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cbs.marketwatch.com
30Y bond: 6.16%
More rate jitters; more losses
By Kevin N. Marder, CBS MarketWatch
Last Update: 7:11 PM ET Aug 3, 1999 Bond Report
NEW YORK (CBS.MW) -- Beset by seemingly endless fears of a higher interest rate backdrop, investors sold into an early rally Tuesday, leaving U.S. shares in a pool of red by day's end.
"The buyers have stepped aside, saying, 'it's the summer, it's slower, we don't know where interest rates are going, let's just step aside for a while,' " said Jay Susskind, director of trading at Ryan Beck & Co.
The Dow Jones Industrial Average advanced 31.35 points to 10,677.31, making it the lone winner among popular indexes.
The Nasdaq Composite descended 35.64 points, or 1.4 percent, to 2,587.99. The Standard & Poor's 500 Index fell 0.4 percent. The Russell 2000 Index of small-capitalization stocks sank 1.4 percent.
"We're getting these strong openings and weak closes, which is very typical when you're in a corrective phase," noted Gregory Kuhn, portfolio manager at Kuhn Asset Management Co.
"The market's oversold and we're due for a short-term rally," said Ralph Bloch, chief market analyst at Raymond James & Associates Inc. "This rally will be technical in nature and will not, in my opinion, be the start of anything meaningful and healthy on the way up."
The broader market acted poorly -- and miles worse than a Dow up 31 points. New York Stock Exchange losers whipped winners by 19 to 11. Decliners embarrassed risers by over 2 to 1 in the Nasdaq Stock Market.
"If the breadth figures continue as weak as they have been, I think over the next two to four weeks the market will be in a topping-out pattern," said Bloch. "And a close beneath Dow 10,500 will complete that top and give us a minimum move down to 9,800." See related story.
As in Monday's fall, small- and mid-sized stocks fared much worse than blue-chip issues.
"There was a sense that maybe we could hold here as long as some of these leaders acted okay," Kuhn continued. "But today, they're all starting to come in. VISX, Qualcomm, and QLogic are all down. And your prior leadership group, the Internets, is crumbling."
In the bond market, Treasurys lost ground for the fourth consecutive session Tuesday as buyers shied away from the market, awaiting crucial economic data later in the week. The 30-year Treasury fell 22/32, to yield 6.163 percent. See Bond Report.
The reports considered most vital are Thursday's second-quarter productivity release and Friday's data on July jobs growth. See economic preview and economic calendar and forecasts.
On the Big Board floor, turnover picked up 21 percent to 743 million shares, but was only slightly above its recent average.
Beneath the surface, the Internets ($GIN) were scarred, with volume picking up in many of the issues. The three-month decline in the group has occurred on moderate turnover, with few Net issues succumbing to the sell-at-any-cost volume climax that often coincides with a bottom in a stock, group, or market. Tuesday's downdraft wasn't tied to a single fundamental cause, but rather the group's hypersensitivity to the market's deteriorating interest rate backdrop.
Utility and energy sectors, traditional defensive plays in uncertain times, outperformed.
Added Kuhn, who steered his hedge fund into a 100 percent cash position a week and a half ago: "When Lucent and Nokia came down after their earnings reports, the hair on the back of my neck stood up. These were stocks that had showed the potential to move higher. When they couldn't, something was wrong." See related story.
The action of the current cycle's speculative growth stock glamours was particularly disturbing: Qualcomm depreciated 12 1/2 to 140, VISX 8 1/8 to 92 5/8, QLogic 5 3/4 to 76 5/8, Copper Mountain 13 1/2 to 102 1/2, and NextLink 16 9/16 to 87 7/8.
Yahoo (YHOO: news, msgs) might pay more than $17 billion for ExciteAtHome (ATHM: news, msgs), BusinessWeek Online reported. Excite stock put on 7/16 to 43 3/8 and Yahoo shares declined 6 15/16 to 125 3/8. ExciteAtHome's president denied the report, saying there's "no truth" to the speculation. See full story.
Comments by Credit Suisse First Boston analyst Bill Burnham weighed on electronic brokerage stocks. Burnham, noting a drop in online trading volume in July vs. April, believes it's probable that the third-quarter figure will represent a fall from that of the second period. That would be the first sequential decline for the group. Listen to interview with Burnham.
