MARKET SNAPSHOT
Nasdaq close to flat
Jittery investors control the Dow
Productivity up 2.4%
By Julie Rannazzisi, CBS MarketWatch
Last Update: 3:32 PM ET May 4, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- Cautious investors, fearful that the upcoming employment report will show larger-than-expected strength, kept the Dow Industrials underwater throughout Thursday's session. But selling in the Nasdaq abated late in the day, mimicking a move witnessed on Wednesday.
Weakness in the retail and financial sectors held the broader market down. Major retailers reported April 2000 sales on Thursday, with some in line and some -- as in Kmart's case -- well below expectations. See full story. Utility, gold and oil service stocks rose, as did the biotech sector, which recovered following a bruising two-day sell-off.
Market participants remain nervous as expectations for a 50-basis-point rate hike at the next Fed meeting mount, causing players to stay sidelined. Fed Chief Alan Greenspan, who spoke at a Chicago banking conference Thursday morning, did not shed light on the central bank's intentions on monetary policy and stuck to the topic of bank regulation. See full story.
The Dow Industrials fell 64 points, or 0.6 percent, to 10,415 at 3:31 p.m. Downside leaders were Wal-Mart, Walt Disney, Home Depot and McDonald's. Upside leaders were old-economy companies such as Exxon Mobil, Alcoa and Boeing.
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The Nasdaq Composite slipped 6 points, or 0.2 percent, to 3,701. The Nasdaq 100 index, which encompasses the largest Nasdaq stocks by market capitalization, lost 17 points, or 0.5 percent, to 3,547.
The Standard & Poor's 500 Index lost 0.5 percent while the Russell 2000 Index of small-capitalization stocks added 0.9 percent.
Uphill road
Market observers believe it will be an uphill road for tech stocks going forward.
"I believe tech stocks will struggle for a bit. I don't feel the sector has bottomed yet," said Mike Vogelzang, chief investment officer at Boston Advisors.
"Money continues to flow into mutual funds but it has moved away from technology," he added. "Wall Street believes the economy will slow later in the year and that the Fed will overshoot on the tightening front. This will create more volatility in the months ahead."
Joseph Barthel, chief investment strategist at Fahnestock & Co., believes the Nasdaq is oversold and expects a countertrend rally to develop -- which he expects to be short-lived in nature.
There may be some relief once the Fed meeting is over but come June, Barthel believes the Nasdaq can revisit this year's lows.
"We continue to see light volume both on the upside and the downside. Unless volume picks up on the upside, rallies will be used as an opportunity to sell," according to Todd Gold, technical strategist at Gruntal & Co.
But Gold said the Nasdaq's ability to erase over half of its losses late Wednesday was a positive sign for the market, as was the increased buying interest in some of the larger tech stocks.
Volume came in at 784 million on the Big Board and at 1.06 billion on the Nasdaq Stock Market. Market breadth remained positive despite the market's decline with advancers beating decliners by 15 to 12 on the NYSE and by 19 to 18 on the Nasdaq.
On the economic front, first-quarter productivity came in at 2.4 percent, the slowest pace since last year's second quarter. That compared to the expected 3.7 percent increase. See full story. Further, unit labor costs rose 1.8 percent, slightly more than consensus expectations.
In specific issues, Walt Disney inched down 1/16 to 41 3/16. Late Wednesday, the company (DIS: news, msgs) posted a second-quarter profit from operations of 18 cents a share compared to the First Call estimate of 14 cents a share. Higher advertising revenue at ABC and ESPN bolstered Disney's profit. See full story.
Shares of Kmart (KM: news, msgs) fell 7/8, or 9.8 percent, to 7 7/16. The company reported disappointing April sales, which fell 0.8 percent, and said it would not meet its first-quarter earnings goal. The retailer now expects earnings of about 5 cents a share for the first quarter, well short of the First Call estimate of 10 cents a share.
Shares of Wal-Mart (WMT: news, msgs) were still reeling from a Goldman Sachs downgrade on Wednesday, losing 2 1/16 to 51 3/8. On Thursday, the retailing giant reported that same-store sales jumped 10.9 percent in April, ahead of an estimate of 8 percent by Schroders.
Shares of Charles Schwab (SCH: news, msgs) fell 2 5/16 to 42 15/16. The company announced a 3-for-2 stock split late Wednesday.
In earnings news, Gene Logic posted a first-quarter loss of 21 cents per share on Thursday, wider than the First Call projection of a loss of 15 cents a share. The company (GLGC: news, msgs) lost 25 cents per share during the same period last year. Shares fell 4 1/8 to 26. See story.
Shares of Sapient (SAPE: news, msgs) jumped 16 5/8, or 21 percent, to 96 following its addition to the Standard & Poor's 500 Index, replacing Reynolds Metals, which was acquired by Alcoa.
Shares of Chiron Corp. put on 1 7/16 to 36, bolstering the biotech sector. The AMEX Biotech Index, of which Chiron is a component, rose 4.5 percent. See related story. The company (CHIR: news, msgs) posted late Wednesday a profit from operations of 21 cents a share in the first quarter, compared to the 16 cents projected by First Call. See full story.
Inktomi (INKT: news, msgs) rose 4 13/16 to 150, buttressed by the announcement of two separate alliances with Nokia and DoubleClick. Merrill Lynch's Internet Infrastructure Holdrs (IIH: news, msgs), of which Inktomi is a component, inched up 0.9 percent.
In the bond market, prices recovered, though the 30-year continued to lag the rest of the yield curve. Yields have increased substantially in the previous trading sessions as investors' nervousness has increased.
The 10-year Treasury note inched up 1/32 to yield 6.40 percent and the 30-year bond fell 7/32 to yield 6.13 percent.
With expectations building that the central bank will be more aggressive on the tightening front on the heels of stronger-than-expected economic news and hawkish comments from Fed officials, market participants have become wary and have dumped Treasury bonds.
In other news released Thursday, weekly initial claims rose 20,000 to 303,000. View economic calendar and forecasts and historical economic data.
In currency markets, the dollar gave back some of the hefty gains posted in recent trading sessions against the yen. The euro remained soggy and has continued to set fresh lows day after day as confidence in the fledgling currency wanes. See related story. Euro/dollar lost 0.4 percent to 0.8918 in recent trading while dollar/yen fell 1.0 percent to 108.03.
In the commodity arena, June crude added 27 cents to $27.02 while the Bridge CRB index climbed 1.49 to 216.68. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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