MARKET SNAPSHOT
Stocks brace for flat to lower open
NAPM release ahead
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 8:29 AM ET Jul 3, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - U.S. shares are readying for an open on the steady to mildly lower side Monday with a couple of economic numbers to sift through in the morning and a fresh quarter to contend with.
September S&P 500 futures rose 2.90 points, or 0.2 percent, and were trading roughly 1.50 points below fair value, according to HL Camp & Co. Nasdaq futures were off 19.50 points, or 0.5 percent.
The equity markets will observe a 1 p.m. close ahead of the Independence Day holiday while bond market trading will cease at 2 p.m.
In company news, Informix (IFMX: news, msgs) warned Monday that it expects to report a profit of 1 to 3 cents a share in the second quarter compared to earnings of 6 cents a share in the year-ago period. First Call had expected the company to earn 12 cents a share in the quarter. The company will release quarterly results on July 19. The stock added 15/32 to 7 7/16 ahead of the news Friday.
In shares seeing activity before the official start of trading, Sprint (FON: news, msgs) added 2 3/4 to 53 3/4 in Instinet after a German newspaper reported that Deutsche Telekom was considering a $117 billion bid for the company. See Indications.
In the Treasury arena, prices were mixed, with the 10-year Treasury note off 5/32 to yield 6.045 percent while the 30-year bond lost 7/32 to yield 5.915 percent. See Bond Report
On the economic front, Monday will see the release of the June National Association of Purchasing Management index at 10 a.m. The number is expected at 53.2 percent, according to a survey of economists conducted by CBS MarketWatch.com. May construction spending, seen rising by 0.1 percent, will also be out. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, dollar/yen was off 0.1 percent and was recently trading at 106.01 while euro/dollar fell 0.4 percent to 0.9489. See latest currency rates.
The outlook
The major averages spent another week meandering in a razor-thin range and market participants aren’t expecting any fireworks next week either, even if it does encompass the fourth of July holiday.
While window-dressing late Friday sent the Nasdaq sharply higher, participants believe the market is likely to adopt a wait-and-see attitude next week.
“[The market] is neither here nor there. It’s not good, but it’s not bad. It’s a market with little real momentum, up or down,” remarked Frank Gretz, chief market strategist at Shields & Co.
One event that could jolt the market out of its recent doldrums is next Friday’s June employment report. Recall that the May jobs data brought back the bulls on Wall Street, generating a 6.4 percent pop in the Nasdaq and a 1.3 percent climb in the Dow Industrials.
The taut labor market has been the Fed’s main preoccupation since it began tightening in June 1999. If more evidence emerges that the job market is loosening, it’ll build the case for a sidelined Fed at the August 22 Federal Open Market Committee meeting.
A survey of economists conducted by CBS MarketWatch.com predicts non-farm payrolls to have risen by 268,000 in June with a 4.0 percent unemployment rate. The jobless rate stood at 4.1 percent in the previous month while non-farm payrolls grew by 231,000 in May. See Economic Preview.
Slowdown concerns
Terry Gabriel, technical analyst at IDEAglobal.com, said concerns about a slowdown in the wireless sector this week had ripple effects on the rest of the technology arena.
“We’ve had lots of gyrations but I think expectations of a slowdown are unwarranted. I think earnings will be strong in the stocks that matter in the second quarter,” Gabriel said.
Outside of technology, Gabriel believes the cyclicals and the financials will have trouble sustaining any upward move until it’s clear that the Fed is done tightening.
Market stats
On the week, the Dow Industrials rose 0.4 percent. It’s down 9.1 percent for the year. The Nasdaq rose 3.1 percent on the week and is down 2.5 percent for the year.
Wilshire Associates notes that notes that $780 billion in wealth was destroyed in the broad stock market during the second quarter. April was the worst month, with $865 billion in wealth destroyed while June was the best month, with $650 billion in wealth created. In May, $560 billion in wealth was lost, Wilshire said.
Earnings watch
First Call said next week’s focus will remain on pre-announcements, as few companies are set to report. Of the 309 pre-announcements to date, First Call said 56 percent were negative, 16 percent positive, and 28 percent on target.
Industry analysts are expecting second-quarter growth of 19.1 percent, which has been upwardly revised from 17.6 percent on April 1 and 18.4 percent a week ago.
Among the sectors that saw their earnings expectations revised lower: Basic materials, consumer staples and the financials. However, lowered earnings expectations were more than offset by raised expectations in the energy and technology segments, First Call said.
Friday’s trading activity
Big-cap tech stocks generated great sponsorship Friday, with buying intensifying late in the session. The climb in technology also helped push the Dow Industrials into positive territory after spending the day in the minus column.
