MARKET SNAPSHOT
Shares set to climb at the open
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 9:11 AM ET Jun 26, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Technology stocks appear ready to recover a touch at the open Monday after succumbing to selling pressure for two straight sessions. The broader market is also poised for gains as market participants brace for this week?s Federal Open Market Committee meeting.
September S&P 500 futures rose 5.60 points, or 0.4 percent, and were trading roughly 7.40 points above fair value, according to HL Camp & Co. Nasdaq futures, meanwhile, added 47.00 points, or 1.3 percent.
In shares trading before the opening bell, Philip Morris added 1 9/16 to 25 in Instinet trading. See Indications. The Dow-component (MO: news, msgs) said it will acquire all of Nabisco Holdings (NA: news, msgs) at $55 per share in a deal valued at $18.9 billion, including the assumption of about $4 billion in debt. Read the full story. Further, Philip Morris said it plans to combine Nabisco with its Kraft Foods unit and sell less than 20 percent of the newly combined company to the public.
Meanwhile, following the sale of Nabisco Holdings, R.J. Reynolds (RJR: news, msgs) will acquire Nabisco Group Holdings (NGH: news, msgs) at $30 per share in a deal valued at approximately $9.8 billion.
Separately, Trim Tabs reported that U.S. equity funds received inflows of $7.6 billion in the three days ending June 22. Trim Tabs noted that while the infusion was impressive, the bulk -- about $5 billion -- occurred on Tuesday.
Aggressive growth funds took in $3.1 billion while growth and income funds saw $2.5 billion in inflows, Trim Tabs said. Further, Trim Tabs said liquidity is turning bullish with cash takeovers coming back and equity inflows stronger.
In the bond market, prices were a smidgen higher as the FOMC vigil commences. The Fed meets Tuesday and Wednesday, with a decision on short-term rates to be revealed on Wednesday.
The consensus on Wall Street is for the central bank to leave the fed funds rate unchanged at 6 1/2 percent after hiking rates six times since June 1999.
The 10-year Treasury note added 3/32 to yield 6.18 percent while the 30-year bond was up 2/32 to yield 6.03 percent.
On the economic front, Monday will see the release of May existing home sales. The week?s calendar will again be a light one, with the highlights represented by consumer confidence, durable good orders, new home sales and personal income and spending numbers. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, dollar/yen climbed 0.8 percent from the prior session to 105.43 while euro/dollar shed 0.5 percent to 0.9311. See latest currency rates.
Japan?s general election Sunday produced close-to-expected results with the ruling Liberal Democratic Party and its coalition partners gaining 271 of the 480 seats of the lower house, assuring that Prime Minster Yoshiro Mori will hold on to his post. Still, the LDP party lost more than 30 seats and currency traders were reluctant to take the yen higher.
Also weighing on the yen was talk of a downgrade of Japan?s credit rating, which were quickly denied by the rating agencies. But increased expectations that Japan will soon end its zero interest-rate policy -- in place since February 1999 -- may give the yen a boost going forward.
The outlook
All eyes will be on the Federal Reserve in the coming days as the monetary policymakers meet to decide on the direction of short-term interest rates
An overwhelming majority on Wall Street expects Alan Greenspan & Co. to leave the fed funds rate at the current 6 1/2 percent. See forecast.
While some are banking on a relief rally if the central bank indeed decides to stand pat on rates, Barry Hyman of Ehrenkrantz King Nussbaum doesn?t believe it will be the catalyst to take the market higher.
?We need to see the next set of economic numbers,? Hyman said. And not all are comfortable with the ?soft landing? theory.
In the meantime, concerns over a slowing economy and earnings going forward is keeping a lid on the Nasdaq?s attempt to break out of its recent trading range.
?The market?s action this past week was indicative of what it?ll do during earnings season,? said Peter Boockvar of Miller, Tabak & Co.
There?s uncertainty over second-quarter earnings and the Nasdaq selling on Thursday and Friday tells us that people are not optimistic. They?re trying to figure out which companies will fare well and which won?t.
Friday?s trading activity
The Dow Industrials clung to modest gains Friday thanks to strength in many of its cyclical components while the Nasdaq wilted under the weight of a tumbling Internet sector.
?Never underestimate how volatile Nasdaq can be. The index made an attempt to break out of the upper end of its recent trading range and failed,? said Barry Hyman, senior market strategist with Ehrenkrantz King Nussbaum. He added, however, that it?s not unusual for the market to fail in a first attempt to break out of a range.
