MARKET ACITIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, MAY 1, 1998 (1)
MARKET WATCH
Bay Street Takes High Road
Stronger resource issues and an easing of concern over rate hikes pushed Toronto's key stock index to a higher close on Friday, its third in a row, and helped it recover from losses earlier in the week.
''It was just strong right from the beginning and closed that way,'' one equities trader said. ''Rates are not going to be raised - yahoo! It's riding high on enthusiasm.''
And while rate fears have faded, there's still some lingering nervousness out there, said Fred Ketchen, chief equities trader at Scotia Capital Markets. "One questions whether all the hype at the beginning of the week about the Federal Reserve Board raising interest rates was really necessary," Ketchen said.
A host of economic indicators that measure production, unemployment and prices in the United States suggest there is no inflation threat and hence no need to raise rates, he added.
"This would appear to me again to be a non-inflationary environment, with GDP hanging in there as strongly as it is . . . and I think by the end of the week people are feeling better about it."
Canadian stocks rose, sent higher by Canadian Pacific Ltd. and oil producers on higher crude prices after the Organization of Petroleum Exporting Countries said they would consider further supply cuts.
The Toronto Stock Exchange 300 composite index gained 37.12 points, or 0.5%, to 7702.11. About 96 million shares changed hands on the TSE, down from 121.7 million shares traded on Thursday. Trading volume was worth C$1.7 billion. Advancing issues beat out declines 553 to 454 and 299 issues closed unchanged.
All of Toronto's 14 subindexes advanced except for golds and real estate. Conglomerates led the way, up 2.75 percent, and were followed by heavyweight oils, paper and forestry products and utilities.
Over the week the TSE 300 bobbed down and then up, only losing 31.83 points or 0.41 percent by Friday's close. Toronto reversed course from losses on Monday, when fears of U.S. interest rate hikes had spooked investors. ''The week started with the Wall Street Journal telling us that we've got to be scared of rates and everything's going in the tank,'' said Rolie Bradley, institutional salesman at Maison Placements Canada. But Thursday's U.S. economic data pointed to a low inflation rate environment, helping soothe nervous players, Bradley said. ''With the economic news, we rebounded.''
CP and BCE Inc. contributed 13 points to the benchmark's advance. BCE shares (bce/tse) rose 70› to $61.60, Canadian Imperial Bank of Commerce (cm/tse) climbed 35› to $51.20 and Bank of Nova Scotia (bns/tse) gained 25› to $39.50.
The paper and forest products grouping was the day's third-best performer with a gain of 1.35 per cent. The index came out at the end of the week with a 0.71 per cent loss. Abitibi-Consolidated gained 80 cents to $22.05. Fletcher Challenge Canada was up 90 cents to $22.15.
CP (cp/tse), which accounts for 2.4% of the TSE 300, rose $1.90 to $43.90 after the company's railroad unit said it boosted its offer to $800 a share from $650 a share for the 4000 shares, or 20%, of the Ontario & Quebec Railway Co. it does not already own.
A fall in gold stocks, which account for 5.5% of the TSE 300, tempered the market's advance. Barrick Gold Corp. (abx/tse) lost 55› to $31.50, Teck Corp. (tekb/tse) dropped 90› to $20 and Echo Bay Mines Ltd. (eco/tse) fell 46› to $4.74
Alcan Aluminium Ltd. shares (AL/TSE) closed Friday at $47.05, up 65›. Alcan is taking a 20% direct stake in the US$1-billion Utkal alumina project in eastern India as part of its long-term strategy to reduce raw material costs, the company said Friday. Its partners are Norway's Norsk Hydro ASA (40%), Alcan affiliate Indian Aluminium Co. Ltd. (20%) and Tata Industries Ltd., the leading Indian industrial conglomerate (20%).
Newfoundland Capital Corp.(NNCb.TO) , which jumped nearly 14 percent or 1.75 to 14.50 after the radio and community paper company's board of directors declared a special dividend of C$5 a share for both class A subordinate voting and class B common shares.
Noble China Inc. (NMO/TSE) closed up 50› at $5.20 on Friday, after trading as high as $6.10. Volume was heavy. The company said on Friday it has won a three-year-old legal dispute, clearing the way to focus on extracting a return from its interest in two breweries in northern China. The Toronto-based company said a binding arbitration ruling has ordered former chairman Lei Kat Cheong to pay it at least $78 million, and probably more than $100 million, although executive vice-president Robert Vaux said the chances of collecting the full award are slim. But at the very least, the arbitration panel's decision will probably mean the company can seize Lei's 5.4 million shares (33% of the total outstanding) in partial settlement of the award and cancel them. That would instantly raise per-share profit, cash flow and asset value by 50%, Vaux said.
Laidlaw Inc.(LDM.TO) rose 0.10 to 20 on nearly 5.4 million shares, topping the most actives. Laidlaw receipts nearly matched shares in volume and stayed flat at 10.60.
