MARKET SNAPSHOT
Another gaggle of earnings
Shares poised for a pause
By Julie Rannazzisi, CBS MarketWatch
Last Update: 8:49 AM ET Apr 19, 2000 Bond Report
NEW YORK (CBS.MW) -- The U.S. stock market appears ready to pause Wednesday following two straight sessions of mammoth gains. A gaggle of earnings reports will continue to invade the market and set the tone for individual stocks.
June S&P 500 futures lost 1.70 points, or 0.1 percent, and were trading roughly 3.20 points below fair value, according to HL Camp & Co. Nasdaq futures, meanwhile, lost 3.00 points, or 0.1 percent, erasing the brunt of their earlier losses.
Many stocks had a buy-the-rumor and sell-the-fact reaction to their quarterly results.
Intel, for example, lost 4 to 125 in pre-market trading, according to Madoff Investment Securities in London, after posting better-than-expected results late Tuesday. The company (INTC: news, msgs) posted a first-quarter profit from operations of 88 cents a share, beating the First Call estimate of 69 cents a share. Read full story. On Tuesday, Morgan Stanley Dean Witter upgraded the company to a "strong buy" rating from an "outperform."
America Online's third-quarter earnings came in at 11 cents a share late Tuesday, 2 cents ahead of the First Call estimate. See full story. Shares (AOL: news, msgs) tacked 1 1/4 onto its NYSE close to 61 3/4, Madoff said.
And IBM fell 5 1/8 from its NYSE close to 110, Madoff said. The Dow-component (IBM: news, msgs) registered first-quarter earnings of 83 cents a share after the close Tuesday, beating the First Call estimate of 78 cents a share. Big Blue's sales dipped 5 percent in the fiscal first-quarter. Dwindling personal computer sales hurt earnings and Y2K was still a factor in the decline of its hard-disk drive business. But IBM executives expect 2000 will be a good year. View story.
On Wednesday, Lucent Technologies posted a second-quarter profit from operations of 25 cents a share, 3 cents ahead of the First Call estimate. Shares (LU: news, msgs) inched up 1/4 to 59 1/2 in Instinet dealings. See full story.
In the bond market, prices were close to the unchanged mark in early dealings with little news to focus on and a fixation on the stock market's movements.
On the economic front, Wednesday saw the release of the February trade gap, which widened to $29.2 billion, much larger than the expected $27.7 billion. A surge in oil imports due to the recent rise in crude prices was the main factor behind the huge deficit. View economic calendar and forecasts and historical economic data.
The 10-year Treasury note was flat to yield 6.07 percent and the 30-year bond added 1/32 to yield 5.90 percent. See Bond Report.
In currency markets, dollar/yen was recently trading at 104.59, off 0.1 percent from Tuesday's close, while euro/dollar added 0.3 percent to 0.9473.
Tuesday's trading activity
Encouraged by a flurry of positive earnings results in both tech and non-tech companies, the bulls stampeded on Wall Street Tuesday. The frenzied buying was concentrated in technology shares and took the Nasdaq to its largest point gain in history.
The Nasdaq has risen a remarkable 14 percent over the past couple of trading sessions and is up a whopping 17.5 percent from its low of 3,227 reached in intra-day dealings Monday. But the tech-packed index is still down nearly 25 percent from its record close of 5,048 on March 10.
"Everyone is conditioned to buy the dip. People don't want to be left on the side. And everyone's breathing a sigh of relief right now," said Peter Boockvar, equity strategist at Miller, Tabak & Co.
The market's furious comeback following last week's rout is by no means unexpected, Boockvar said. And momentum is making the upside move just as violent as it was on the downside, he said.
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While Monday's rally was extremely selective in nature, investors' increased confidence translated into a broad advance on Tuesday, with improved market breadth and impressive climbs in second- and third-tier names. In fact, the B2B and biotech sectors -- which had been shunned for weeks -- came roaring back.