?And what we?ve seen in recent weeks wasn?t the broadest of rallies. Investors are focusing on only a cluster of issues,? Hyman continued.
?The strength of the big-cap issues earlier in the week masked weakness in the broader market,? said Peter Boockvar, equity strategist at Miller, Tabak & Co. The advance-decline line, in fact, was negative for most of the week, even on days the major averages advanced.
Net stocks tumbled due to an over 19 percent plunge in shares of Amazon.com (AMZN: news, msgs) following cautious analyst comments and worries about its earnings prospects. Earlier in the week, many Net stocks came under pressure due to worries about their cash burn rates.
An advance in chip stocks capped additional losses in the technology arena, though the sector came well off its highs in afternoon trading. In the broader market, retail, drug and utility stocks rose while bank and biotech shares retreated, relinquishing earlier gains
The Dow Jones Industrial Average added 28.63 points, or 0.3 percent, to 10,404.75.
Upside movers included Alcoa, Boeing, Coca-Cola, Wal-Mart and McDonald?s while AT&T, Philip Morris and Walt Disney were among the downside movers.
The Nasdaq Composite dropped 91.17 points, or 2.3 percent, to 3,845.65 while the Nasdaq 100 index tumbled 117.70 points, or 3.1 percent, to 3,686.41.
The Standard & Poor's 500 Index inched down 0.7 percent while the Russell 2000 Index of small-capitalization stocks trimmed 0.9 percent.
?Tech stocks had a nice run this week and last week and we?re digesting those gains,?said Bill Schneider, head of block trading at UBS Warburg.
?There?s no real rush to do anything. The market is myopic in its focus on next week?s Fed meeting,? Schneider said. ?I?d expect suppressed activity heading into the FOMC meeting and a relief rally afterwards.?
One economist believes that while the Fed will stand pat on rates next week, more moves to tighten are likely to take place later in the year. See Fed Preview.
?It?s premature to conclude that the Fed is done tightening,? said John Lonski, chief economist at Moody?s Investors Service. He sees a 7 percent fed funds rate by year-end -- that?s 50 basis points higher than the current target.
While there are hints of some softness in specific firms? earnings and Internet companies are proceeding more cautiously in response to higher interest rates, Lonski believes the U.S. economy will gain momentum in the summer due, among others, to a drop in mortgage rates.
Volume came in at 851 million on the NYSE and at 1.37 billion on the Nasdaq Stock Market. Breadth was negative, with losers beating winners by 16 to 12 on the NYSE and by 22 to 17 on the Nasdaq.
Separately, Trim Tabs said all equity funds had inflows of $6.5 billion over the week ended June 21 compared with inflows of $12.3 billion during the prior week. Equity funds that invest primarily in U.S. stocks had inflows of $6.6 billion, compared with inflows of $10.8 billion during the previous week.
Sector movers
The Internet sector came under the gun, with the Goldman Sachs Internet Index ($GIN: news, msgs) down 5.9 percent. Amazon.com put a drag on the index, falling 8 1/8, or 19.3 percent, to 33 7/8. See full story. Morgan Stanley?s influential Mary Meeker believes that there is ?probably no upside to revenue estimates for the second and third quarters,? according to a Morgan Stanley spokesperson. She reiterated her ?outperform? rating on Amazon. See Net Stocks.
And Lehman Brothers said that while Amazon has one of the best-established brands in the business-to-consumer space, it finds the company?s credit weak and deteriorating due to the company?s massive negative operating cash flows and increasing debt. Lehman doesn?t believe this risk is priced into the Amazon?s convertible bonds.
Among other Internet shares in the red were Yahoo (YHOO: news, msgs), down 6 3/8 to 125 5/16, while EBay (EBAY: news, msgs) fell 7.4 percent, or 4 5/16 to 53 7/8.
America Online shares (AOL: news, msgs) lost 4 1/8 to 52 3/8. Time Warner (TWX: news, msgs) and AOL overwhelmingly approved Friday AOL?s proposed $120 billion acquisition of the entertainment giant. A 97-percent majority of AOL shareholders approved the merger while 99 percent of Time Warner said yes to the deal. See full story. Time-Warner shares lost 4 1/16 to 77 9/16.
Among the upside movers in the chip sector, Rambus soared 18.1 percent, or 17 9/16 to 114 11/16. The company has settled a patent infringement dispute with Japan?s Hitachi. Hitachi has agreed to pay Rambus (RMBS: news, msgs) a settlement fee as well as quarterly royalty payments. Read the story.
