WALL ST WEEK AHEAD - Will Microsoft spoil rally?
By Amy Collins
November 07, 1999 15:43
NEW YORK, Nov 7 (Reuters) - Only a week after Microsoft Corp. joined the Dow 30, analysts are wondering whether the wounded software giant will become an albatross around the neck of Wall Street's emerging rally.
In a massive anti-trust case, a U.S. federal judge said the world's largest software company used its monopoly power to punish competitors and had done consumers harm.
"Clearly, this is a severe blow to Microsoft. And as of last week, it's in the Dow (Jones Industrial average) so it will play out with a real negative tone in the early goings," Arthur Hogan, chief market analyst at Jefferies & Co. said shortly after the judge's ruling was released.
"I think upon appeal it may not be as harmful to Microsoft at the end of day as it appears, but it's clearly disappointing and it will set a negative tone to the market."
Some analysts said a detrimental Microsoft decision may already be priced into the company's stock.
"I think Microsoft all along felt that the ruling was quite likely to go this way with this judge, and the Street has been girding for it for a year," said Arnold Berman, a technology strategist at Soundview Technology Group Inc. in Stamford Conn.
"Microsoft stock, in a week where the Nasdaq broke 3,000 for the first time, has been acting decidedly tired in anticipation of this," he said.
How widely the decision will ripple through the market remains to be seen.
"I think the stock market in the last several months has moved not because of Microsoft, but in spite of it," said Arnie Owen, managing director of capital markets at Cruttenden Roth.
"One of things that's going on is the change of leadership. We've gone away from box makers and chip makers. We've gone into telecom and fiber optics."
The market continued its rally Friday after the October payroll data gave more confidence to analysts who believe the Federal Reserve is less likely to raise interest rates at its Nov. 16 policy setting meeting.
"We think the market should continue this momentum in light that strong economic growth is not translating into higher inflation," Alan Skrainka, chief market strategist at Edward Jones in St. Louis.
A new Reuters poll Friday showed that the top Wall Street brokerages were divided over whether the Fed will raise interest rates Nov. 16, a shift away from confidence a week earlier that a hike was imminent.
The survey found that 16 of 30 primary dealers of U.S. government securities expect no rate change, 12 foresee a rise and two said it was too close to call. A week earlier, 18 were predicting a raise on Nov. 16.
The important economic data this week is Wednesday's producer price index, a measure of wholesale prices, and third quarter productivity data and unit labor costs Friday.
The Dow Jones industrial average Friday closed 64.84 points higher, or 0.61 percent, at 10,704.48. The broad Standard and Poor's 500 index ended up 7.59 points, or 0.56 percent, at 1,370.23.
The Dow, which ended its first week with four new components, closed down 25 points for the week. The two prior weeks showed a gain of 710 points, which erased the highest one-week point loss ever, of 630 points, for the week ended Oct. 15.
The new components to the Dow are Microsoft, Intel Corp. , SBC Communications Inc. and Home Depot Inc. .
The Nasdaq composite index was up 46.34 points, or 1.52 percent to 3,102.29 Friday, and up 135 points for the week with six consecutive all-time high closes on the strength of technology shares.
Breadth has been strong in heavy volume on the Big Board and Nasdaq, giving analysts reason to put more credence in the rally.
"It's one way to measure whether there's real investment demand behind the move. Is the fire power there?" said Gregory Nie, a technical analyst at First Union Securities Inc. in Chicago. "We're very close to getting back into sync."
Although the bulk of third-quarter earnings are out of the way, a handful of big technology and retailing companies are on tap this week.
Cisco Systems Inc. , Dell Computer Corp. , Wal-Mart Stores Inc. , May Department Stores Co. , Federated Department Stores Inc. , Gap Inc. , Intimate Brands Inc. and Abercrombie & Fitch Co. are all expected to report this week, according to First Call/Thomson Financial. |
