MARKET SNAPSHOT
Nasdaq wobbles
Tech weakness hurts Dow
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 1:57 PM ET Jul 21, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Weakness in the technology sector following a string of earnings warnings kept the broad market under the gun Friday.
The chip and computer software sector came under the greatest selling pressure.
But pockets of strength were also seen in the market, as biotech, transportation and paper stocks posted respectable gains. Also higher were defensive areas of the market such as drug, utility and consumer stocks. On the downside in the broader market were oil service and financial stocks. The latter turned lower as the bond market slipped after posting mild gains at the open.
"Right now we're just looking to digest earnings," said Louis Parks, senior managing director at Raymond James.
"The market should be pleased with Fed chair Alan Greenspan's comments on Thursday," Parks said, adding that Friday's price action was the result of some minor profit-taking.
The Dow Jones Industrial Average slipped 101 points, or 0.9 percent, to 10,742 at 1:42 p.m.
Hewlett-Packard (HWP: news, msgs) was the Dow's downside leader, slumping 7 3/4, or 6.0 percent, to 122 1/4.
In a research note, Merrill Lynch said there may be some pressure on H-P shares as a results of the earnings warning from Lexmark International.
"We spoke with H-P a few weeks ago and they are also seeing some weakness in their printer business. However, they maintain that other areas of the business will offset that weakness," Merrill's Steve Milunovich said.
Eastman Kodak (EK: news, msgs) posted second-quarter earnings of $1.65 per share, matching the First Call estimate. That compares to earnings-per-share of $1.52 in the year-ago period. The Dow company said it expects a third-quarter profit from operations in the range of $1.56 to $1.66 a share, which is in line with the First Call estimate of $1.61 a share. See full story. The stock slipped 1 3/4 to 58 1/8.
Also pressuring the Dow were shares of Honeywell, Microsoft, Intel and IBM. The latter took the blue-chip barometer sharply higher on Thursday, registering stellar gains on the heels of its earnings news. Moving on the upside were shares of Alcoa, AT&T and American Express. The latter was upgraded by Prudential Securities to a "strong buy" from a "hold" rating and reached a fresh 52-week high.
The Nasdaq Composite fell 77 points, or 1.9 percent, to 4,106 while the Nasdaq 100 Index dropped 77 points, or 1.9 percent, to 3,917.
"We had some selective bad news from Agilent and Ericsson that's affecting the market," said Art Hogan, chief market strategist at Jefferies & Co. "The market's reaction is a little overdone," he continued.
Hogan remains very positive on the market, defining second-quarter earnings and the fundamental backdrop as "terrific."
The Standard & Poor's 500 Index shed 1.1 percent while the Russell 2000 Index of small-capitalization stocks lost 1.6 percent.
Volume stood at 663 million on the NYSE and at 1.06 billion on the Nasdaq Stock Market. Decliners bested advancers by 16 to 11 on the NYSE and by 25 to 13 on the Nasdaq.
Sector movers
Internet stocks wilted as the market responded to AOL's earnings news. The Goldman Sachs internet Index ($GIN: news, msgs) slipped 2.7 while Merrill Lynch's Internet Holdrs (HHH: news, msgs) fell 2.8 percent, led by RealNetworks, which shed 4 15/16, or over 9 percent, to 48. See Net Stocks.
America Online (AOL: news, msgs) trimmed 2 1/4 below its NYSE to 59 5/16. The company reported after the close fourth-quarter earnings of 13 cents a share, beating the First Call estimate by 2 cents. See full story. Quarterly revenue grew to $1.9 billion, up 39 percent from the same period last year, and up from $1.84 billion in the previous quarter. But advertising and commerce revenue came in below expectations.
Commenting on AOL's quarter, Merrill Lynch said though subscriber revenues came in a bit shy of expectations, margins and earnings-per-share were well ahead of them. The brokerage raised its 2001 earnings estimate to 58 cents a share from 53 cents and established a 13-cent estimate for the first-quarter. Merrill maintained a "buy" rating on the stock.