Micron Technology (MU: news, msgs) added 3 13/16 above its NYSE close to 88. The company reported fiscal third-quarter earnings after the close Thursday, posting earnings-per-share of 47 cents compared to the First Call estimate of 34 cents a share. In the year-ago third quarter, the company reported a net loss of 5 cents per share. See full story.
The Philadelphia Semiconductor Index ($SOX: news, msgs), of which Micron and Rambus are components, added 0.6 percent.
Shares of Human Genome Sciences (HGSI: news, msgs) jumped 12 3/8 to 145 3/8 after the company announced Friday it would begin human clinical trials of a protein that may help patients with immune system problems. See full story. The stock ended off 12 percent to 133 on Thursday, mirroring a sharp decline in biotech stocks.
Shares of Millennium Pharmaceutical (MLNM: news, msgs) trimmed 4 15/16 to 119 9/6, erasing gains posted early in the session. The company announced a joint venture with Aventis (AVE: news, msgs) for the development and commercialization of drugs for the treatment of inflammatory diseases and new drug discovery technologies. Further, Millennium will provide Aventis with rights to its drug discovery technologies in exchange for payments of up to $200 million over a five-year period while Aventis will invest $250 million in Millennium's common stock.
The Amex Biotech Index ($BTK: news, msgs) rose 0.4 percent after dropping 7.7 percent on Thursday while the Nasdaq Biotech Index ($IXBT: news, msgs), of which Human Genome and Millennium are components, lost 0.8 percent.
Shares of Celera Genomics (CRA: news, msgs), up 8 to 128, bucked the downward trend in the biotech sector. Celera and scientists from the federally-funded Human Genome Project are expected to announce Monday that they've completed a rough draft of the sequence of the human genome. The biotech sector ran up early in the week in anticipation of the event.
In the software sector, the CBOE Computer Software Index ($CWX: news, msgs) lost 2.7 percent, dragged down by a crippling sell-off in shares of Citrix Systems(CTXS: news, msgs). The stock tumbled 17.9 percent, or 4 1/16 to 18 11/16. The company announced Friday that its founder and chairman Edward Iacobucci has resigned, as has Michael Brown, one of its directors. See full story.
And Microsoft (MSFT: news, msgs) fell 2 3/16 to 77 11/16. The software behemoth announced at its Forum 2000 conference Thursday a Web-oriented strategy that will shift its focus to the online accessing of software through personal computers as well as devices other than PCs. Read the story.
Individual movers
Shares of AT&T (T: news, msgs) lost 1 3/4 to 34 5/16. A federal appeals court overturned an earlier decision by a federal judge and ruled that the city of Portland, Ore. can?t force cable operators to open their networks to rival Internet service providers -- a nice victory for Ma Bell. See full story. ExciteAtHome (ATHM: news, msgs), which is controlled by AT&T, fell 1 13/16 to 19 1/16.
Shares of Qualcomm (QCOM: news, msgs) lost 1 7/8 to 66 3/8 after climbing 5.8 percent on Thursday on rumors that Nokia (NOK: news, msgs) was interested in purchasing the company. Nokia lost 3 5/16 to 53 3/16.
Over the IPO arena, networking technology firm Accelerated Networks (ACCL: news, msgs) jumped 219 percent, or 32 7/8 to 47 7/8, over its IPO price of $15 -- which was the top of its original $13-to-$15 predicted range. See IPO Report.
Shares of Staples (SPLS: news, msgs) fell 10.7 percent, or 1 13/16 to 15 3/16. Merrill Lynch downgraded the company to a ?near-term accumulate? from a ?near-term buy.? Rating Revisions.
Shares of Walt Disney (DIS: news, msgs) lost 1 7/8 to 39 5/8. The Dow-component was lowered to a ?maintain? rating from an ?accumulate? by A.G. Edwards.
Treasury focus
Government prices were deep in the red, with no economic news to focus on and investors cautious ahead of the Fed?s decision on interest rates next week.
The 10-year Treasury note lost 19/32 to yield 6.18 percent while the 30-year bond fell 30/32 to yield 6.03 percent. This is the 30-year?s first climb above the 6 percent level since June 1. See Bond Report.
There is no economic data set for release on Friday. Next week?s calendar will also be light, with the main releases in the form of consumer confidence, personal income and spending numbers and new home sales.
Monday will see the release of May existing home sales. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, dollar/yen added 0.1 percent from the previous session to 104.65 while euro/dollar added 0.1 percent to 0.9363. See latest currency rates.
In the commodity arena, August crude rose 6 cents to $32.25 while the Bridge CRB index fell 2.59 to 224.49.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
