MARKET SNAPSHOT
Mixed open for U.S. shares
Bonds drop
By Julie Rannazzisi, CBS MarketWatch
Last Update: 7:43 AM ET Apr 28, 2000 Market Pulse
BOND REPORT
NEW YORK (CBS.MW) -- The U.S. stock market is poised for an open on a mixed note Friday in a session that will see only a small number of quarterly results released. Some strength was detected in the technology sector in pre-market trading, which saw an encouraging run-up on Thursday.
June S&P 500 futures rose 6.20 points, or 0.4 percent, and were trading approximately 1.20 points below fair vlaue, according to figures provided by HL Camp & Co. Nasdaq futures climbed 15.00 points, or 0.4 percent.
In the bond market, prices extended losses in thin dealings. The 10-year Treasury note lost 3/32 to yield 6.25 percent and the 30-year bond dropped 5/32 to yield 6.00 percent.
On the economic front, Friday will see the release of March personal income, expected to rise by 0.6 percent, and personal consumption expenditures, expected to show a 0.8 percent increase. View economic calendar and forecasts and historical economic data.
In currency markets, dollar/yen rose 0.8 percent to 107.24. Euro/dollar, which continues to set fresh record lows each session, changed hands at 0.9050, or 0.6 percent lower from the previous session.
Thursday's trading activity
A burst of buying activity in many big-cap technology stocks took the Nasdaq sharply higher Thursday in the face of key economic data revealing that wage inflation is on the rise.
The technology sector got a helping hand from a number of positive earnings releases, which bolstered investors' confidence and brought out the bargain hunters.
The Dow Industrials, meanwhile, was held down by a slump in the financial and retail sectors though rallies in its tech components lifted the blue-chip barometer well off its lows.
"Thursday's numbers offered a great excuse to sell. It feels like the market's bottoming because [shares acted so well]," said Michael Vogelzang, president and chief investment officer at Boston Advisors.
Inside the broad market, bank stocks were, not surprisingly, among the hardest hit as expectations of higher interest rates hurt the financial sector. Biotech, utility, retail and airline stocks were also in the red. Among the sectors on the upside were gold and oil service shares. In the tech arena, semis were the upside leaders, with the Philadelphia Semiconductor Index up 7.0 percent. The market also saw gains in many of the Internet companies that posted better-than-expected results.
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The Dow Industrials lost 57.40 points, or 0.5 percent, to 10,888.10 after dropping as much as 198 points earlier in the day. Downside leaders were AT&T, Home Depot, J.P. Morgan and Coca-Cola. Upside leaders were Intel, Microsoft and United Technologies.
The Nasdaq Composite added 143.94 points, or 4.0 percent, to 3,774.03 after falling as much as 117 points immediately after the open.
Despite the Nasdaq's positive price action Thursday, many observers said the index still needs to prove itself. In fact, market breadth lacks strength and the narrow participation suggests a lack of conviction.
"Investors continue to question whether the Fed will be able to engineer a soft landing and are taking a wait-and-see approach," said Sam Stovall, Standard & Poor's senior investment strategist. The Nasdaq's low volume, he continued, suggests that there's still a dearth of buyers.
"The Nasdaq's rebound off its lows is encouraging. But we [need to see] follow-through buying to push the index convincingly higher. Internals are still hazy. We're not showing conviction," said Todd Gold, technical strategist at Gruntal & Co.
"The technology group is still very sloppy and needs to demonstrate better strength. Otherwise the current bounce will be just a bounce in a downtrend and further risk will follow," echoed Robert Dickey, chief technical analyst at Dain Rauscher Wessels. "It?s too early -- perhaps just by days -- to make a big commitment to the group."
Volume stood at 1.11 billion on the Big Board and at 1.55 billion on the Nasdaq Stock Market. Losers pounced on winners by 16 to 13 on the NYSE while advancers beat decliners by 21 to 20 on the Nasdaq.
The Standard & Poor's 500 Index inched up 0.3 percent while the Russell 2000 Index of small-capitalization stocks added 2.1 percent.
