MARKET SNAPSHOT
Microsoft gains in pre-market trading
Tech shows some strength
By Julie Rannazzisi CBS MarketWatch
Last Update: 8:57 AM ET Jun 8, 2000
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NEW YORK (CBS.MW) -- A judge ruling to split Microsoft in two has been viewed as a buying opportunity by investors as shares of the software behemoth have been rising in trading before the opening bell Thursday.
The bounce in Microsoft shares is helping the tech sector, which looks ready to climb at the open. June S&P 500 futures rose 2.00 points, or 0.1 percent, and were trading around fair value, according to HL Camp & Co. Nasdaq futures, meanwhile, climbed 52.50 points, or 1.4 percent.
Microsoft (MSFT: news, msgs) added 1 1/4 to 71 3/4, according to Madoff Investment Securities in London. See Indications. U.S. District Judge Thomas Penfield Jackson ordered after the close Wednesday that Microsoft (MSFT: news, msgs) be split into two separate companies -- one centered on the Windows operating system and the other based on its application software businesses -- to remedy antitrust violations. The ruling will also place conduct restrictions on the company. Microsoft immediately vowed to appeal. See full story.
"This is an unwarranted and unjustified intrusion into the marketplace," Microsoft chief executive Steve Ballmer told a news conference in Rotterdam. Read the story.
The government market, meanwhile, traded a smidgen lower out of the gate.
The 10-year Treasury note fell 1/8 to yield 6.16 percent while the 30-year bond lost 5/32 to yield 5.92 percent.
The Treasury market has been unable to rally in recent sessions due to an inundation of corporate supply. In addition, unexpectedly hawkish comments from a number of Fed officials in recent sessions has kept the market cautious. Recent Fedspeak, in fact, suggests the central bank isn't as close to the end of its tightening cycle as the market believes.
In economic news, Thursday saw the release of initial claims, which rose 20,000 to 309,000 in the latest week. Moreover, import prices rose 0.6 percent in May. View Economic Forecast, economic calendar and forecasts and historical economic data.
In the currency market, the euro climbed against the dollar as the European Central Bank surprised markets with its decision to raise short-term rates to 4 1/4 percent from 3 3/4 percent. Euro/dollar rose to an intra-day high of 0.970, a level not seen since April 5, and was recently trading at 0.9649, up 0.4 percent.
The euro -- which has been badly beaten down in recent months -- ran up in recent sessions on intervention fears and rate hike expectations. Dollar/yen rose 0.2 percent to 105.62 in recent dealings.
Wednesday's trading activity
After a generally rangebound session, U.S. stocks shot into positive territory in afternoon dealings Wednesday thanks to hearty interest in some big-name tech stocks like IBM and Hewlett-Packard.
In the meantime, U.S. District Judge Thomas Penfield Jackson ordered after the close that Microsoft (MSFT: news, msgs) be split into two separate companies -- one centered on the Windows operating system and the other based on its application software businesses -- to remedy antitrust violations. The ruling will also place conduct restrictions on the company. Microsoft immediately vowed to appeal. See full story.
"The judge's decision is a continuation down the same line we've seen before," said John Zaro, managing member at Bourgeon Capital Management.
With the federal judge's decision out in the open, Zaro believes there will now be some quiet time in Microsoft shares. "Now we're on to the next process, which will take longer."
In the worst case scenario, Microsoft will trade like a regular technology stock, according to Zaro. In the best case scenario, he said, it will outperform the market.
Inside Wednesday's market, semiconductor stocks recovered nicely in afternoon trading after falling earlier in the day as Intel was hit by an analyst downgrade. Internet and computer-related issues also moved higher. In the broader market, financial, airline and drug stocks rose while paper and gold stocks slipped.
The Dow Industrials climbed 77.29 points, or 0.7 percent, to 10,812.86. Leading on the upside were IBM, American Express, Hewlett-Packard and J.P. Morgan. Shares of Honeywell, Boeing and Alcoa were the blue chip barometer's downside movers.
Microsoft managed to eke out a small gain during regular-hours trading, rising 7/8 to 70 1/2. The stock is off a whopping 41 percent from its 52-week high. Microsoft shares rose 1 3/8 to 71 7/8 in after-hours trading over the Island ECN on heavy volume. See After Hours for post-market trading activity.
Microsoft shares remained in a razor-thin range Wednesday as investors awaited the 4:30 p.m. ruling. "There's always room for a surprise and nobody wanted to make any bets," said Chris Wolfe, equity strategist at J.P. Morgan.
Shares of IBM (IBM: news, msgs), meanwhile, climbed 8 5/8, or 7.7 percent, to 121. Goldman Sachs had positive comments on the Dow component, saying that it's making real progress in services, UNIX servers, and enterprise storage.
Goldman Sachs said IBM has better clarity on growth for the second half and is feeling increasingly comfortable that even in the third quarter, IBM could get pretty close to double-digit revenue growth. The brokerage said their 7.8 percent revenue growth forecast for IBM may be low.
Intel (INTC: news, msgs) shares backpedaled following an analyst downgrade, but came well off session lows, losing only 5/8 to 128 15/16. ABN Amro lowered its rating on the chip behemoth to an "outperform" from a "buy" and cut its 12-month price target to $150 from $155. Read the story. Analyst David Wu cited less confidence about the success of Intel's Pentium IV in moving into the mainstream PC segment. The analyst lowered its preliminary 2001 earnings-per-share estimate to $3.75 from $3.90, which is still above the First Call estimate of $3.56. Intel rival Advanced Micro Devices (AMD: news, msgs) lost 3 5/16 to 86 15/16.
