MARKET SNAPSHOT
Tech stocks stage nice comeback
Chips rebound for second session
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 5:02 PM ET Jul 31, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) -- Technology stocks bounced back Monday following last week's damaging sell-off as bargain hunters emerged to scoop up some injured names within the Nasdaq, helping the index score triple-digit gains.
All sectors within technology rose, with the exception of the computer software segment. Chips led on the upside, rising for a second consecutive session. Networking issues recovered after Friday's steep sell off, as did Internet stocks - with a nice rally in the business-to-business sector.
The broader market saw gains in the financial sector, which helped the Dow Industrials post modest gains. But selling in retail stocks hurt the blue-chip barometer late in the trading session. Also ending in the red were utility, biotech and drug stocks.
Still, market watchers believe the major averages won't make any
major headway until investors become more comfortable with earnings expectations going forward.
Nick Sargen, chief investment strategist at J.P. Morgan, said the rise in technology Monday was merely a bounce back following last week's drubbing.
"We were very oversold last week. The market got caught in a herd mentality," echoed Art Hogan, chief market strategist at Jefferies & Co.
Economic data will now take center stage as the earnings season winds down, Sargen continued. "But the data has not been convincing enough for investors to take positions either way."
"Negative earnings guidance from some of the bellwethers shook the market," Sargen said. Investors, he added, are trying to decipher whether this is a trend or a one-time event.
The Dow Jones Industrial Average added 10.81 points, or 0.1 percent, to 10,521.98 after rising as much as 92 points in intra-day dealings.
Upside movers included Intel, Honeywell, International Paper, Citigroup and J.P. Morgan. Moving lower were shares of Wal-Mart, Merck, Procter & Gamble, Caterpillar and Coca-Cola.
"Fundamentals do matter and the market will continue to reward strength and stability and punish fluff and failed promises. Stock-picking will be the key," said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
Belski sees more downside pressure for the market over the near-term, especially the next two to three weeks.
Belski said he's inclined to remain more defensive in his buying habits, focusing on health care, financials and an improving fundamental environment within the consumer staples sector.
In a research note, Lehman Brothers' Jeffrey Applegate said that until the market gets renewed leadership and comfort with the earnings and interest rate outlook, observers will only see churning with no real progress in prices. Applegate expects to see this kind of action until the August 22 Federal Open Market Committee Meeting.
While second-quarter earnings continue to be terrific, the market's negative reaction to many good reports suggest investors are treating positive earnings surprises as history, with worries about a slowdown in earnings growth in the forefront. Lehman Brothers' projected earnings growth for the third and fourth quarters currently stands at 14 percent.
The Nasdaq Composite rallied 103.99 points, or 2.8 percent, to 3,766.99 while the Nasdaq 100 Index tacked on 132.04 points, or 3.8 percent, to 3,609.35. The Nasdaq had a horrendous performance last week, plunging 10.5 percent.
"Investors appear to be taking a wait-and-see approach," said Sam Stovall, senior investment strategist at Standard & Poor's. "There's a dearth of leadership and I see that continuing."
The Standard & Poor's 500 Index climbed 0.8 percent while the Russell 2000 Index of small-capitalization stocks put on 2.1 percent.
Elsewhere, volume was relatively light, coming in at 931 million on the NYSE and at 1.50 billion on the Nasdaq Stock Market. Volume, however, was heavy on the Nasdaq as it sold off from Wednesday through Friday last week, topping 1.7 billion. Breadth was marginally positive, with advancers beating out decliners by 16 to 12 on the NYSE and by 22 to 18 on the Nasdaq.
The week will be a lighter one on the earnings front. So far, 81 percent of the S&P 500 companies reported, First Call said. And all but four Dow companies have unveiled their quarterly results. Earnings growth for the second quarter for S&P 500 companies currently stands at 22.1 percent, according to the earnings compiler.
