MARKET SNAPSHOT
Tech shares sizzle
NAPM index weaker, jobs data ahead
By Julie Rannazzisi CBS MarketWatch
Last Update: 4:11 PM ET Jun 1, 2000
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NEW YORK (CBS.MW) -- Economic data unveiling softer economic growth helped alleviate interest rate concerns and sent technology stocks sharply higher Thursday. The buying was particularly heated in big-cap tech names.
Market participants now sense that the Fed's tightening cycle may be coming to an end and this has awaken the somnolent bulls. The recent slew of data has increased the perception that another 25-basis-point rate hike may put an end to the current rate hike cycle, which began in June 1999.
"Softer housing, auto and retail sales numbers are raising hopes that the Fed may not have to do a lot more to slow down the economy," said John Waterman, managing director at Rittenhouse Financial. "But we need another month to see a pattern develop in the data."
Friday's employment data will be key in determining a trend as the central bank is most worried about the tight jobs market and a cooling off would be welcome. A survey of economists conducted by CBS MarketWatch.com predicts a 370,000 increase in May non-farm payrolls with a 3.9 percent unemployment rate. Average hourly earnings are seen rising 0.4 percent.
"This is what people were banking on. We're [finally] seeing signs that the Fed's six interest rates are having a dampening effect on the economy," said Brian Slater, portfolio manager at Condor Capital Management.
The National Association of Purchasing Management index for May revealed slower growth in the manufacturing sector. The index fell to 53.2 percent compared to April's 54.9 percent and expectations for a 55.2 percent reading. Key subcomponents also revealed a softer manufacturing sector, with the prices paid index at 65.8 percent from the previous 76 percent and the new orders index at 51.1 percent from April's 56.3 percent. See full story.
Thursday's technology buying was particularly intense in the big-cap names, with shares of Cisco Systems, Sun Microsystems, Oracle and Microsoft registering solid gains.
"All the quality names are coming back in a big way," Slater said.
In the broader market, biotech, bank and brokerage stocks lifted while chip, Internet and computer software issues propelled the tech sector. Oil service, paper and utility shares were downside movers.
The Dow Industrials tacked on 129 points, or 1.2 percent, to 10,652.
The Dow is receiving most of its support from its technology components. In fact, Hewlett-Packard, Microsoft and Intel were among the blue-chip barometer's upside leaders. But the Dow's financial components also improved following the release of friendly economic data Thursday morning with gains in Citigroup and J.P. Morgan.
"If we keep up this pace and Friday's jobs data is also benign, people will gain further confidence," Slater said.
The Nasdaq Composite put on 181 points, or 5.3 percent, to 3,582 -- its fifth largest point increase in history.
The Nasdaq 100 index surged 194 points, or 5.9 percent, to 3,518.
The Standard & Poor's 500 Index advanced 2.0 percent while the Russell 2000 Index of small-capitalization stocks climbed 3.4 percent.
Volume was decent, standing at 957 million on the NYSE and at 1.58 billion on the Nasdaq Stock Market. Market breadth was positive, with advancers outnumbering decliners by 21 to 9 on the NYSE and by 27 to 13 on the Nasdaq.
Sector movers
The business-to-business sector is flying Thursday, with Merrill Lynch's B2B Holdrs (BHH: news, msgs) up a heady 8.6 percent. Among the upside movers were PurchasePro (PPRO: news, msgs), up 1 51/64 to 23 1/16. The company has been picked by Hilton Hotels (HLT: news, msgs) to establish a hospitality purchasing exchange.
Shares of other B2B firms moved higher in tandem with the broad market rally. Ariba (ARBA: news, msgs) picked up 10 percent, or 5 1/46 to 57 3/8 while Internet Capital Group (ICGE: news, msgs) up 3 7/8 to 30 13/16.
The drug sector slipped, erasing earlier gains, with the AMEX Pharmaceutical Index ($DRG: news, msgs) off 0.4 percent. But Pfizer (PFE: news, msgs), up 1 1/16 to 45 9/16, bucked the trend. Merrill Lynch named the company a "Focus One" stock and reiterated its "near-term, long-term buy" rating. Merrill said Pfizer is the best-positioned pharma company in the industry.
Shares of retail issues reacted to the relesae of monthy sales data. The S&P Retail Index ($RLX: news, msgs) added 0.6 percent. Best Buy (BBY: news, msgs) put on 5 1/2 to 69 1/2 after reporting that first-quarter sales were up 24 percent -- a record for the period and one that beat out even management?s most optimistic expectations. See related story. Best Buy said it expects earnings per share to reach 34 cents, 6 cents above the First Call estimate.