The hardware sector struggled and the Goldman Sachs Computer Hardware Index ($GHA: news, msgs) erased 1.9 percent. Lexmark International was the biggest downside mover but losses in Hewlett-Packard also weighed on the index.
Lexmark (LXK: news, msgs) tumbled 27 percent, or 17 3/8 to 46 5/8, after posting second-quarter earnings of 62 cents a share, missing the First Call estimate of 64 cents a share. Further, the company warned that third-quarter earnings could come in at around 60 cents, below the Wall Street estimate of 70 cents a share. Merrill lowered its rating on the stock to "intermediate-term accumulate" from an "intermediate-term buy." See Hardware Stocks.
Meanwhile, Agilent Technologies (A: news, msgs), which was spun off by Hewlett-Packard, tumbled 23 1/4 below its NYSE close to 49 3/4 after warning late Thursday that third-quarter earnings won't meet Wall Street estimates due to shipping delays caused by production constraints and parts shortages. The company said it expects to earn between 18 and 22 cents a share for the third quarter, below the First Call estimate of 35 cents a share. Read the full story.
Chip stocks slid for the fourth straight session due to heavy losses in shares of Xilinx, which shed 10 1/4, or 11.8 percent, to 76 13/16. The stock (XLNX: news, msgs) was hit by a downgrade from WR Hambrecht to a "buy" rating from a "strong buy," citing a relatively high valuation. Xilinx reported late Thursday first-quarter earnings of 27 cents a share, two cents ahead of the First Call estimate. The Philadelphia Semiconductor Index ($SOX: news, msgs) fell 4.0 percent.
Merrill's Internet Architecture Holdrs (IAH: news, msgs) shed 0.2 percent. Sun Microsystems (SUNW: news, msgs), which is a component of the Holdrs, unleashed fourth-quarter earnings of 39 cents a share late Thursday, beating the First Call estimate of 33 cents a share. Read the story. Sun's chief financial officer said annual revenue growth should be "pushing 30 percent" in the coming quarters with earnings growth coming close to matching the revenue gains. The stock rose 6 1/8 to 104 3/16.
Retail stocks hugged the flatline, with the S&P Retail Index ($RLX: news, msgs) off 0.2 percent. Sears, Roebuck & Co. (S: news, msgs) checked in with second-quarter earnings of $1.11 a share, ahead of the First Call estimate of $1.05 a share. The company made 86 cents a share in the same quarter last year. Read the full story. The stock was off 1 13/16 to 31 15/16.
The wireless telecom sector came under some pressure following Ericsson's (ERICY: news, msgs) quarterly results. The Swedish company's first-half profits rose by a stellar 337 percent but it warned that third-quarter profits would be hit by problems in its phone handset business. See full story. The stock slipped 2 3/4 to 19 3/4. Nokia (NOK: news, msgs) shed 7/16 to 54 1/16 while Motorola (MOT: news, msgs) lost 7/16 to 37 9/16.
Treasury focus
Bond prices slipped, relinquishing earlier gains on a bout of profit taking. The Treasury market rallied heartily on Thursday on the heels of calming remarks from Greenspan.
The 10-year Treasury note fell 1/8 to yield of 6.01 after falling above the 6 percent level for the first time in a week earlier in the day. The 30-year bond fell 1/32 to yield 5.80 percent. See Bond Report.
On the economic front, the Treasury Budget statement for June will be out on Friday.
Next week's economic plate will be a full one, with two key reports due out: the second-quarter employment cost index -- which is a broad measure of wages and benefits -- as well as the advance reading of second-quarter gross domestic product. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen jumped 1.5 percent to 109.12, a level not seen since early June. Euro/dollar edged up 0.1 percent to 0.9335. See latest currency rates. The yen was weighed down by news that rating agency Standard & Poor's has heightened its focus on the country on the heels of the Sogo bankruptcy.
In the commodity market, September crude lost 84 cents to $28.93 while the Bridge CRB index fell 0.58 to 222.54.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