Other Canadian markets rose.
The Montreal Exchange portfolio climbed 17.46 points, or 0.5%, to 3871.42, up 10.87 points, or 0.3%, since last Friday.
The Vancouver Stock Exchange rose 6.29 points, or 1%, to 635.83, down 0.47 of a point on the week.
Wall St. charges ahead. Stocks rally into the weekend, as investors feel good about the economy
The Dow Jones Industrial Average ($INDUA) rose as high as 9,131.63 in the first hour of trading, but spent most of the day waffling around the 9,095 level. Optimism returned in the last 45 minutes of trading, sending the index up 83.70, or 0.9%, at the close to 9,147.07 - completing its best two days since Feb. 2-3. For the week, the Dow rose 0.9%.
Troubling to some, however, was that the Dow Transportation Index ($TRAN) fell 23.75 to 3,485.42 Friday and slid over 2% for the week.
The Nasdaq Composite Index (COMP) struggled to stay in positive territory for much of the session, falling as low as 1,864.44, about 4 points off its opening level. But the tech-flavored index managed find its legs late in the day to rise 5.02 to 1,873.43. For the emotionally draining week, the Nasdaq rose 0.24%.
The S&P 500 (SPX) closed up 9.25 to 1,121.02 and ended the week higher by 1.2%. The small-cap proxy Russell 2000 Index ($IUX) rose 2.05 to 484.94 to close the week up 0.8%.
In NYSE trading, a modest 578 million shares were exchanged, while advancing issues edged declining stocks by an 18-to-11 spread. 702.2 million shares were traded on Thursday.
The Nasdaq composite index rose 5.03 points, or 0.3%, to 1873.43, up 4.48 points, or 0.2%, on the week. 763 million shares traded hands, while the breadth of the issues favored losers by a 21-to-20 spread.
In economic news, the NAPM's index of manufacturing activity fell to 52.9% in April from 54.8% in March, a bigger drop than economists were expecting.
Bond prices rose on the news, but finished off their best levels of the session, up 1/4 of a point. The yield on the benchmark 30-year Treasury bond, which moves in the opposite direction of its price, fell to 5.93%.
Thursday's sharp rally was extended on further evidence that inflation remains in check. Early gains sparked by a weaker-than-expected National Association of Purchasing Managers report were soon erased, but the momentum reemerged in the late going to push major indices higher again. The Dow closed up nearly 84, the Nasdaq rose 5, and the S&P 500 climbed 9.25.
Oil producers and drilling stocks were notably stronger, thanks to a hike in crude prices amid rumors of more production cuts by OPEC. Financial names rose as interest rates fell and speculation of further consolidation in the sector was revived. Weakness in drug and airline stocks kept gains for major markets in check, however. Tech stocks were mixed, but with a positive bias.
Stocks also got a boost from speculation that capital gains taxes will be lowered, said David Mead, chief investment officer at Harris Bank in Chicago. Bank shares rose on speculation that mergers and acquisitions will continue to drive prices higher. The chairmen of Fleet Financial Group Inc. and BankBoston Corp. held merger talks as recently as this week, but the negotiations broke down amid differences about whether the Boston-based rivals were a good strategic fit, the Boston Globe reported. Fleet shares (flt/nyse) rose US$3 5/16 to US$89 11/16, BankBoston (bkb/nyse) jumped US$2 15/16 to US$110 7/8 and J.P. Morgan & Co. (jpm/nyse) rose US$3 7/8 to US$135 1/8.
Additionally, American Express (AXP) gained 3 5/16 to 105 1/2 and J.P. Morgan (JPM) closed up 3 7/8 to 135 1/8, leading a strong performance in the banking sector. The Philadelphia KBW Banking Index (BKX) climbed 18.69 to 883.55.
Rumors were circulating Friday that Wells Fargo (WFC), up 18 3/4 to 387 1/4, is in talks to merge with US Bancorp (USB), which rose 3 to 130.
Elsewhere in the group, Citicorp (CCI) gained 2 13/16 to 153 5/16, Chase Manhattan Bank (CMB) climbed 2 5/16 to 140 7/8, and BankAmerica (BAC) rose 2 11/16 to 88 1/16.
FirstMerit (FMER) rose 1 7/8 to 30 1/4 thanks to separate upgrades from A.G. Edwards & Co. and McDonald & Co.
Heller Financial (HF) rose 3 to 30 in its first day of public trading.
Mellon Bank Corp. (MEL) fell 7/8 to 71 1/8 as word spread that Bank of New York (BK) likely will drop its $22 billion takeover bid. BONY shares rose 1 15/16 to 61.
Dow gainers included Eastman Kodak Co. (EK), which rose 1 3/16 to 73 3/8 on news that it is teaming up with Intel to boost its digital imaging business. Additionally, the firm's management had a bullish meeting with analysts in New York.
