MARKET SNAPSHOT
Tech stocks find more buyers
Biotech, drug stocks climb
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:13 PM ET Jul 17, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Technology stocks flourished for the fourth straight session Monday as expectations that the week will bring positive earnings news encouraged the bulls.
But the Dow Industrials declined due to weakenss in some of its financial and more cyclical components. The rotation into tech stocks continued to take last week's leaders higher.
"We still have a lot of earnings to digest, which are expected to be good. The main concern, of course, is the outlook for the third quarter," said Peter Boockvar, equity strategist at Miller, Tabak & Co.
"For the time being, however, there's reason to rally as the earnings news will be supportive. The pre-announcement period flushed out all the disappointments," he continued.
Inside the market, biotech shares buttressed the major averages while oil service, chemical and financial shares retreated. Meanwhile, drug issues recovered nicely after coming under heavy selling pressure last week. In the tech sector, chip and Internet stocks remained the market's darlings.
The Dow Jones Industrial Average lost 8 points, or 0.1 percent, to 10,804.
General Electric, J.P. Morgan, Honeywell and Johnson & Johnson lead on the upside while downside movers included Alcoa, Philip Morris, SBC Communications and General Motors.
SG Cowen named IBM the "bottom line action idea" for the week, saying that strong growth should resume after the second quarter for the company's services and software businesses. The brokerage has a $140 to $150 1-year price target. See Rating Revisions. Big Blue is expected to report second-quarter earnings this week, with First Call estimating earnings of $1.00 a share. The stock rose 1 9/16, or 1.5 percent, to 105 1/2 after climbing as high as 107 7/8 in intra-day dealings.
"All the market's perceived leaders within technology are acting strongly," said Scott Bleier, chief investment strategist at Prime Charter. "Momentum is taking theses stocks higher -- faster than most [market watchers] imagined."
While the Dow remains the trailing market index, Bleier noted the incredible strength in the optical networking and chip sectors.
The Nasdaq Composite put on 28 points, or 0.7 percent, to 4,274 while the Nasdaq 100 Index gained 21 points, or 0.5 percent, to 4,062.
"The Nasdaq is rolling along while the Dow is stuck in the mud. What has energized the tech group are tremendous earnings, starting with Yahoo last week," observed Donald Selkin, chief market strategist at Joseph Gunnar.
"Tech remains the market's leadership area. In addition, the interest rate backdrop is very favorable," Selkin added.
The Standard & Poor's 500 Index added 0.52 point while the Russell 2000 Index of small-capitalization stocks rose 0.5 percent.
Volume came in at 905 million on the NYSE and at 1.56 billion on the Nasdaq Stock Market. Losers beat winners by 15 to 13 on the NYSE while advancers outnumbered decliners by 22 to 19 on the Nasdaq.
Separately, U.S. equity funds took in roughly $5.5 billion in the three days ending July 13, Trim Tabs said. Aggressive growth saw inflows of $2 billion while growth and income took in $1.7 billion. In the meantime, stock market liquidity boomed last week to $15.8 billion, according to Trim Tabs.
A peek at earnings
The week will be flooded with earnings releases, with many financial and technology bellwethers set to report their quarterly results. Among the tech behemoths set to unleash earnings are Intel, Microsoft, IBM, EMC, Sun Microsystems, Lucent Technologies and America Online.
First Call expects second-quarter earnings to gain 23.2 percent over the year ago period. The gains will be led by energy, technology, and basic materials -- papers, metals, and chemicals. First Call said estimates for energy and technology continue to rise while analysts have been trimming estimates for basic materials over the past two months.
"We're in the meat of the earnings season," Selkin said.
Hear interview on this week's earnings.
Sector movers
Chip stocks regained their composure after taking a dip earlier in the session. The Philadelphia Semiconductor Index ($SOX: news, msgs) added 2.2 percent. Novellus Systems (NVLS: news, msgs), which is a component of the Philly Index, saw its shares rise 2 15/16, or 4.6 percent, to 67 3/16. The company will report second-quarter results after the close Monday, with First Call anticipating earnings of 52 cents a share.
Also set to report this week is chip kingpin Intel (INTC: news, msgs), which is expected to post a profit of 98 cents a share. The stock slipped 3/8 to 146 5/16 after reaching a fresh 52-week high of 147 1/2 on Monday.
Corning (GLW: news, msgs) put on 8 to 267. The company revealed Monday second-quarter earnings of 94 cents per share, well ahead of the First Call estimate of 80 cents per share and 52 cents in the year-ago period. See full story. The company is a component of Merrill Lynch's Broadband Holdrs (BDH: news, msgs), which added 2.9 percent on Monday.
Also giving a boost to the Broadband Holdrs was a rally in Qualcomm shares. The stock (QCOM: news, msgs) put on 7 5/8, or 12 percent, to 70 11/16. The developer of Code Division Multiple Access technology announced that the Japanese Patent Office and the European Patent Office have upheld the validity of three of Qualcomm's patents covering important features of CDMA systems.
