Market Snapshot
Nasdaq recovers; Dow in the red
ECI up 1.4%; GDP up 5.4%
By Julie Rannazzisi, CBS MarketWatch
Last Update: 10:30 AM ET Apr 27, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- The Nasdaq staged a rapid about-face Thursday as dip buyers emerged to snap up technology issues following a steep drop at the open. The Dow Industrials, on the other hand, remained deep in negative territory, held down by inflation fears sparked by stronger-than-expected economic data.
Inside the market, bank and brokerage stocks were, not surprisingly, among the hardest hit as expectations of higher interest rates tend to hit the financial sector the most. Biotech, retail, oil service and drug stocks also slid. Among the sectors on the upside were gold and chemical stocks. In the tech arena, semis were the upside leaders.
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The Dow Industrials dropped 121 points, or 1.1 percent, to 10,824 at 10:23 a.m.
The Nasdaq Composite added 20 points, or 0.6 percent, to 3,650 after falling as much as 117 points immediately after the open.
The Standard & Poor's 500 Index lost 0.6 percent while the Russell 2000 Index of small-capitalization stocks inched down 0.3 percent.
Volume stood at 267 million on the Big Board and at 346 million on the Nasdaq Stock Market. Losers pounced on winners by 16 to 7 on the NYSE and by 21 to 10 on the Nasdaq.
Data watch
The first-quarter employment cost index rose 1.4 percent, buttressed by higher benefits costs. It was the index's largest gain since the third quarter of 1989 and easily beat the 1.1 percent increase projected by Wall Street. Year-over-year, the ECI rose 4.3 percent in the first quarter, the largest increase in more than eight years. See full story.
First-quarter gross domestic product, meanwhile, rose by a less-than-expected 5.4 percent. The market had expected a 6 percent increase. Moreover, the GDP price deflator rose by a higher-than-expected 2.7 percent, triggering more inflation jitters.
"Inflation is back as a threat to the U.S. economy and financial markets," said John Lonski, chief economist at Moody's Investors Service, adding that the rise in the ECI was not just driven by a rise in the cost of benefits. "Wages and salaries also picked up speed. Inflation is spreading quite rapidly."
Lonski believes the fed funds rate will rise to 7 percent by year end. The Fed last hiked rates on March 21, bringing short-term rates to 6 percent.
Earnings news
MCI WorldCom posted first-quarter earnings of 43 cents a share after payment of preferred dividends. That was in line with the consensus estimate of analysts surveyed by First Call. The stock (WCOM: news, msgs) rose 1 1/4 to 42 1/8. See full story.
BroadVision (BVSN: news, msgs) rose 4 1/8 to 36 1/2. After the close Wednesday, the company posted first-quarter earnings of 4 cents a share, 2 cents head of the First Call estimate.
Amazon.com fell 2 1/2 to 51. Late Wednesday, the company (AMZN: news, msgs) reported that it lost 36 cents in the first quarter compared to the First Call prediction of a loss of 36 cents per share. See full story.
Shares of Halliburton lost 1 to 42 5/8. Late Wednesday, the company (HAL: news, msgs) said it made 11 cents a share in the first quarter, in line with the First Call estimate. The company also announced its board of directors approved a share repurchase program for up to 44 million shares, or about 10 percent of the company's outstanding common stock.
InfoSpace added 61/64 to 65. Late Wednesday, the company (INSP: news, msgs) checked in with a first-quarter profit of 1 cent a share, handily beating the First Call projection of a loss of 6 cents a share.
Celera Genomics (CRA: news, msgs) lost 4 1/8 to 64 7/8. The company registered a third-quarter loss of 45 cents a share after the close Wednesday, ahead of the First Call estimate projecting a loss of 49 cents a share.
VerticalNet (VERT: news, msgs) advanced 4 to 50. The company lost 16 cents in the first quarter, blasting past the First Call projection of a loss of 27 cents a share.
Bond focus
In the bond market, prices were mixed, erasing most of the losses posted on the heels of the strong economic data. Weakness in the equity market will likely produce safe-haven flows into the Treasury market throughout the session.
The 10-year Treasury note lost 1/32 to yield 6.14 percent and the 30-year bond added 7/32 to yield 5.93 percent. See Bond Report.
In other news, weekly jobless claims rose 26,000 to 283,000. Separately, Fed Chair Alan Greenspan will speak in the afternoon. View economic calendar and forecasts and historical economic data.
Currency corner
The dollar initially fell on weakness in the financial markets but was quick to regain its composure.
The euro remained underwater following the European Central Bank's decision to raise short-tern rates by 25 basis points to 3.75 percent. The ECB said the euro's current levels don't reflect the euro-zone's strong economic fundamentals. The market had expected the rate hike and observers said only a more aggressive 50-basis-point move would have helped the sagging euro over the near term.
Euro/dollar was recently trading at 0.9165, off 0.7 percent, after reaching a fresh record low of 0.9140 earlier in the day.
Dollar/yen, meanwhile, edged up 0.1 percent to 106.28. As expected, the Bank of Japan maintained its current zero interest rate policy -- in place since Feb. 1999 -- at its policy board meeting Thursday. continued.
In the commodity arena, June crude added 20 cents to $24.85 while the Bridge CRB index lost 0.09 to 210.63. View latest commodity prices.
Julie Rannazzisi is Markets Editor for CBS MarketWatch.
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