Observers said quarter-end window dressing and readjustments by fund managers gave the market support late in the session following an extremely rangebound week.
Inside the market, chip, hardware and networking issues reaped the brunt of the buying while the broader market saw advances in retail and drug shares. Bank, brokerage, paper and utility shares declined.
“There’s a lot of volatility beneath the averages. What’s encouraging is that market breadth numbers have been positive,” noted Donald Selkin, chief market strategist at Joseph Gunnar.
The Dow Jones Industrial Average advanced 49.85 points, or 0.5 percent, to 10,447.89
A great deal of churning took place in the Dow during the final half hour of trading.
Leading on the upside were shares of Procter & Gamble, United Technologies, Wal-Mart, McDonald’s and General Electric. Downside movers were SBC Communications, IBM, Citigroup and Exxon Mobil.
Market players believe the range will continue to be king for the near-term.
“Until proven otherwise, the market remains stuck in a range of 10,250 and 10,750 for the Dow, and 3750 and 4050 for the Nasdaq. A break of any of those levels would be enough to get something more meaningful going but the indicators are mixed, volumes are low, and ‘more of the same’ is the most likely trend for the next few weeks,” said Robert Dickey, chief technical strategist at Dain Rauscher Wessels.
“It would be nice to expect the second quarter-earnings reports to be enough to drive the market higher, but this expected news may have a similar effect as the Fed meeting did -- which was a little up and a little down,” he continued.
“There’s uncertainty over whether the Fed is really done tightening and concerns that the economy has slowed too much and will really hurt corporate profits,” said David Powers, senior technology analyst at Edward Jones.
“I still think we’re in no man’s land,” he continued.
“My view is that we’ll continue to go sideways with an upward bias once the earnings news is out. The market has been held down by the negative pre-announcements,” Powers said.
He believes second-quarter results will be generally solid but doesn’t expect high-valuation stocks to see a lot of upside since they’ve priced in most of the good news.
The Nasdaq Composite tacked on 88.89 points, or 2.3 percent, to 3,966.12 while the Nasdaq 100 Index jumped 97.96 points, or 2.7 percent, to 3,763.79.
The Standard & Poor's 500 Index added 0.8 percent while the Russell 2000 Index of small-capitalization stocks edged up 0.9 percent.
Volume was healthy, coming in at 1.39 billion on the NYSE and at 1.80 billion on the Nasdaq Stock Market. Breadth was mixed, with advancers matching decliners on the NYSE while winners beat losers by 22 to 18 on the Nasdaq.
Separately, Trim Tabs said all equity funds had inflows of $1.8 billion over the week ended June 28 compared with inflows of $6.5 billion during the previous week. Equity funds that invest chiefly in U.S. stocks had inflows of $2.7 billion versus inflows of $6.6 billion during the prior week.
Sector movers
Hardware stocks recovered after taking a hit on Thursday and the Goldman Sachs Hardware Index ($GHA: news, msgs) added 2.6 percent. Compaq rose 1 1/16 above its NYSE close to 25 9/16.
The stock (CPQ: news, msgs) dropped 11.4 percent on Thursday following a Salomon Smith Barney downgrade to a "neutral" from "buy" and a lowering of its price target to $25 from $45. Second-quarter revenue concerns were cited. On Friday, a number of brokerages, including Merrill Lynch, SG Cowen and Donaldson, Lufkin & Jenrette, came to Compaq’s defense, saying that the company’s channel inventories remain in good shape. See full story. Compaq released after the close a statement in response to the Smith Barney downgrade, saying that it’s comfortable with channel inventory levels.
Semiconductor stocks led the tech sector on the way up, with the Philadelphia Semiconductor index ($SOX: news, msgs) up 1.1 percent, interrupting a four-day losing streak that saw a 7.3 percent decline. Among the winners were while Advanced Micro Devices, up 1 3/4 to 78 and KLA-Tencor, up 15/16 to 58 9/16. Intel was up 1 15/16 at 133 11/16. Altera (ALTR: news, msgs) rose 5 1/4 to 101 15/16. The stock was upped to Chase H&Q’s “strong buy-focus” list from the “buy-focus” list.
Shares of wireless carriers recovered Friday. The sector took a hit Thursday after Ericsson’s president Kurt Hellstrom warned that growth in the mobile phone market could slow due to higher-than-expected costs operators are paying for third generation cell-phone licenses. Ericsson (ERICY: news, msgs) added 1 15/16 to 20, Nokia (NOK: news, msgs) rose 1 13/16 to 50 1/16 while Motorola (MOT: news, msgs) added 3/16 to to 29 1/2. Goldman Sachs resumed coverage of Nokia and Ericsson with a “recommended list” rating. See Rating Revisions.
