MARKET SNAPSHOT---For "DR. DAVE's Late Late Show"
Bonds tumble
Another drubbing for Nasdaq
Dow remains perky
By Julie Rannazzisi, CBS MarketWatch
Last Update: 5:22 PM ET Apr 11, 2000 Market Pulse
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NEW YORK (CBS.MW) -- The Nasdaq took another hit Tuesday, pressured by the tech and biotech sectors, which were dragged down by significant losses in shares of Motorola and Biogen following their earnings releases.
"We'll probably test the lows of last week on the Nasdaq," opined Peter Cardillo, chief strategist and director of research at Westfalia Investments. But this week's selling, he said, is occurring in an orderly fashion compared to last week.
Over the next few weeks, the market will continue to separate the winners from the losers and scrutinize quarterly results.
"What counts isn't necessarily earnings but revenue growth and what management has to say about the future. You'll see more victims if there's talk of lower profit margins," Cardillo added, referring to Tuesday's news from Motorola. "It's a wake-up call for many in the market."
"Motorola made the market nervous, but companies that come up with good revenue growth and earnings are going to be rewarded," said Jon Burnham, president of Burnham Securities.
In the broad market, paper, oil service, utility, airline and drug stocks rose while brokerage and gold stocks backpedaled.
The Dow Industrials put on 100.52 points, or 0.9 percent, to 11,287.08, propelled by gains in its "old-economy" names such as Coca-Cola, Honeywell, Alcoa and McDonald's. The Dow is still off 1.8 percent for the year.
The divergence continues to favor the Dow as investors look for a safe-haven place to park their money, Cardillo said. He believes the blue-chip barometer can reach new highs in the short term. The Dow's last record close was on Jan. 14, when the index ended at 11,722.98.
The Nasdaq Composite tumbled 132.30 points, or 3.2 percent, to 4,055.90 after falling as much as 179 points in morning dealings. The Nasdaq is down 0.3 percent for the year but has climbed 406 points from its low of 3,649 last Tuesday.
"Much of the selling activity will likely become more earnings and group-specific [going forward]," said Brian Belski, chief investment strategist at George K. Baum.
He believes the big-cap tech stocks have a better chance of outperforming the small- and mid-cap techs over the next months due to their stronger near-term fundamental readings.
Many segments of the market were priced for perfection and investors are punishing any minor disappointment -- on the earnings front and otherwise -- with steep selling, said Bill Schneider, head of block trading at Warburg Dillon Read.
The Standard & Poor's 500 Index lost 0.3 percent while the Russell 2000 Index of small-capitalization stocks fell 1.6 percent.
Volume came in at 971 million on the NYSE and at 1.67 billion on the Nasdaq Stock Market. Winners outpaced losers by 15 to 14 on the Big Board while decliners clobbered advancers by 30 to 12 on the Nasdaq.
A drop in shares of Motorola (MOT: news, msgs), off 27, or 17.9 percent, to 124, put a damper on the tech sector Tuesday. The company (MOT: news, msgs) warned Tuesday that its wireless phone business is likely to face pressure on profit margins for the rest of the year due to a shift away from more expensive wireless phones to cheaper models as well as shortages of key components. Motorola thus expects to earn 67 cents in the second quarter and $3.14 for the year compared to the First Call estimate of 70 cents and $3.18, respectively.
J.P. Morgan downgraded Motorola to a "long-term buy" rating from a "buy" on slower-than-expected expansion in operating margins in the personal communications systems sector. And First Union Securities reiterated its "buy" rating on Motorola and upped its price target to $209 from $159, saying the company's results were solid with the only concern stemming from European handset margins. See Rating Revisions.
Late Monday, meanwhile, Motorola registered a profit from operations of 59 cents a share, a penny ahead of the First Call estimate. See full story. Merrill's Broadband Holdrs (BDH: news, msgs), which include Motorola, fell 6.7 percent.
Losses in Biogen, off 12, or 18.5 percent, to 53, pressured the biotech arena. After the close Monday, the company (BGEN: news, msgs) posted a first-quarter profit from operations of 41 cents per share compared to the First Call estimate of 43 cents a share. See full story. Biogen was downgraded to an "attractive" from a "buy" rating by PaineWebber and to an "outperform" from "buy" by ABN Amro. USB Piper Jaffray lowered its price target to $84 from $69 and reiterated its "neutral" rating on the stock.
Merrill Lynch's Biotech Holdrs (BBH: news, msgs) fell 5.3 percent with the largest losses seen in Millennium Pharmaceutical (MLNM: news, msgs), off 15 1/2 to 134 5/16, and Celera Genomics (CRA: news, msgs), down 11 1/8 to 88 7/8.
Meanwhile, B2B companies remained under pressure, with Merrill's B2B Holdrs (BHH: news, msgs) losing 8.0 percent, led by SciQuest, off 3 5/8 to 20 1/16, and PurchasePro, off 4 1/2 to 43 1/2.
In specific issues, Abbott Laboratories (ABT: news, msgs) saw its shares rise 1 to 38 1/16. The company posted first-quarter earnings of 44 cents per share, in line with the First Call estimate.
Separately, TAP Pharmaceutical Products -- a joint venture between Abbott Laboratories and Japan's Takeda Chemical Industries -- said an FDA subcommittee recommended approval of Uprima for the treatment of erectile dysfunction. Pfizer (PFE: news, msgs), maker of the impotence drug Viagra, ended flat at 39 13/16.
Shares of ViroPharma (VPHM: news, msgs) tumbled 48 1/2, or 67.6 percent, to 23 1/4 after the company reported results from three late-stage trials of its drug Pleconaril that didn't meet statistically significant primary endpoints. See full story. The company received downgrades from Morgan Stanley Dean Witter, J.P. Morgan and USB Piper Jaffray.
Shares of Dow-component International Paper (IP: news, msgs) added 9/16 to 43 11/16. The company registered a profit from operations of 60 cents per share, 2 cents ahead of the First Call estimate. See full story and view
Earnings Surprises.
The Philadelphia Forest and Paper Products Index added 2.3 percent.
Shares of Sears (S: news, msgs) added 2 15/16 to 40 7/8. Banc of America raised its 12-month price target to $51 from $44 and reiterated its "strong buy" rating.
Nike (NKE: news, msgs) rose 2 1/8 to 45 1/8. Banc of America raised its 6- to 12-month price target to $51 from $46 and set a $57 12- to 18- month price target. The brokerage also reiterated its "strong buy" recommendation.
See After Hours for post-market trading activity.
In the Treasury market, prices fell sharply, erasing earlier safe-haven, Nasdaq-driven gains. Speculation that a large fund was unloading government paper to scoop up cheap agency bonds sparked a swift turnaround.
The 10-year Treasury note fell 26/32 to yield 5.88 percent while the 30-year bond tumbled 1 20/32 to yield 5.78 percent. See Bond Report.
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There are no economic numbers set for release on Tuesday. A string of market-moving data will be unveiled later in the week. Wednesday will see the release of the import and export price indexes.
In the meantime, Fed Chair Alan Greenspan's speech at the National Skills Summit at Howard University didn't mention monetary policy. View economic calendar and forecasts and historical economic data.
In currency markets, dollar/yen was recently trading at 106.97, up 0.5 percent from the previous close, while euro/dollar slipped 0.3 percent to 0.9589.
In the commodity arena, May crude added 29 cents to $24.14 while the Bridge CRB index edged down 0.31 to 208.29. See full story and view latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