Boeing (BA) rose 1 5/8 to 51 11/16 after it won a $1.6 billion U.S. military contract.
Cable stocks rose ahead of a key industry conference next week. Cablevision Systems (CVC) rose 2 15/16 to 64 3/8, Tele-Communications Inc. (TCOMA) closed up 2 1/8 to 34 3/8, and Comcast (CMCSK) gained 1 9/16 to 37 3/8.
It was a different story in the drug sector as the AMEX Pharmaceutical Index (DRG) fell 8.19 to 629.70. Merck (MRK) fell 4 3/16 to 116 15/16, and was the big hindrance on the Dow.
Eli Lilly (LLY) fell 3 1/4 to 66 5/16 after Merrill Lynch cut its recommendation on the stock to "accumulate" from "buy." In concert, Warner-Lambert (WLA) slid 1 3/8 to 188, Pfizer (PFE) dropped 1 1/16 to 112 3/4, and Johnson & Johnson (JNJ) closed off 1 5/16 to 70 3/16.
Airline stocks also tumbled, sending the AMEX Airline Index (XAL) down 16.22 to 738.06. The prospect of higher fuel costs sent shares of AMR Corp. (AMR), Delta Air Lines (DAL), US Airways (U) and UAL (UAL) down at least 2 points each.
CD Warehouse (CDWI) rose 2 5/16 to 11 11/16 thanks to positive comments in Investor's Business Daily.
Mycogen (MYCO) jumped 2 5/16 to 22 13/16 on news that Dow Chemical (DOW) wants to buy the 31% of the firm it does not already own. Dow rose 1 11/16 to 98 3/8.
Nutraceutical International (NUTR) fell 6 7/16 to 11 9/16 after reporting a second-quarter loss of 14 cents per share.
Technology bellwethers overcame early jitters, sending the Morgan Stanley High Tech Index (MSH) up by 2.90 points to 581.64 and the Nasdaq 100 Index (NDX) higher by 3.41 to 1251.53. The Philadelphia Semiconductor Index (SOX) closed up 1.06 points to 316.95.
PC makers helped foster the sector's gains. Compaq Computer (CPQ) rose 1 5/16 to 29 3/8, thanks to an upgrade to "buy" from "hold" at Salomon Smith Barney, which set a price target of $40 for the world's largest computer maker. In concert, Dell Computer (DELL) rose 3 1/2 to 84 1/4, another new 52-week high.
Additionally, Intel (INTC), up 1 5/16 to 82 1/8, Novellus Systems (NVLS), which rose 1 3/8 to 49 1/4, and Computer Associates (CA), higher by 1 3/16 to 59 13/16. Dow member IBM (IBM) closed up 1 to 116 7/8, while Sun Microsystems (SUNW) and Cisco Systems (CSCO) both rose fractionally.
After some initial weakness, Internet stocks finished mostly higher. America Online (AOL) rose 3 9/16 to 83 1/2, Amazon.com (AMZN) closed up 2 3/4 to 94 1/2, and Lycos (LCOS) gained 1 9/16 to 63 3/8. Yahoo! (YHOO) and Infoseek (SEEK) both fell fractionally.
Investors regained their fervor for shares of K-Tel International (KTEL), which rose 10 15/32 to 48.
CDNow Inc. (CDNW) fell 2 1/4 to 29 3/4 after the Internet music retailer said its first-quarter loss widened to 78 cents per diluted share. Analysts had estimated a loss of 60 cents a share.
Save for Computer Associates, big software makers exhibited weakness. Industry leader Microsoft (MSFT) fell 1/2 to 89 5/8 while PeopleSoft (PSFT) closed off 2 1/8 to 45 1/8.
Eagle Point Software (EGPT), however, rose 1 7/8 to 6 3/4 after reporting fiscal third-quarter earnings of 7 cents per share, reversing a loss of 5 cents per share a year ago and 6 cents better than expectations.
Drags on tech indices included Lucent Technologies (LU), which fell 1 3/16 to 75 1/16, and Dow component Hewlett-Packard (HP), which slid 7/8 to 74 1/2.
Electronic Data Systems (EDS) plummeted 4 3/8 to 38 5/8 despite reporting first-quarter earnings of 43 cents per share, just a penny shy of expectations.
Adaptec Inc. (ADPT) fell 3 15/16 to 19 3/4 after it reported earnings for its fiscal fourth quarter of 20 cents per diluted share, 8 cents shy of estimates.
Etec Systems Inc. (ETEC) fell 8 7/8 to 47 7/8 after the maker of semiconductor equipment said third-quarter earnings will be below last year's due to delays in shipping a product. Deutsche Morgan Grenfell and Needham & Co. separately downgraded the stock.