The B2B sector took a breather Monday with Merrill's B2B Holdrs (BHH: news, msgs) up 0.4 percent following a 33 percent surge last week. Leading on the downside were shares of Scient, off 9 9/16 to 61 15/16. The winner in group Monday was VerticalNet (VERT: news, msgs), which rose 7 3/8, or 14 percent, to 58 1/2 after Goldman Sachs upped the company to its recommended list from "market outperformer." See Market Pulse.
Biotech stocks were on a roll Monday, keeping the Nasdaq and Russell 2000 indexes well underpinned. The Nasdaq Biotech Index ($IXBT: news, msgs) put on 2.9 percent while the Amex Biotech Index ($BTK: news, msgs) added 4.2 percent. Shares of Immunex added 3 5/16 to 58 1/2 while Celera Genomics gained 7 3/8 to 100 1/8.
Among the losers were Genentech (DNA: news, msgs), off 7 1/2 to 154. The biotech concern posted a second-quarter profit from operations of 29 cents a share, matching the First Call estimate. The company made 27 cents a share in the year-ago period. See full story.
In merger news, Georgia-Pacific (GP: news, msgs) said Monday it will buy Fort James (FJ: news, msgs) in a stock-and-cash deal worth about $11 billion. Under terms of its agreement, Georgia-Pacific will acquire all outstanding shares of Fort James for $29.60 per share in cash and 0.2644 shares of Georgia-Pacific Group stock. Shares of Georgia-Pacific lost 2 3/16 to 26 7/16 while Fort James added 9 1/4, or 37 percent, to 33 13/16. See full story. The Philadelphia Paper Products Index ($FPP: news, msgs), of which Fort James and Georgia-Pacific are components, added 1.6 percent.
Further, Georgia-Pacific posted second-quarter earnings of $1.20 a share, beating the First Call estimate of $1.16 a share and meeting the $1.20 earned in the previous quarter last year.
The financial sector backpedaled as investors pondered a number of earnings releases. The S&P Bank Index ($BIX: news, msgs) edged down 0.5 percent while the Amex Securities Broker/Dealer Index ($XBD: news, msgs) trimmed 2.8 percent.
Bank of America reported second-quarter earnings of $1.23 a share, matching the First Call consensus estimate. The company made $1.15 in the year-ago period. The stock (BAC: news, msgs) shed 1/4 to 47 1/4.
The Bank of New York checked in with a second-quarter profit of 48 cents a share, beating the First Call estimate by a penny. The company made 42 cents in the year-ago period. Shares (BK: news, msgs) added 7/8 to 47 13/16.
And FleetBoston Financial (FBF: news, msgs) reported a second-quarter profit from operations of 83 cents a share, a penny ahead of the First Call estimate. The company made 72 cents in the year-ago quarter. The stock lost 3/8 to 37 3/8.
Chemical stocks came under pressure following an earnings warning from Rohm & Haas. The company (ROH: news, msgs) warned that second-quarter earnings will come in at about 42 cents a share compared to the First Call estimate of 55 cents a share. The company reported a loss of 6 cents a share in the year-ago period. See full story. The S&P Chemical Index ($CEX: news, msgs) shed 2.8 percent while Rohm & Haas lost 5 3/4 to 28 7/8.
Shares of Liberate Technologies climbed 2 1/4, or about 7 percent, to 36 3/8. Liberate (LBRT: news, msgs) received a $100 million investment from Cisco Systems. In return for the investment, Cisco received a 3.88 percent stake in Liberate -- making Cisco the third largest investor in Liberate. Cisco (CSCO: news, msgs) added 9/16 to 68 13/16.
General Mills (GIS: news, msgs) lost 2 3/4 to 33 9/16. The food company will pay over $5.4 billion in stock in a complicated deal to London-based Diageo PLC (DEO: news, msgs). See full story.
Treasury focus
Treasury prices tumbled, with 10- and 30-year issues pacing the decline. Investors were nervous ahead of this Tuesday's consumer price index and Fed Chief Alan Greenspan's appearance on Capitol Hill Thursday.
The 10-year Treasury note trimmed 13/32 to yield 6.16 percent while the 30-year bond lost 20/32 to yield 5.92 percent. See Bond Report.
On the economic front, Monday saw the second-tier report of business inventories, which climbed 0.8 percent in May. See full story.
The week's economic highlight is Tuesday's consumer price index, expected to show a 0.4 percent increase in June. The core, which excludes the volatile food and energy components, is expected to show a 0.2 percent increase, according to a survey of economists conducted by CBS MarketWatch.com.
Also due out this week: the May trade figures and June housing starts and building permits.
Moreover, Alan Greenspan will appear before the Senate Banking Committee on Thursday to talk about the economy and monetary policy. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, the dollar gained ground against the Japanese currency following the Bank of Japan's decision to leave interest rates near zero, a policy that has been in place since February 1999. Market participants had speculated that the BOJ would put an end to its current policy and opt for an increase in short-term rates. See full story.
Dollar/yen added 0.3 percent to 108.14 while euro/dollar edged down 0.2 percent to 0.9360. See latest currency rates.
In the commodity market, August crude fell 57 cents to $30.83 while the Bridge CRB index tacked on 1.50 to 222.10.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