Within the tech arena, Internet, networking and computer software stocks were the star performers. The Goldman Sachs Internet Index rose a whopping 11.2 percent. The broader market, meanwhile, got a boost from a stellar showing in financial stocks. Bank and brokerage shares benefited from a slew of better-than-expected earnings reports and expectations that the market's return to health will improve their bottom line in the second quarter.
The only areas that ended in the red were the utility, paper chemical and gold sectors.
The Dow Industrials tacked on 184.91 points, or 1.8 percent, to 10,767.42, led by shares AT&T, Microsoft, Johnson & Johnson, Citigroup and Intel.
The Nasdaq Composite climbed 254.41 points, or 7.2 percent, to 3,793.57, ending at session highs on high volume.
The Standard & Poor's 500 Index gained 2.9 percent while the Russell 2000 Index of small-capitalization stocks put on 5.8 percent.
Volume was heavy, checking in at 1.09 billion on the Big Board and at 2.15 billion on the Nasdaq Stock Market. Market breadth improved markedly from Monday with advancers beating decliners by 20 to 10 on the NYSE by 33 to 11 on the Nasdaq.
Wait-and-see mode
While encouraged by the rally, many market watchers took a wait-and-see approach to Tuesday's price action.
Todd Gold, technical strategist at Gruntal & Co., said two days of rallies don't signify the market has reached a bottom and that the worst is over. A marked and sustainable improvement in market internals is needed, he said, in order to successfully push through resistance.
Gold said it's unlikely the market will witness a V-shaped bottom. It's more likely prices will chop back and forth in order to form a base from which to stage a solid rebound.
A V-shaped bottom, Boockvar said, would render the market more vulnerable to another sharp correction.
In addition, Boockvar warned that the reasons the market sold off so badly last week -- inflation fears and overvaluation -- didn't disappear.
"A bear market should not end in a month and a half. It should take four to five months to clear out the excesses," said Bill O'Neil, founder and chairman of Investor's Business Daily. Thus, be ready to see prices whipsaw back and forth as the markets "base" and prepare for their next lasting advance.
O'Neil remains bullish for the long term. "Technology and the Internet are here to stay," he said. Once the healthy process of washing out the excesses takes place, he sees a roaring bull market returning in the fall.
O'Neil suggests that investors still on margin or fully invested use rallies to decrease their leverage.
On fire sectors
The business-to-business sector rebounded smartly, with Merrill Lynch's B2B Holdrs (BHH: news, msgs) up 18.1 percent. Sharp gains were seen in Commerce One, up 12 to 82 3/8, Retek, up 6 3/8 to 23 1/8, and FreeMarkets, up 19 1/4 to 72. Agile Software jumped 16 3/16, or 78 percent, to 36 7/8.
USB Piper Jaffray upgraded FreeMarkets to a "strong buy" rating from a "buy" rating. See Rating Revisions.
And Merrill's Internet Infrastructure Holdrs (IIH: news, msgs) jumped 29.7 percent. Vitria Technology put on 17 3/8, or 82.2 percent, to 38 1/2, and BroadVision, up 11 1/8 to 38.
Vitria benefited from Credit Suisse First Boston's reiteration of a "strong buy" rating on the stock. In addition, the company (VITR: news, msgs) posted a loss from operations of a penny a share in the first quarter, two cents ahead of the First Call estimate of a loss of 3 cents a share.
The online brokerage sector also saw sharp gains, helped by a backdrop of positive quarterly results as well as expectations that there will be huge increases in account growth.
DLJdirect posted first-quarter earnings of 13 cents a share, well ahead of the First Call estimate of 4 cents a share. The stock (DIR: news, msgs) climbed 1 3/16 to 10 3/4. Shares of E-Trade(EGRP: news, msgs) put on 3 5/16 to 21 1/2 while Ameritrade piled on 2 9/32 to 17 1/8. See full story.
