Isaac & Co. (FIC) bested expectation by 2 cents, reporting fiscal second quarter earnings of 38 cents per share. Its stock rose 4 15/16 to 38 5/8.
Brown Group (BG) rose 1 3/16 to 15 3/8 after the shoe company predicted first quarter earnings will exceed expectations.
Kellogg's (K) first-quarter earnings of 42 cents per share were a penny ahead of projections but its stock slid 1 1/4 to 39 3/4.
Eastman Chemical (EMN) fell 1 5/8 to 68 7/8 as it reported first quarter earnings of 94 cents per share, 2 cents shy of estimates.
Ucar International (UCR), conversely, beat the Street by 2 cents and its shares rose 2 1/4 to 32 1/2.
Philip Services (PHV) shed 15/16 to 8 on word that it will have to restate its results for 1997. Morgan Stanley lowered ratings on the stock to"neutral" from "outperform."
American International Group (AIG) tumbled 6 11/16 to 131 1/2 following a downgrade from Salomon Smith Barney to "outperform" from "buy."
International Home of Foods (IHF) climbed 1 5/8 to 28 3/8, thanks to an upgrade from Donaldson, Lufkin & Jenrette to "buy" from "market perform."
Consulting firm Charles River Associates (CRAI) rose to 23 1/8 from its initial offering price of $18.50.
Ambassadors International (AMEI) rose 2 1/4 to 29 after selling a secondary offering of 2.75 million common shares. |
