MARKET SNAPSHOT
Cisco rises after earnings
Mild recovery for techs?
By Julie Rannazzisi, CBS MarketWatch
Last Update: 7:46 AM ET May 10, 2000 Market Pulse
Bond Report
NEW YORK (CBS.MW) -- Tech stocks may see a slight recovery at the open with some strength detected in big-cap shares in pre-market trading Wednesday.
June S&P 500 futures rose 2.00 points, or 0.1 percent, and were trading roughly 2.50 point above fair value, according to HL Camp & Co. Nasdaq futures rose 24.50 points, or 0.7 percent.
Cisco Systems added 1 1/4 to 64, according to Madoff Investment Securities in London. See Indications. After the close Tuesday, the networking giant (CSCO: news, msgs) checked in with third-quarter earnings of 14 cents a share, a penny ahead of the First Call estimate. The company earned 9 cents in the year-ago period. See full story.
In the bond market, prices put on a mixed performance in early dealings ahead of Treasury's auction of $8.0 billion in 10-year notes Wednesday afternoon.
The 10-year Treasury note rose 1/32 to yield 6.525 percent and the 30-year bond shed 1/32 to yield 6.21 percent.
No economic data is set for release on Wednesday. View economic calendar and forecasts and historical economic data.
In currency markets, the dollar weakened slightly against the yen and the euro. Dollar/yen shed 0.3 percent to 108.97 while euro/dollar added 0.3 percent to 0.9107.
Tuesday's trading activity
Technology shares stumbled for a second consecutive session Tuesday as buyers remained cautious ahead of a number of key earnings releases and next week's Federal Open Market Committee meeting.
Losses in shares of chip, biotech and computer issues pushed the Nasdaq lower while drug, paper and airline stocks hurt the broader market.
The market's grind lower on light volume continues to reflect investors' edginess on the interest rate and earnings front, observers say.
"The market is trying to hammer out the boundaries of its trading range. It's in a consolidation process and continues to work off the excesses from the October to March period," said Scott Bleier, chief investment strategist at Prime Charter.
"Nobody wants to be a hero right now. It's a trading range kind of market -- pure and simple," he continued.
"What the Fed says about its stance on rates going forward will be key," said Brian Slater, portfolio manager at Condor Capital Management. Though he believes stocks have factored in a 50 basis point rise in short-term rates, he expects the market to tread water until the conclusion of the FOMC meeting.
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Intl' Indexes
The Dow Industrials erased 66.88 points, or 0.6 percent, to 10,536.75.
The Dow's laggards included shares of Microsoft, International Paper, Caterpillar and American Express.
Consumer stocks -- including Coca-Cola, Procter and Gamble, McDonald's, and Wal-Mart -- were among the Dow's upside leaders.
Coca-Cola (KO: news, msgs) shares climbed 1 7/8 to 50 3/8 following an upgrade to Goldman Sachs' recommended list from its previous "market performer" rating. See The Ratings Game.
The Nasdaq Composite dropped 84.37 points, or 2.3 percent, to 3,585.01 while the Nasdaq 100 index lost 76.34 points, or 2.2 percent, to 3,445.26.
The Standard & Poor's 500 Index fell 0.8 percent while the Russell 2000 Index of small-capitalization stocks dropped 1.8 percent.
In the meantime, volume remained extremely light with a total of only 894 million shares trading on the NYSE and 1.44 billion changing hands on the Nasdaq Stock Market. Losers beat winners by 16 to 13 on the NYSE and by 27 to 14 on the Nasdaq.
"We continue to see-saw back and forth with a tug-of-war between those who believe [in the market's upside potential] and those who don't," said John Waterman, managing director of investments at Rittenhouse Financial. "A lot of people are just sitting on the sidelines."
Bleier believes the market's narrow range will frustrate many players and force out some of the "hot money" that brought the market to the excesses witnessed in January and February.
The Cisco test
The earnings reports of a number of bellwethers -- including Dell Computer, Cisco Systems and Applied Materials -- are expected to set the tone for the tech sector this week.
Cisco's earnings will be a true test for the market, Waterman said earlier in the day.
Slater said the quarterly results of Cisco -- the mother of highly-valued stocks -- will be particularly important as investors question the valuation of tech stocks.
Sector movers
Chip stocks led the tech sector on the downside -- following an extremely brief spurt right out of the gate -- with the Philadelphia Semiconductor Index off 5.1 percent. (See 1-year chart of index.)
The Semiconductor Industry Association said Tuesday that surging demand for wireless devices buttressed chip sales to a record $14.96 billion in March -- a 33.8 percent year-to-year increase. See full story. The positive news failed to benefit the sector with Rambus (RMBS: news, msgs) down 12 13/64, or 6.4 percent, to 178 9/16, Applied Materials [a: amat] off 5 1/16 to 90 5/8 and Intel (INTC: news, msgs) down 11/16 to 116 15/16.