Separately, Trim Tabs reported that U.S. equity funds saw inflows of $1.7 billion during the three days ending July 27. Aggressive growth funds took in $710 million while tech funds saw inflows of $20 million. In the meantime, Trim Tabs said liquidity dropped significantly over the five days ended July 27. One bright spot was the jump in newly announced stock buybacks.
Sector movers
Over in the wireless telecom sector, Nokia (NOK: news, msgs) added 5/8 to 44 7/16, extending Friday's gains. The stock got clobbered on Thursday after the company warned that its third-quarter results will be lower compared to the second quarter. Among other companies in the group, Ericsson (ERICY: news, msgs) gained 1 to 19 1/8 while Motorola added 3/8 to 33 5/8.
Biotechs were the sore spot in the market, with the Nasdaq Biotech Index ($IXBT: news, msgs) off 0.2 percent and the Amex Biotech Index down ($BTK: news, msgs) down 2.1 percent. Weighing in the group was a 34.4 percent plunge in shares of Cephalon (CEPH: news, msgs) after the company announced disappointing results from testing of a potential treatment for attention deficit disorder. See related story.
Still, analysts came to the defense of the stock, with Chase H&Q upgrading eth company to a "buy" from a "market perform," labeling the reaction to the results as overdone. An SG Cowen upped the company to a "strong buy" from a "buy" rating. See Rating Revisions.
The retail sector took a beating Monday, with the S&P Retail Index down 3.5 percent. Among some of the downside leaders were shares of Kmart (KM: news, msgs), down 1.4 to 7, and Wal-Mart (WMT: news, msgs), which slipped 3 7/16, or 5.9 percent, to 55 1/4. The stock was the biggest percentage loser in the Dow Industrials. See related story.
In merger news, Entergy Corp.(ETR: news, msgs) and FPL Group announced they're merging in a $27 billion deal to create the largest electric utility in the country. The merger was labeled by the companies as one of equals. Under the terms of the deal, FPL (FPL: news, msgs) shareholders will receive 1 share of the new company for each share of FPL they own. And each holder of Entergy stock will receive 0.585 of a share of the new company for each share of Entergy. FPL shares lost 1/16 to 52 13/16 while Entergy slipped 2 1/4 to 28 1/16. See full story. The Philadelphia Utilities Index ($UTY: news, msgs), of which Entergy and FPL are components, lost 1.1 percent.
In earnings news, Union Carbide (UK: news, msgs) recorded a second-quarter profit of 86 cents a share -- excluding an 8-cent after-tax gain -- versus the First Call estimate of 85 cents a share. The company is being bought by Dow Chemical (DOW: news, msgs). The stock added 15/16 to 45 1/8 while Dow Chemical gained 5/8 to 29 3/16. The S&P Chemical Index ($CEX: news, msgs) added 1.0 percent.
Tyson Foods posted third-quarter earnings of 18 cents a share, matching the First Call estimate. The company made 30 cents a share in the year-ago period. Shares (TSN: news, msgs) shed 1/8 to 9 3/8.
And Baker Hughes (BHI: news, msgs) registered a second-quarter from operations of 12 cents a share, beating the First Call estimate of 7 cents a share. The stock added 15/64 to 34 1/2. Read full story.
Treasury focus
Over in the bond market, prices lost eked out tiny gains late in the trading session.
The week's highlights on the economic front include: June personal income and personal consumption expenditures, the National Association of Purchasing Management Index for July, June new home sales, June construction spending, June factory orders and the July employment report, set for release on Friday.
Monday saw the release of the Chicago Purchasing Managers index for July, which fell to 52 percent from June's 56.8 percent. See full story and view Economic Preview, economic calendar and forecasts and historical economic data.
The 10-year Treasury note added 2/32 to yield 6.035 and the 30-year bond gained 1/32 to yield 5.78 percent. See Bond Report.
In the currency arena, dollar/yen inched up 0.1 percent to 109.40 in volatile action while euro/dollar edged up 0.3 percent to 0.9265. See latest currency rates.
In the commodity market, September crude fell 75 cents to $27.43 while the Bridge CRB index slipped 1.32 to 218.61. See related story.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
