MARKET SNAPSHOT
Market in broad advance
Philip Morris boosts Dow
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:54 PM ET Jun 26, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) -- The Dow Industrials rallied Monday, buoyed by stellar gains in shares of Philip Morris as well as its financial and drug components. The Nasdaq also captured investors? fancy, registering handsome gains that reversed a two-day losing streak.
The broader market derived its strength from financial, consumer, biotech and drug stocks while technology saw the biggest buying interest in computer software, networking and hardware issues. On the downside were chip, paper, oil service and transportation shares.
?We?re kind of just marking time until the Fed meeting. The real question comes down to what the Fed says in its statement,? said Nick Sargen, chief investment strategist at J.P. Morgan. He expects the central bank to reiterate that it still sees the risks to the U.S. economy weighted toward higher inflation.
The Dow Jones Industrial Average put on 138.24 points, or 1.3 percent, to 10,542.99.
Upside movers included Philip Morris, Johnson & Johnson, Hewlett-Packard, American Express and Caterpillar.
Among the Dow?s downside movers were shares of AT&T, International Paper, Honeywell and DuPont, all of which reached fresh 52-week lows Monday.
Philip Morris jumped 3 5/8, or 15.5 percent, to 27 1/16. 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. Nabisco Holdings added 1 1/8 to 52 3/4.
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. R.J. Reynolds added 1 1/2 to 28 3/8 while Nabisco Group rose 15/16 to 26 1/2.
The Nasdaq Composite rallied 66.78 points, or 1.7 percent, to 3,912.12 while the Nasdaq 100 index jumped 86.15 points, or 2.3 percent, to 3,771.45.
Sargen noted that most of the earnings warnings received by the market were concentrated in the traditional manufacturing sector -- with not many hinting at a slowdown in the technology arena.
And the second-quarter earnings season is likely to give technology more positive reinforcements. In the aggregate, the tech group should hold up better than the rest of the market, Sargen continued. But investors will zero in on revenue growth and punish the companies that don?t live up to expectations as they brace for a cooler economy down the road, he said.
Art Hogan, chief strategist at Jefferies & Co., believes the market will perform well this week and get its usual relief rally at the conclusion of the Fed meeting on Wednesday.
?I think the Fed is done tightening. The trend of a slowing U.S. economy is clear,? Hogan added.
Further, Hogan said the pre-announcement season has been quiet, with not many blow-out negative surprises thus far.
The Standard & Poor's 500 Index rose 1.0 percent while the Russell 2000 Index of small-capitalization stocks edged up 1.2 percent.
Volume checked in at 888 million on the NYSE and at 1.31 billion on the Nasdaq Stock Market. Breadth was mixed, with winners beating losers by 15 to 13 on the NYSE while decliners outpaced advancers by 21 to 19 on the Nasdaq.
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 $2.5 billion in inflows, Trim Tabs said. Further, Trim Tabs said liquidity is turning bullish with cash takeovers coming back and equity inflows stronger.
Sector movers
Chip stocks backpedaled, with the Philadelphia Semiconductor Index ($SOX: news, msgs) off 0.1 percent. Chip giant Intel (INTC: news, msgs) turned lower, losing 3/16 to 134 3/16 after rising earlier in the session on news that it had introduced three new Celeron processors in a move to expand its presence in the lower-end PC market. See Tech Report.
This month?s high-flier Rambus (RMBS: news, msgs) rose 2 11/16 to 117 3/8. Motorola (MOT: news, msgs) fell 2 3/8 to 30. Lehman Brothers lowered the company?s rating to an ?outperform? from a ?buy.? See Rating Revisions and related story
Further, UBS Warburg said mobile phone units are not expected to be up materially, adding that the sector could experience some near-term weakness. UBS Warburg views Nokia (NOK: news, msgs) as the best-positioned to prosper in the current environment while Motorola and Ericsson (ERICY: news, msgs) are expected to be impacted by the weakness. Nokia lost 3/8 to 52 7/8 while Ericsson added 1/2 to 19 3/4.
The biotech sector was higher after witnessing choppy action throughout the session. Celera Genomics and scientists from the federally-funded Human Genome Project announced Monday morning they've completed a rough draft of the sequence of the human genome. Celera (CRA: news, msgs) lost 14 to 113 after running up last week ahead of the announcement. See full story.
The Amex Biotech Index ($BTK: news, msgs) added 3.0 percent, while the Nasdaq Biotech Index ($IXBT: news, msgs) climbed 3.7 percent. Among the upside movers were Amgen (AMGN: news, msgs), up 3 5/16 to 69 15/16, and Chiron Corp. (CHIR: news, msgs), up 3 7/8 to 47 15/16.
The drug sector lifted Monday, with the Amex Pharmaceutical Index ($DRG: news, msgs) up 1.5 percent. Shares of Johnson & Johnson (JNJ: news, msgs) added 5 3/4 to 95 1/2 after PaineWebber upped the Dow-component to a ?buy? from a ?neutral? rating.
And shares of Alza Corp. (AZA: news, msgs) added 4 13/16 to 61 1/4. The company was upped by Merrill Lynch to a ?buy? from an ?accumulate? rating.
Internet stocks fell, with the Goldman Sachs Internet Index ($GIN: news, msgs) off 1.1 percent. Shares of Yahoo fell 6 to 119 5/16. The company (YHOO: news, msgs) unveiled Monday its new enterprise-packaged offering with three Internet partners.