Applied Materials will report earnings after the close Wednesday and is expected to earn 55 cents a share in its second quarter, according to First Call estimates.
Retail stocks ended a touch higher with the CBOE Retail Index rising 0.4 percent. Wal-Mart and Dollar General posted gains following the release of their quarterly results.
Wal-Mart (WMT: news, msgs) checked in with first-quarter earnings of 30 cents a share compared to the First Call estimate of 29 cents per share. The company earned 20 cents in the year-ago period. The stock rose 5/8 to 53 and was one of the Dow's upside leaders.
Dollar General (DG: news, msgs) reported a first-quarter profit of 17 cents a share, matching the First Call estimate. The company earned 14 cents in the year-ago period. The stock rose 5/8 to 23 5/16.
CVS Corp. (CVS: news, msgs), also a component of the CBOE Retail Index, checked in with first-quarter earnings of 47 cents a share, in line with the First Call estimate. The company made 40 cents in the year-ago period. But the company warned in its conference call following the release of its quarterly results that second-quarter earnings would fall 1 cent short of analysts' estimates of 46 cents. The retailer is comfortable, however, with analysts' full-year estimate of $1.79 a share. See related story. The stock lost 5/8 to 44 1/8.
Over in the Internet arena, the business-to-business sector took a hit with Merrill Lynch's B2B Holdrs (BHH: news, msgs) off 5.4 percent. Commerce One fell 3 5/16 to 47 3/4 while Ventro Corp. declined 2 13/16 to 27 3/16.
Merrill's Internet Infrastructure Holdrs (IIH: news, msgs) fell 4.7 percent, led lower by shares of Kana Communications, down 6 5/16 to 46 3/8, and RealNetworks, down 3 to 38 1/4.
Specific movers
PSINet (PSIX: news, msgs) posted a first-quarter loss from operations of $1.06 per share, less than the First Call prediction of a loss of $1.28 per share. The company lost 56 cents in the year-ago period. The stock gained 2 5/8 to 26 15/16.
In other news, Sprint (FON: news, msgs) will purchase approximately 26 million shares from the nation?s second-largest Internet service provider EarthLink for about $431 million, or $16.50 per share, bringing its overall investment in the company (ELNK: news, msgs) to 26.7 percent. See full story. EarthLink shares gained 1 7/16 to 18 7/16 while Sprint was off 3/8 to 59 7/8.
Xicor (XICO: news, msgs) plunged 11 11/16 to 6 11/16 after announcing that revenues for the second quarter of 2000 will most likely be flat or lower compared to the first quarter of 2000. The company said earnings will also be below analysts' expectations.
Shares of 3Com (COMS: news, msgs) put on 4 9/16 to 48 1/4 after setting a July 27 date to spin off the remaining 532 million shares it owns in Palm (PALM: news, msgs). Further, 3Com also announced that it has increased its share buyback program to $1 billion for the next two years. See full story. Palm fell 3 1/8 to 29 1/8.
Shares of ExciteAtHome (ATHM: news, msgs) rose 2 7/16 to 19 15/16 after climbing as much as 75 percent on reports that Comcast (CMCSK: news, msgs) is interested in buying AT&T's voting stake in the company. See full story. AT&T added 1/2 to 37 5/8.
Shares of Caterpillar lost 15/16 to 38, relinquishing earlier gains. The company (CAT: news, msgs) was upgraded to a "buy" from a "hold" rating by ABN Amro. See Rating Revisions.
Treasury focus
Treasury prices rose following six straight sessions of declines that saw the yield on the 30-year bond climb by nearly 30 basis points.
The first leg of Treasury's refunding took place without problems for the market, with $12.0 billion in 5-year notes sold at a high yield of 6.789 percent and a bid-to-cover ratio -- which measures demand -- of 1.98.
The 10-year Treasury note rose 10/32 to yield 6.53 percent and the 30-year bond added 14/32 to yield 6.22 percent. See Bond Report.
In economic news, March wholesale inventories rose by 0.7 percent.
In currency markets, the dollar gained more ground against the yen, with weakness in Japan's stock market hurting the Japanese currency. The Nikkei 225 index fell 355.42 points, or 1.95 percent, to a six-month closing low of 17,844.54. See full story.
Dollar/yen rose 0.2 percent to 109.14 while euro/dollar added 1.2 percent to 0.9073.
In the commodity arena, June crude lost 4 cents to $28.05 while the Bridge CRB index gained 1.41 to 217.13. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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