In other news, PaineWebber (PWJ: news, msgs) checked in with first-quarter earnings of $1.16 a share versus the First Call estimate of $1.09 a share. The stock rose 2 11/16 to 41 1/2. Other brokerages rose in tandem, with Merrill Lynch up 9 1/4 to 99 1/2 and Goldman Sachs up 6 1/4 to 93 3/4.
Earnings deluge
Four Dow companies unleashed quarterly results early Tuesday. See Earnings Surprises.
Coca-Cola (KO: news, msgs) posted a first-quarter profit from operations of 32 cents a share compared to the First Call estimate of 21 cents per share. The consensus analyst estimate included 10 cents per share in charges for the impact of a planned inventory reduction. The stock inched up 1/8 to 48 5/8 after climbing ahead of its report on Monday. See full story.
Caterpillar (CAT: news, msgs) registered first-quarter earnings of 73 cents a share, well ahead of the 58-cent per share First Call estimate. The stock lost 11/16 to 40 1/4.
Johnson & Johnson (JNJ: news, msgs) posted first-quarter earnings of 93 cents a share, two cents ahead of the First Call estimate. Shares rose 4 to 81 1/2.
Finally, Dow component Philip Morris posted first-quarter earnings of 89 cents a share, in line with the First Call estimate. Shares (MO: news, msgs) added 9/16 to 20 11/16. See story.
Texas Instruments lost 1/2 to 148 1/2 after running up ahead of its positive earnings release on Monday. The company (TXN: news, msgs) posted first-quarter earnings of 55 cents a share late Monday compared to First Call's 53-cent per share projection. See full story. A.G. Edwards upped the company to a "buy" from an "accumulate" rating.
Shares of Wit Capital (WITC: news, msgs) tacked on 1 1/8 to 11 1/2. Late Monday, the company posted earnings of 8 cents a share, handily beating First Call expectations of 2 cents a share. See full story.
EMC Corp. registered strong first-quarter earnings Tuesday. The company (EMC: news, msgs) posted earnings of 30 cents a share, 1 cent ahead of the First Call estimate. Shares rose 5 5/8 to 130 1/8. See full story.
Pfizer (PFE: news, msgs) registered a first-quarter profit from operations of 28 cents a share, beating the First Call estimate of 25 cents per share. The stock added 1 9/16 to 39 9/16. See full story.
Vitesse Semiconductor (VTSS: news, msgs) shed 10 1/2 to 62 9/16. The company posted late Monday second-quarter earnings of 16 cents a share, a penny ahead of the First Call estimate. Shares See story.
DoubleClick (DCLK: news, msgs) checked in late Monday with a loss of 11 cents a share in the first quarter, matching the First Call estimate. Shares lost 8 3/16 to 51 5/8. See full story.
Novellus (NVLS: news, msgs) posted first-quarter earnings well above Wall Street expectations, with results of 45 cents a share compared to First Call's projection of 39 cents a share. Shares climbed 7 3/16 to 60 11/16.
In the bond market, prices ended mixed. Stock watching remained the Treasury market's favorite sport. Treasury's announcement that it will buy back $2 billion in debt Thursday ranging from Feb. 2020 to August 2025 gave only some short-lived support to the market.
The 10-year Treasury note shed 5/32 to yield 6.07 percent and the 30-year bond added 12/32 to yield 5.91 percent. See Bond Report.
Tuesday saw the release of March housing starts, which fell 11.2 percent to 1.604 million compared to the expected 1.70 million. Building permits lost 4.5 percent to 1.579 million compared to the expected 1.65 million. See full story.
In currency markets, dollar/yen was recently trading at 104.69, up 0.2 percent from the previous close, while euro/dollar lost 0.7 percent to 0.9458.
In the commodity arena, May crude added 22 cents to $26.11 while the Bridge CRB index rose 0.75 to 212.75. See full story and view latest commodity prices.
Julie Rannazzisi is Markets Editor for CBS MarketWatch. |