Inktomi (INKT: news, msgs), Critical Path (CPTH: news, msgs), Tibco Software (TIBX: news, msgs) and Citrix Systems (CTXS: news, msgs) are contributing to the overall package development. See full story. Inktomi lost 25 5/16, or 18 percent, to 115 1/16, Critical Path added 4 3/16 to 54 1/8, Citrix Systems rose 13/16 to 19 1/2 and Tibco rose 3 59/64 to 93 27/64.
Shares of Amazon (AMZN: news, msgs) added 1/16 to 33 15/16 following a bruising sell-off on Friday that saw the stock drop by 19 percent following negative comments on the stock?s credit quality from Lehman Brothers.
A number of analysts came to Amazon?s defense on Monday, such as Prudential Securities, which reiterated his "strong buy" rating on the stock and dispelled fears that Amazon will run out of cash at year end. And SG Cowen said it believes Amazon will show healthy growth in quarter-over-quarter sales and that the e-tailer will have plenty of cash on hand -- $350 million in a worst-case scenario -- by the time it reaches the brokerage?s expected break-even point in the second-half of 2001.
Business-to-business stocks took a hit Monday, with Merrill?s B2B Holdrs (BHH: news, msgs) off 2.1 percent. Among the downside movers were shares of Scient (SCNT: news, msgs), which tumbled 20.5 percent, or 9 5/8 to 37 7/16. Banc of America lowered its rating on the company to a ?market perform? from a ?buy? rating. VerticalNet (VERT: news, msgs) slumped 4.8 percent, or 1 7/8 to 36 13/16. Janney Montgomery Scott downgraded the company to an ?accumulate? from a ?buy? rating.
The computer software sector got a boost Monday, leading the CBOE Software Index ($CWX: news, msgs) up 3.4 percent -- among the day?s best-performing sectors. Oracle (ORCL: news, msgs) jumped 3 3/16 to 82 11/16 after the company introduced software that allows businesses to more easily link information from different databases, applications and Internet sites. See Silicon Stocks. Microsoft (MSFT: news, msgs) also climbed, up 1 13/16 to 79 1/2.
Financial stocks rose, with the S&P Bank Index ($BIX: news, msgs) up 1.4 percent.
First Union (FTU: news, msgs) warned it?s closing its Money Store consumer finance unit and taking a $2.8 billion restructuring charge that will result in lower-than-expected second quarter earnings. The company sees lower second-quarter earnings of between 72 cents and 74 cents a share before the restructuring compared to the First Call estimate of 85 cents a share. Read the story. Still, shares rose 1/16 to 27 7/8.
Individual movers
In merger news, meanwhile, Webvan and HomeGrocer announced that they?re merging in a $1.2 billion deal that the companies say will create a ?clear leader? in the crowded online grocery market.
Webvan (WBVN: news, msgs) will pay 1.07605 of its shares for HomeGrocer?s (HOMG: news, msgs)138 million shares. Read the story. Shares of Webvan fell 1 13/32 to 7 5/16 while HomeGrocer lost 1 7/32 to 6 7/8.
Shares of Omnicare Inc. (OCR: news, msgs) tumbled 48.5 percent, or 8 13/16, to 9 3/8. The company warned that it expects earnings-per-share of between 15 to 18 cents compared to the First Call estimate of a profit of 22 cents a share. See full story.
Shares of Brookstone (BKST: news, msgs) plunged 12.6 percent, or 1 11/32 to 9 11/32, after the company that it will lose 4 to 8 cents a share in the second quarter compared to the First Call estimate of a profit of 5 cents a share. Read the story. The company cited sluggish Father?s Day sales for the slow quarter.
Treasury and currency focus
Bond 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.
PaineWebber?s Chief Economist Maury Harris said that while the Fed is expected to stand pat on rates Wednesday, the central bank should issue another warning that risks remain skewed to higher inflation.
Harris observed that despite signs of an economic slowdown during the second quarter, the Fed remembers that real gross domestic product growth slowdowns reported in the second quarter in each of the past two years have proven to be just temporary. He expects a 25-basis-point rate increase at the August 22 meeting unless there?s further weakness in key gauges such as the unemployment rate, delivery lead times and prices paid by purchasers in June and July.
The 10-year Treasury note put on 19/32 to yield 6.11 percent while the 30-year bond was up 24/32 to yield 5.98 percent. See Bond Report.
On the economic front, Monday saw the release of May existing home sales, which climbed by a larger-than-expected 4.3 percent to a 5.09 million rate. A survey of economists conducted by CBS.MarketWatch.com had expected a 4.87 million level. Read the full story.
?This number indicates that the housing market is not as weak as
many seem to believe,? said Ian Shepherdson, chief U.S. economist at High Frequency Economics. The strength of mortgage demand, which remains close to its cycle high, suggests that the recent, relative weakness in existing home sales has had much to do with the lack of supply rather than declining demand, he continued.
?The bottom line here is that the housing market remains resilient, though the incremental impact on GDP growth from the sector this year will be small,? Shepherdson concluded.
The week?s economic 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 commodity arena, August crude lost 62 cents to $31.63 while the Bridge CRB index climbed 0.54 to 225.03.
In the currency market, dollar/yen climbed 1.0 percent from the prior session to 105.65 while euro/dollar added 0.1 percent to 0.9362. 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. See related story.
Also weighing on the yen was talk earlier in the session of a downgrade of Japan?s credit rating -- which was 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.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com.
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