Kmart's same-stores sales rose 0.9 percent and its shares (KM: news, msgs) added 5/16 to 8 13/16. Shares of Dow-component Wal-Mart (WMT: news, msgs) shed 3/4 to 56 7/8. The company reported a 7.4 percent increase in comparable stores sales.
Individual issues
Microsoft (MSFT: news, msgs) rose 2 5/16 to 64 7/8. (See 6-month chart.) Late Wednesday, Microsoft attorneys labeled a government breakup proposal "defective" in a final effort to persuade a federal judge not to split the software titan. U.S. District Court Judge Thomas Penfield Jackson said the U.S. government will have until Monday to respond to Microsoft. Goldman Sachs made positive comments on Microsoft earlier in the session, saying the bad news was already factored in. See full story.
Shares of Qualcomm (QCOM: news, msgs) gained 3 5/8 to 70. China Unicom said that plans to build a wireless communications network based on CDMA technology was still on track, according to a report in the China Daily, which cited an unnamed company spokesperson. On Tuesday, reports surfaced that China Unicom told analysts it would not adopt CDMA, causing a 13 percent drop in shares of Qualcomm. See Market Pulse.
Hewlett-Packard (HWP: news, msgs) saw its shares jump 9 percent, or 10 11/16 to 130 7/8, and was the Dow's upside leader. Banc Of America upped H-P's rating to a "strong buy" from a "buy." On Wednesday, H-P said Amazon.com will become one of its top five customers under a new deal to supply 90 percent of the company's (AMZN: news, msgs) technology infrastructure, including Internet servers and storage.
And Motorola (MOT: news, msgs) put on 5 1/2 to 99 1/4. ABN Amro upped the company to a "buy" from an "outperform."
Shares of ExciteAtHome jumped 7 percent, or 1 5/16 to 19 13/16. Late Wednesday, ExciteAtHome (ATHM: news, msgs) announced a strategic alliance with Akamai Technologies (AKAM: news, msgs) to improve the content and applications delivery over ExciteAtHome's network. Akamai put on 7 to 73 3/4.
Shares of Net2Phone (NTOP: news, msgs) surged 3 1/8 to 32 5/8. After the close Wednesday, the company posted a net loss of 21 cents a share, narrower than the 22 cents a share expected by First Call. In the year-ago period, the company lost 3 cents a share. Dain Rauscher Wessels upped the stock to a "strong buy" rating form a "buy" and raised its price target to $81 from $77.
Verio (VRIO: news, msgs) lost 2 1/2 to 54 3/8 following a downgrade by Donaldson Lufkin & Jenrette to an "underperformance" from a "buy" rating. See Rating Revisions.
Treasury focus
Bond prices turned higher, erasing the mild losses registered out of the gate. The positive data added to Wednesday's euphoria.
The 10-year Treasury note climbed 17/32 to yield 6.21 percent while the 30-year bond shot up 29/32 to yield 5.95 percent. The 30-year's yield dipped below 6 percent in intra-day dealings Thursday for the fist time since May 2.
In other economic news, April construction spending fell 0.6 percent compared to expectations for a 0.1 percent increase. And weekly initial claims rose 1,000 to 286,000. See Economic Forecast, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen continued its ascent, gaining 1.1 percent to 108.80, its highest level since mid-May. The greenback reached a peak of 109.05 in early trading Thursday. Euro/dollar, meanwhile, lost 0.7 percent to 0.9306.
Lending some support to the dollar was news that Japan's Financial Supervisory Agency ordered Daihyaku Mutual Life Insurance to suspend some of its operations. Daihyaku is the third life insurer to fail in Japan after Nissan Mutual Life Insurance in 1997 and Toho Mutual Life Insurance in 1999, according to the Nihon Keizai Shimbun. The news, while expected, was nonetheless viewed as a reason dump yen.
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Daihyaku's failure is a good example of how a sharp drop in equity prices -- with the Nikkei 225 index off 20 percent since mid-April -- can snowball into a death spiral, according to Carl Weinberg, chief economist at High Frequency Economics. "Daihyaku's problem is that unrealized losses on the equities in its portfolio drove the net asset value of the company negative."
In the commodity market, July crude rose 37 cents to $29.38 after plunging $1.34 to $29.01 on Wednesday. The Bridge CRB index edged up 0.59 to 223.84. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch.
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