MARKET HEADING DOWN TODAY?
U.S. Stocks May Decline as Intel Rating, Forecasts Cut at Morgan Stanley
By Deborah Stern
U.S. Stocks May Decline as Intel Rating Cut by Morgan Stanley
New York, June 18 (Bloomberg) -- U.S. stocks may decline as
Intel Corp.'s investment rating and earnings estimates were cut
at Morgan Stanley Dean Witter & Co.
''It definitely has a negative impact,'' said Jim Herrick,
managing director at Robert W. Baird & Co. in Milwaukee. ''Any
time you have a big brokerage downgrade Intel it's going to have
a big effect on the stock.''
September futures on the Standard & Poor's 500 Index fell 3
to 1352.50, after trading as high as 1362.50. That's about even
with ''fair value,'' taking into account dividends, cost of money
and number of days until expiration. The Nasdaq 100 Index futures
contract sank 6.50 to 2211, losing a 6.50-point gain. The Dow
Jones Industrial Average contract fell 20 to 10,935.
Intel, the world's biggest maker of semiconductors for
personal computers, fell 2 1/4 to 55 3/4 in early trading. The
stock has lost half its value since Jan. 29 amid concern that its
revenue and earnings will be hurt as it sells more of its cheaper
processors.
Computer-related companies suffered most in the past two
months as bond yields climbed. Investors tend to buy such stocks
for earnings projected far into the future, and higher interest
rates reduce the present value of those profits.
Stocks rallied yesterday as investors interpreted
congressional testimony by Federal Reserve Chairman Alan
Greenspan to mean that rate increases will be more limited than
expected.
''The main message from Greenspan was that there may be a
preemptive tightening at the end of this month, but probably an
insurance policy and not a series of tightenings,'' said John
Praveen, global market strategist at Credit Suisse Asset
Management, which oversees $194 billion.
Intel
Intel's investment rating was cut to ''outperform'' from
''strong buy'' by Morgan Stanley analyst Mark Edelstone. The
analyst reduced his 1999 earnings estimates for the chipmaker to
$2.25 from $2.35.
Adobe Systems Inc. the No. 1 maker of graphics software used
by magazines and newspapers, gained 2 5/8 to 76 1/2 after topping
earnings forecasts. ''Adobe was an upside surprise, and that can
only help the techs,'' said Peter Coolidge, managing director of
equity trading at Brean Murray & Co.
Adobe said fiscal second-quarter earnings surged 61 percent
on strong sales of its Acrobat Web publishing software. The
company earned 70 cents a share in the quarter ended June 4.
Adobe said June 2 its results would beat the 65-cent average
analyst estimate from First Call Corp.
Gillette Co. fell 3 3/4 to 43 9/16 in trading on the
Instinet system after the world's biggest maker of razors and
blades warned second-quarter profits will miss analysts'
forecasts for the rest of this year because of declining sales in
Brazil, Russia and Japan.
The maker of Mach3 razors, Duracell batteries and other
consumer goods said earnings will decline about 20 percent, more
than expected. Gillette said profits are expected to rebound by a
percentage increase in the ''high single digits'' in the third
quarter and ''in the mid-teens'' in the fourth quarter, both less
than forecast.
Today marks the quarterly expiration of options on common
stocks and stock indexes, as well as futures on indexes.
Investors and Wall Street brokerages buy or sell stocks and
options in the days leading up to the expirations to reverse
earlier bets.
Stocks have generally risen in options expiration weeks over
the past five years, and that was the case this week.
Still, today may see. It's a Friday in the summer, it's an
options expiration day and there's still not consensus on what
Greenspan might do,'' Coolidge said.
''There's a hesitation until the Fed acts, and I don't see
you'll see the Dow break out of a trading range of 10,400-
11,000'' until the Fed policy-makers' meeting at the end of June.
Web IPOs
Internet companies GoTo.com Inc., Mail.com Inc. and Viant
Corp. could rise in their first day of trading.
The Bloomberg U.S. Internet Index rallied 16 percent in the
past three days, after a 43 percent drop from its April 13 high
cooled demand for Internet shares.
NextCard Inc. rose 3.9 euros, or 11.6 percent, to 37.50 in
Germany. The issuer of credit cards over the Internet said it's
adding $1 million a day to the $150 million it already has lent
to holders of its cards. NextCard, which began trading last
month, is increasing its loans to customers by some 45 percent a
quarter, Chairman and Chief Executive Jeremy Lent said. After
three years in business, NextCard has 100,000 customers and is
taking on 10,000 more each month, he said.
Genzyme Corp. rose 0.70 euros to 45.70 after the
biotechnology company said it expects earnings of $1.85 a share
in 1999. The company is expected to earn $1.76, based on the
average estimate from First Call.
Wet Seal Inc. could fall after the retailer of fashions for
young women said second-quarter earnings could be similar to the
year-earlier's 35 cents-a-share results if same-store sales
continue at the same rate. The company was expected to earn 44
cents, according to the average estimate from First Call.
Nova Corp. may fall after the fourth-largest U.S. processor
of credit-card transactions said its fiscal 2000 earnings will
range between $1.48 and $1.52 a share, lower than the average
$1.73 estimate from analysts polled by First Call.
Iomega Corp. may decline after the maker of the Zip storage
drive for personal computers warned of a second-quarter loss and
said it will cut 450 jobs as it closes two California plants. The
company expects a loss, excluding a $45 million restructuring
charge, of 5 cents to 10 cents a share. Analysts polled by First
Call expected Iomega to break even in the second quarter. The
stock closed yesterday at 4 3/8, down from a 1996 high of 27.
Frontier Corp. fell 0.30 euro to 55.40 after the No. 5 U.S.
long-distance phone provider rejected an unsolicited $13.13
billion takeover proposal from Qwest Communications International
Inc., saying it won't break an existing agreement with Global
Crossing Ltd.
Qwest, which fell 0.30 euro to 35.50, said it won't raise
the offer it made Sunday and that it's ''confident'' the bid will
eventually be determined ''superior.''
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