The ‘defensive’ drug sector recovered late in the session, adding to Thursday’s nice run Thursday. The Amex Pharmaceutical Index ($DRG: news, msgs) added 1.6 percent. Shares of Eli Lilly (LLY: news, msgs) lost 2 1/8 to 99 1/2 following a 15.5 percent jump on Thursday. PaineWebber lowered its rating on the stock to a “neutral” rating from an “attractive” while Bear Stearns downgraded the stock to an “attractive” from a “buy.”
Specific movers
Roper Industries (ROP: news, msgs) shares lost 7 1/8 to 25 5/8. The company said it sees a third-quarter profit of 35 to 37 cents a share, short of the First Call estimate of 51 cents a share and less than the 41 cents it reported in the year-ago period. See full story.
Xerox shares (XRX: news, msgs) added 11/16 to 20 1/4, erasing earlier losses that came on news that Securities and Exchange Commission started an investigation of accounting issues related to the company’s Mexico business. The company said it intends to cooperate fully in the probe. See full story.
Nike shares added 5/16 to 39 13/16. The company (NKE: news, msgs) reported after the close Thursday that it made 46 cents a share in the fourth quarter, in line with the First Call estimate. The company said it overcame a “challenging” retail environment with earnings that climbed 39 percent over the same period last year. See full story.
Shares of Liberate Technologies added 5 1/2 to 29 5/16. The company (LBRT: news, msgs) posted late Thursday a fiscal fourth-quarter, pro-forma loss of 13 cents a share, less than the First Call estimate of a loss of 20 cents a share. The company lost 16 cents a share in the year-ago period. See full story.
Research In Motion (RIMM: news, msgs) added 6 3/8 to 45 1/4 after registering a breakeven first-quarter -- in line with Wall Street estimates. The company made a profit of 3 cents in the same quarter last year. See full story.
Unisys shares (UIS: news, msgs) lost 3/16 to 14 9/16 after dropping over 37 percent on Thursday on a warning of lower-than-expected earnings in the second quarter.
Shares of AT&T (T: news, msgs) shed 7/16 to 31 13/16. The Dow component is reportedly considering a spin-off of its consumer long-distance unit in an effort to revive its lagging stock price. No decision is imminent and the company is exploring a range of options, potentially including the outright sale of the consumer business, according to press reports. Read the full story.
Shares of Intraware tumbled 14.3 percent, or 2 11/16 to 16 1/16. Late Thursday, the company (ITRA: news, msgs) registered a loss of 40 cents a share, less than the First Call forecast of a loss of 45 cents a share. The company lost 16 cents in the year-ago period.
Verio (VRIO: news, msgs) slumped 4 1/64 to 55 31/64 after the Committee on Foreign Investment in the U.S. served notice that it will investigate its planned acquisition by Japan’s NTT Communications. NTT extended its offer Friday to acquire all of Verio's stock through July 14. See Silicon Stocks.
Over in the IPO arena, data storage services provider StorageNetworks (STOR: news, msgs) jumped 63 1/4, or 234 percent, to 90 1/4 in its first day of trading after pricing at $27 per share -- or $2 above its already-boosted $23 to $25 range. The stock was originally expected to be priced between $17 and $19 a share. See IPO Report.
Shares of Silicon Storage Technology tacked on 12 1/2, or 16.5 percent, to 88 5/16. The company (SSTI: news, msgs) expects earnings to exceed 50 cents a share, more than a dime higher than the First Call estimate of 39 cents a share, thanks to high demand for its flash memory products. Read the story.
See After Hours for post-market trading activity.
Treasury focus
Long-dated Treasurys stumbled late in the day while the front end held on to tiny gains.
The 10-year Treasury note added 2/32 to yield 6.02 percent while the 30-year bond was off 9/32 to yield 5.90 percent. See Bond Report.
On the economic front, Friday saw the release of May personal income, up 0.4 percent compared to the expected 0.3 percent increase, while personal consumption spending rose by an as-expected 0.2 percent. Read full story and view Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the dollar climbed against the yen. Market participants brace for Tuesday’s release of the quarterly tankan survey of Japan’s businesses, which is expected to show an improvement in business conditions. If the figure comes in better-than-expected, the case will build for the Bank of Japan to end its zero-rate interest policy, which began in Feb. 1999.
Dollar/yen jumped 0.6 percent and was recently trading at 105.98 while euro/dollar added 0.2 percent to 0.9532. See latest currency rates.
In the commodity arena, August crude lost 22 cents to $32.50 while the Bridge CRB index plunged 3.21 to 223.93.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