In the meantime, the initial public offering of AT&T Wireless Group (AWE: news, msgs) rose slightly in its first day of trading, gaining 1 3/8 to 31 1/2.
The 360 million-share deal priced at $29.50, around the middle of its $26 to $32 per share range. The IPO -- the largest in history in the U.S. -- raised $10.6 billion. AT&T shares lost 3 to 48. See IPO Report.
The B2B sector ended sharply higher, with Merrill Lynch's Holdrs (BHH: news, msgs) up 7.6 percent. Some of the biggest gainers included SciQuest, VerticalNet and CheckFree Holdings. The latter (CKFR: news, msgs) jumped 14 13/16 to 54 3/8.
Bank of America (BAC: news, msgs) and CheckFree announced an alliance Thursday under which Bank of America will sell its electronic billing and payments business to CheckFree in exchange for a 16-percent stake in the company. Shares of Bank of America ended off 1/2 to 51 1/4. See full story.
Shares of Scient (SCNT: news, msgs) rose 1 13/16 to 53 7/16. WR Hambrect reiterated its "buy" rating on the company and set an $80 price target while Donaldson, Lufkin & Jenrette raised its price target on the stock to $112 from $90. See Rating Revisions.
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. See full story.
"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 an increase in the cost of benefits. "Wages and salaries also picked up speed. Inflation is spreading quite rapidly."
While Lonski believes the fed funds rate will end the year at 7 percent, he doesn't think the ECI rise on Thursday will necessarily render the Fed more aggressive and produce a 50-basis-point rate increase at the May 16 Federal Open Market Committee meeting.
"The Fed will take a look at the equity market before deciding," Lonski said. The central bank last hiked short-term rates on March 21, bringing them 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 4 1/2 to 45 3/8. See full story.
BroadVision (BVSN: news, msgs) rose 7 5/8 to 40. After the close Wednesday, the company posted first-quarter earnings of 4 cents a share, 2 cents head of the First Call estimate. See story.
Network Solutions (NSOL: news, msgs) saw its shares rise 20 9/16 to 135 15/16 after reporting earnings of 20 cents per share, well ahead of the First Call estimate of 14 cents a share. Read the story.
Amazon.com fell 5/8 to 52 7/8. 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. Prudential Securities upgraded the company to a "strong buy" from a "hold" while First Union Securities downgraded the company to a "hold" from a "buy."
Shares of Halliburton lost 1 7/8 to 45 1/2. 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. See Earnings Surprises. Lehman Brothers upped the company to a "buy" from a "neutral" rating.
InfoSpace added 7 61/64 to 72. 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 2 1/2 to 66 1/2. 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 5 7/16 to 51 7/16. The company lost 16 cents in the first quarter, blasting past the First Call projection of a loss of 27 cents a share.
See After Hours for post-market trading activity.
Bond focus
In the bond market, prices turned sharply lower as investors began to focus on the steamy economic numbers. In addition, stability in the equity market caused safe-haven flows to fade.
In the meantime, Treasury conducted its fourth buyback, paying $3.725 billion to purchase $3.0 billion in previously-issued debt with maturities ranging from Feb. 2015 to Aug. 2020. Offers totaled $10.831 billion.
The 10-year Treasury note lost 23/32 to yield 6.23 percent and the 30-year bond dropped 18/32 to yield 5.99 percent. See Bond Report.
In other economic news released Thursday, weekly jobless claims rose 26,000 to 283,000.
In the currency arena, the dollar initially fell on weakness in the financial markets but was quick to regain its composure.
The euro remained underwater -- reaching fresh lows -- 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 0.9096, off 1.5 percent, after reaching a fresh record low of 0.9061 in recent dealings. Dollar/yen, meanwhile, edged up 0.2 percent to 106.40. As expected, the Bank of Japan maintained its current zero interest rate policy -- in place since Feb. 1999 -- at its policy board meeting Thursday.
In the commodity arena, June crude added 77 cents to $25.42 while the Bridge CRB index lost 0.21 to 210.33. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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