As a result, E-Trade Group (EGRP: news, msgs) shed 4 5/16 to 24 11/16, Ameritrade (AMTD: news, msgs) 2 3/4 to 21 1/4, National Discount Brokers (NDB: news, msgs) 4 15/16 to 32 1/8, DLJdirect (DIR: news, msgs) 2 1/2 to 18 5/8, and Charles Schwab (SCH: news, msgs) 4 11/16 to 37 3/4. Giant Nasdaq market maker Knight/Trimark Group (NITE: news, msgs) fell 4 7/32 to 37 8/256 in sympathy.
America Online surrendered 4 1/16 to 88 13/16 on double its average volume, its heaviest turnover since April 19. In the process, the Internet heavy undercut its June 15 low of 89 1/2, the prior lowpoint since its April 6 record high of 175 1/2. It traded as low as 86.
Other marquee Nets recoiled to the tune of 5 percent to 9 percent. EBay gave back 6 7/8 to 84 3/8, and CMGI sagged 6 7/16 to 81 7/8. But Amazon.com tacked on 7/8 to 94 7/8.
EarthLink Network (ELNK: news, msgs) fell 3 7/16 to 41 7/16 after Morgan Stanley Dean Witter started covering the Internet service provider with an "outperform" recommendation.
Morgan also initiated coverage of two other 'Net outfits with "outperform" opinions. Exodus Communications (EXDS: news, msgs) fell 5 3/16 to 109 1/4 and Verio (VRIO: news, msgs) eased 3/4 to 69 7/8.
Cigna (CI: news, msgs) reported second-quarter operating net of $1.22 a share, a dime richer than the Street's forecast, according to First Call. Revenue grew 8 percent. Merrill Lynch slimmed its rating to "near-term accumulate" from "buy." The stock moved down 5 7/8 to 83 5/8.
Algos Pharmaceutical (ALGO: news, msgs) lost more than half of its value afer the company said its lead product MorphiDex wasn't approved by the U.S. Food & Drug Administration for the treatment of cancer pain. The stock cratered 14 5/16, or 59 percent, to 9 15/16. See full story.
UnumProvident (UNM: news, msgs) lost nearly one-third of its value, down 15 5/16 to 36 3/8, after the disability insurer netted 71 cents a share from operations in the second quarter. Most analysts polled by First Call had counted on a nickel less. See full story.
Global Crossing (GBLX: news, msgs) was down 1 7/8 to 38 1/8. The undersea cable network operator's second-quarter losses narrowed to a penny a share, in line with the First Call forecast, from 58 cents in the same period of 1998.
IVillage (IVIL: news, msgs) fell 3 1/2 to 36 5/8 after the operator of a Web site for women reported a second-quarter loss of 72 cents a share. That was a nickel better than most analysts canvassed by First Call had envisioned. IVillage had lost $1.85 a share in the same period of 1998.
Henry Schein (HSIC: news, msgs) faded 5 3/8 to 15 1/2. The healthcare products distributor warned that third-quarter dental sales will be as much as 5 percent below last year's corresponding period. As well, the company said fourth-quarter dental sales will be flat-to-5 percent higher than the year earlier, at best. See full story.
After Tuesday's close of trade, Maxim Integrated Products (MXIM: news, msgs) said fiscal fourth-quarter profit totaled 34 cents a share, matching the First Call estimate, and a penny richer than the year-ago figure. In afterhours Instinet activity, the shares changed hands at 63 3/4 from a regular-session close of 64 7/8.
After Tuesday's close of trade, Theglobe.com (TGLO: news, msgs) reported a second-quarter pro forma operating loss of 27 cents a share, a nickel better than the First Call forecast. In the second quarter of 1998, the Web site operator lost $1.65 a share. In afterhours Instinet activity, the shares weren't trading.
After Tuesday's close of trade, The Limited (LTD: news, msgs) said robust demand for its Express brands and Lerner New York and Lane Bryant product lines should allow it to net 26 cents a share from operations in the second quarter. Wall Street had anticipated 19 cents, per First Call. In afterhours Instinet activity, the shares weren't trading.
After Tuesday's close of trade, apparel retailer Intimate Brands (IBI: news, msgs) said it believes it will earn 34 cents a share in the second period, 6 cents more than the First Call view. In afterhours Instinet activity, the shares changed hands at 44 5/8 from a regular-session close of 44 1/2.
See latest commodity prices and currency rates.
LOOKING FORWARD
Wednesday, the June factory orders report will be presented at 10:00 a.m. ET. Most forecasters expect a 0.4 percent rise.
See economic calendar and forecasts, daily calendar, weekly calendar, and earnings calendar.
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