Despite beating the Street by 6 cents in reporting first-quarter earnings of 3 cents per share, shares of Informix (IFMX) fell 47/64 to 9 5/32.
Diamond Multimedia Systems (DIMD) fell 1 13/16 to 9 13/16 thanks to a downgrade from CIBC Oppenheimer to "hold" from "buy."
Discreet Logic (DSLGF) fell 2 1/8 to 15 3/4 after reporting fiscal third-quarter earnings of 17 cents per share, 2 cents short of expectations.
STB Systems (STBI) fell 3 7/16 to 10 7/8 following its warning that second-quarter results will not meet expectations.
Amkor Technology (AMKR) rose 2 5/16 from its initial public offering price of $11 per share.
Igen International (IGEN) rose 1 1/4 to 37 5/8 on some positive comments in Business Week.
The Week Ahead
The key "known" issue in the week ahead is the employment report for April, due on Friday. The consensus estimate is that 250,000 jobs were created last month after a decline of 36,000 in March. Unemployment is expected to decline to 4.6% from 4.7%. Both the average hourly earnings and workweek components of the report are projected to rise slightly.
Economic reports this past week, notably the employment-cost index on Thursday, helped snap the market out of its anxiety about the possibility of the Federal Reserve raising interest rates. Still, many traders won't relax until after the employment report has passed.
"Obviously, when you start thinking of the next possible threshold, of course it's employment," said Anthony Karydakis, senior financial economist at First Chicago Capital Markets. "Barring any major surprise with a strong employment report, the Fed is widely presumed to be on hold for a while."
If no outlying numbers emerge from the employment report, Karydakis expects yields on the long bond to "stay trapped here for a while" in the middle of its recent 5.75%-to-6.05% range.
If the past few days are any indication, that should suit equity traders and investors just fine.
The earnings calendar slows in the week ahead, but a bevy of reports are due. Chief among them is Wednesday's report from America Online (AOL). The consensus expectation is that AOL earned 13 cents per share in its fiscal third quarter, up from a penny per share a year ago.
Additionally, Fed Chairman Alan Greenspan has two public speaking engagements scheduled in the week ahead. On Saturday, he addresses the Conference of State Bank Supervisors in Nashville, Tenn.; next Friday, he is the keynote speaker at the Chicago Fed's annual banking conference.
Many on the Street suspect that reports this week in the Wall Street Journal and Washington Post about the Fed moving to a tightening bias were planted in an effort to spook the market lower. If so, the strategy has to be considered a failure and Chairman Greenspan might feel the need to do some "jawboning" of his own.
Never a dull moment.
Major International Markets Were Broadly Higher.
London: British shares extended their gains as fears over a hike in U.S. interest rates subsided. The FT-SE 100 index rose 82 points, or 1.4%, to 6010.3, up 146.4 points, or 2.5%, since last Friday.
Frankfurt: German markets were closed for the May Day holiday. On the week, the Dax index fell 36.84 points, or 0.7%, to 5107.44.
Tokyo: Japanese stocks fell in thin trading on worries over the financial health of some Japanese firms and the yen's weakness. The 225-share Nikkei average lost 40.16 points, or 0.3%, to 15,601.1, down 410.44 points, or 2.9%, on the week. Among losers were some banking issues, apparently hurt by a major Japanese economic newspaper report Friday that Japan's 19 major commercial banks have posted a record 4.37 trillion yen (dlrs 33.10 billion) in combined pretax losses for the fiscal year, which ended March 31.
Hong Kong: The Hang Seng index rose 180 points, or 1.7%, to 10,563.68, but fell 316.25 points, or 2.6%, over the week. Brokers said the Hong Kong market was boosted by overnight gains on Wall Street.
Jakarta: In Indonesia, shares slumped 2.5 percent Friday after President Suharto ruled out political reform before the end of his tenure in 2003. In a warning to campus protesters, Suharto also urged the military to quickly curb any attempts to undermine order as Indonesia endures its worst economic crisis in three decades. Prices of basic commodities have soared and the government has said it will raise fuel and electricity costs by June, deepening the economic burden on Indonesia's 200 million people. The Jakarta Stock Exchange's Composite Index fell 11.610 points, or 2.5 percent, to 448.525.
Sydney: Australian shares raced to a sharply higher close, spurred on by rebounding U.S. markets. The all ordinaries index jumped 42.1 points, or 1.5%, to 2,804.2, but fell 50.7 points, or 1.8%, on the week.
Wellington: New Zealand share prices closed slightly lower, drifting downwards after a strong start to the session on the back of good finishes in the U.S. and Britain's share markets. The NZSE-40 Capital Index fell 3.25 points, or 0.1 percent, to 2,253.29.
The markets were closed for May Day celebrations in the Philippines, Taiwan, South Korea, Singapore, Malaysia and Thailand.
|
