Stock Market Update
Sun, 07 Feb 1999, 9:36pm EST
U.S. Stocks May Rise as Intel, Microsoft, Lucent Bounce Back
U.S. Stocks May Rise as Intel, Microsoft, Lucent Bounce Back
New York, Feb. 7 (Bloomberg) -- U.S. stocks may rise
tomorrow, as Intel Corp. and other computer-related companies
bounce back amid optimism that the concern about rising interest
rates that drove the market down was overdone.
''I think the technology stocks will come back,'' said Don
Selkin, a market strategist at Joseph Gunnar & Co. ''If the bond
market stabilizes, we should get a snapback, especially on the
Nasdaq.''
In Globex trading today, Standard & Poor's 500 Index futures
for March settlement rose 2.00 to 1245.50, or 0.1 percent above
''fair value,'' which takes into account dividends, cost of money
and number of days until expiration. Nasdaq Composite Index
futures rose 8 to 2005, and Dow Jones Industrial Average futures
fell 3 to 9327.
Selkin said he bought Intel and Microsoft Corp. shares last
week as they declined. Intel, the world's largest chipmaker, fell
9 percent to 127 9/16, and Microsoft, the world's largest
software maker, dropped 8 percent to 160.
Dell Computer Corp., Cisco Systems Inc. and Lucent
Technologies Inc. also are attractive buys, he said. ''That's
where the money is going to be made.''
The Dow average dropped 0.6 percent last week and the S&P
500 Index lost 3.1 percent.
Chubb Corp. may rise tomorrow as an article in Barron's said
the 14th-largest U.S. property and casualty insurer may be a
takeover target after its fourth-quarter profits dwindled.
Companies speculated to be interested are U.S. financial-services
companies, European companies such as Aeogon NV and Allianz AG,
and Warren Buffet's Berkshire Hathaway Inc., Barron's reported.
Rates Are Benign
Stocks and bonds fell last week after a string of
unexpectedly strong economic reports triggered concern that the
Federal Reserve's next move might be to raise interest rates in
an attempt to head off inflation. The Nasdaq, packed with
computer shares, fell 5.3 percent, its biggest drop in four
months. Higher rates wuld crimp company earnings.
Still, many investors are confident this will not happen,
given that there is little inflation.
''We continue to think - by and large -- that inflation is
under control and that rates are going to be a benign factor on
the market,'' said James Carroll, a portfolio manager at Loomis
Sayles & Co., which manages $10 billion.
''Cyclical'' stocks, those that do best when the economy is
growing and the most sensitive to inflation, such as
manufacturers, and producers of energy and commodities, rose last
week and are expected to continue their strong performance.
''There's somewhat of a revival -- most of us are
underrepresented in those stocks,'' said Robert Stovall,
president of Stovall/Twenty-First Advisers Inc., which oversees
$1 billion. Stovall said stocks that are attractive include Alcoa
Inc. and Deere & Co. He also mentioned Kennametal Inc., which he
said he owns.
Alocoa, the biggest aluminum producer, rose 7 percent to 89
1/2, last week. It trades at 17 times estimated earnings. Deere &
Co., the No. 1 farm equipment maker, with a P/E of 13, rose 2
9/16 to 35 last week, leading the Morgan Stanley Cyclical Index
higher.
Oil stocks, which also perform best when the economy grows,
gained. Chevron Corp. rose 6 percent last week to 78 7/8 and
Exxon Corp. rose 2 percent to 71 11/16.
''The whole value side of the stock market is going to do
relatively better,'' Loomis's Carroll said.
A spate of strong economic data has surprised many
investors. Not the least was a report from the Commerce
Department, which said the gross domestic product, the total
output of good and services, rose at a faster-than-expected 5.6
percent annual rate in the fourt quarter, capping a year in which
the economy expanded 3.9 percent.
To be sure, not all investors are excited by the prospects
of investing in these stocks.
''The cyclical stocks, the Alcoas, the Phelps Dodges, are
not an area where you can make big money,'' said Selkin.
Movers
AMR Corp. shares may fall tomorrow after its American
Airlines, the No. 2 U.S. carrier, canceled about 11 percent of
flights today after pilots didn't show up for work in a dispute
over the company's purchase of Reno Air Inc.
City Holding Co., a bank holding company, may fall after
reporting a fourth-quarter loss of 90 cents, compared with
earnings of 39 cents a year earlier.
Pioneer Group Inc. may fall after the diversified money-
management company reported a fourth-quarter loss of 40 cents,
compared with earnings of 29 cents a year earlier. The company
said it expects to report an operating loss in the first quarter
and will return to profitability by the second half of the year.
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