The Nasdaq Composite jumped 82.89 points, or 2.2 percent, to 3,839.26 while the Nasdaq 100 index gained 89.69 points, or 2.5 percent, to 3,736.01.
"Technology stocks are sneaking up on expectations of good second-quarter earnings. We're seeing a rotation back into the sector," Wolfe said.
"We're kind of in no man's land with no earnings or economic news," noted Peter Boockvar, equity strategist at Miller, Tabak & Co. "Friday's producer price index will go a long way in clarifying what the Fed will do at the [upcoming] Federal Open Market Committee meeting. A benign number will give us a reason to rally."
In the next weeks, Boockvar continued, the earnings pre-announcement season will commence, which will give investors an indication of the effects of the Fed's recent rate hikes on corporations' bottom lines.
"The market will likely trade sideways until it gets more economic numbers to follow-up on last Friday's employment report," said Jay Suskind, director of trading at Ryan Beck & Co.
The Standard & Poor's 500 Index added 0.9 percent while the Russell 2000 Index of small-capitalization stocks rose 1.0 percent.
Volume was thin, checking in at 847 million on the NYSE and at 1.42 billion on the Nasdaq Stock Market. Winners beat losers by 16 to 13 on the NYSE and by 23 to 17 on the Nasdaq.
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6/8/2000 8:46:06 AM ET
Chip stocks regained their composure in afternoon dealings after slumping for most of the morning on the Intel downgrade. A number of rosy comments on the chip equipment industry helped the Philadelphia Semiconductor Index ($SOX: news, msgs) score gains of 1.6 percent.
Lehman Brothers believes 2000 semiconductor capital spending will exceed 1999 by over 50 percent. Moreover, the brokerage said valuations for semiconductor chip makers are very attractive given the favorable capital spending cycle -- which is expected to last through 2002 and possibly into 2003.
Lehman said the companies best positioned to take market share and post higher earnings estimates over the next 12 months include, among others, Applied Materials (AMAT: news, msgs), up 4 1/4 to 93 9/16, KLA-Tencor (KLAC: news, msgs), up 2 13/16 to 57 3/8 and Teradyne (TER: news, msgs), which rose 2 15/16 to 94 15/16.
Meanwhile, SG Cowen believes stronger third-quarter order growth is possible and continues to highlight leaders such as Applied Materials and Teradyne, which it rates "strong buys."
Shares of Applied Micro Circuits (AMCC: news, msgs) lost 9 15/16 to 96 7/8 following a 13 percent decline on Tuesday. The company disclosed Tuesday that sales to customer Nortel Networks (NT: news, msgs) will be a lower percentage of sales than in prior quarters. However, Applied Micro said non-Nortel sales would make up for the shortfall. Many analysts came to the defense of Applied Micro, including SG Cowen, which said sales to Nortel would be up 8 to 10 percent sequentially while non-Nortel sales would soar 30 to 50 percent.
Shares of Immunex (IMNX: news, msgs) jumped 4 13/16 to 36 5/16. The company announced late Tuesday that the Food and Drug Administration has approved expanded use of its Enbrel drug for reducing symptoms and delaying structural damage in patients with moderately to severely active rheumatoid arthritis See full story. The biotech sector picked up steam late in the trading day Wednesday, adding to this week's smashing gains. The Amex Biotechnology Index ($BTK: news, msgs) added 0.3 percent.
Shares of online brokerage stocks moved higher Wednesday with the AMEX Securities Broker/Dealer Index ($XBD: news, msgs) up 3.0 percent. Donaldson, Lufkin & Jenrette initiated coverage on Knight Trading Group (NITE: news, msgs), up 2 1/8 to 32 3/8, and TD Waterhouse (TWE: news, msgs), up 5/8 to 18 5/16, with a "buy" rating. E-Trade Group (EGRP: news, msgs), up 14 percent, or 2 3/8 to 19 1/4, was initiated as a "top pick" and a 12-month $31 price target.
Airline stocks gained ground on merger speculation. The AMEX Airline Index ($XAL: news, msgs) added 3.3 percent. Press reports said American Airlines and Delta met to discuss industry consolidation and are eyeing a possible merger. See full story. American Airlines' parent company AMR (AMR: news, msgs) is already mulling a bid for Northwest (NWAC: news, msgs). AMR added 1/8 to 28 7/16 while Delta (DAL: news, msgs) rose 1 39/64 to 52 1/2.
Treasury focus
Long-term bond prices recovered in afternoon trading as pressure from corporate supply lifted as a number of deals came to market.
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The 10-year Treasury note erased 3/32 to yield 6.14 percent while the 30-year bond added 1/32 to yield 5.91 percent. See Bond Report.
On the economic front, Wednesday saw the release of April consumer credit, which expanded by $9.3 billion.
In the currency arena, the dollar continued its descent against the yen and the euro following a bruising sell-off on Tuesday. Dollar/yen was recently trading at 105.52, off 0.3 percent from the previous close, while euro/dollar added 0.8 percent to 0.9614.
In the commodity market, July crude added 20 cents to $29.95 while the Bridge CRB index dropped 1.81 to 223.19. View latest commodity prices.
Julie Rannazzisi is markets editor for CBS MarketWatch. |
