MARKET SNAPSHOT
Broad-based tech buying
Blue chips also lift
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 2:09 PM ET Aug 7, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Technology buyers surfaced Monday, with chip and computer hardware the most favored areas of the market ahead of some key earnings reports in the group this week.
"There's some speculative buying ahead of the Dell Computer, Applied Materials and Cisco Systems reports," said Clark Yingst, market analyst at Prudential Securities. The market needs to break the pattern -- prevalent over the past few weeks -- of selling stocks on positive news, he said.
An encouraging sign for the market -- which bodes well for a broad-based rally going forward -- is the rally in shares of financial services and homebuilders shares, according to Yingst.
"The great action in these stocks tells us we're heading for a soft landing, not a recession," Yingst said.
Inside the broader market, oil service, retail, utility, biotech and paper stocks climbed while financial and drug stocks revealed some weakness.
The Dow Jones Industrial Average added 88 points, or 0.8 percent, to 10,857 at 2:00 p.m.
Upside movers included Honeywell, Hewlett-Packard, Microsoft and Philip Morris while a couple of the index's financial components - J.P. Morgan and American Express - moved lower.
Shares of Microsoft (MSFT: news, msgs) added 1 3/86, or 2.1 percent, to 70 1/2. The software kingpin announced Monday a share repurchase program that provides shares to employees under the company's stock-option and purchase plans. The number of shares to be purchased in fiscal 2001 will be based primarily the level of employee stock option exercises. Read the story.
The Nasdaq Composite climbed 72 points, or 1.9 percent, to 3,859 while the Nasdaq 100 Index gained 92 points, or 2.6 percent, to 3,711.
The Standard & Poor's 500 Index edged up 1.0 percent while the Russell 2000 Index of small-capitalization stocks added 1.0 percent.
"The [recent] bullish action by the utilities and other interest rate-sensitive areas are a hopeful sign for the market and rates over the next few months," said Robert Dickey, chief technical analyst at Dain Rauscher Wessels.
Still, the odds are higher that the trading range will continue, rather than strong upward move, Dickey said. "The advance-decline figures and the volume are too anemic to provide a strong enough signal for an uptrend," he concluded.
Yingst said it'll be hard for stocks like Applied Materials to continue to run up once their quarterly reports are unveiled. "No matter how favorable the earnings, the market will perceive it to be a peak report."
But he's still bullish on the chip and chip equipment makers and thinks the group is near-term oversold. The growth rate of semis, he said, should continue to outpace that of the rest of the market, he noted.
That said, Yingst believes it'll be hard for the group to sustain a meaningful advance before the fourth quarter.
On the earnings front, 18 S&P 500 companies will report this week, bringing the total of those having reported to 464, First Call said.
Volume came in at 572 million on the NYSE and at 872 million on the Nasdaq Stock Market. Market breadth remained positive, with winners outnumbering losers by 16 to 11 on the NYSE and by 21 to 17 on the Nasdaq.
Separately, Trim Tabs reported that U.S. equity funds lost $2.3 billion in the three trading sessions ending Aug. 3. Aggressive growth funds lost $1.7 billion while technology funds lost $437 million -- the largest outflow on record for any survey period in the five years that Trim Tabs has tracked the sector.
Trim Tabs also notes that stock market liquidity has turned "dramatically negative," standing at minus $11 billion during the five days ending last Thursday - the worst showing since Trim Tabs began tracking these flows.
The huge influx of new offerings has put a cap on market gains. Trim Tabs notes that last week's $10.4 billion in new offerings was the most since the week ended Feb. 4. Trim Tabs said September has been one of the best months for stock market performance since 1995 thanks to slower new offerings as well as increased equity fund flows.
Sector movers
Internet stocks recovered after seeing some early selling pressure, with Merrill Lynch's Internet Holdrs (HHH: news, msgs) up 1.8 percent and the Goldman Sachs internet Index ($GIN: news, msgs) gaining 1.5 percent.
Merrill Lynch's Internet analyst Henry Blodget reset his ratings on a slew of Internet companies Monday. He said the "resetting" was done not to make a new call on the group but to provide more precise differentiation. Nonetheless, many Net companies that saw this ratings reset took a hit.
Blodget said the Net industry has entered a more mature phase of its development and that analytical and valuation discipline has again become more critical for successful stock picking.
"The tide is no longer rising fast enough to lift all boats. We continue to believe many sectors of the industry are transitioning from hyper-growth to longer-term growth and that this transition will continue to cause a shakeout and consolidation," Blodget said.
Among the companies that saw downward adjustments in their ratings were: EBay, DoubleClick, Barnesandnoble.com, Buy.com, 24/7 Media, Etoys, IVillage, Pets.com, Quokka, Safeguard Scientifics and Webvan. Quokka (QKKA: news, msgs), off 11/16 to 6 5/16, Buy.com (BUYX: news, msgs), off 15/32 to 3 3/16, and Safeguard Scientifics (SFE: news, msgs), down 2 7/16 to 26 1/2, came under the heaviest selling pressure. See Net Stocks. Among the big gainers in the group were shares of Inktomi, up 7 1/2 to 109 1/4, and Priceline.com, up 1 7/16 to 25 11/16.
But Barnesandnoble.com (BNBN: news, msgs) surged 35 percent, or 1 5/16 to 5 1/16 on reports from the New York Times that the company and Microsoft will provide books for downloading and reading on a screen. See full story.
Networking issues saw the heaviest buying interest within the technology arena. The Amex Networking Index ($NWX: news, msgs) added 2.3 percent. Cisco Systems (CSCO: news, msgs) rose 1 11/16 to 67 1/4. Cisco will unleash its fourth-quarter results after the close Tuesday. First Call estimates earnings-per-share of 15 cents.
In a research note Monday, UBS Warburg said it expects Cisco to meet or slightly exceed estimates of $5.411 billion in revenues and earnings-per-share of 15 cents. Warburg estimates 10 percent sequential revenue growth but believes Cisco will show growth closer to 12 to 14 percent. In a research note Friday, Morgan Stanley Dean Witter said concerns last week about Cisco's results were unfounded and believes the company's earnings are likely to outpace expectations.
Chip stocks interrupted a four-day losing streak Monday, with the Philadelphia Semiconductor Index ($SOX: news, msgs) up 3.2 percent. Among the components of the index, Intel (INTC: news, msgs) rose 1 1/8 to 63 11/16 and Advanced Micro Devices (AMD: news, msgs) added 1 15/16 to 64 11/16. USB Piper Jaffray lowered its rating on AMD to a "neutral" from a "buy."
Meanwhile, chip equipment stocks recovered after taking a drubbing last week on the heels of a profit warning from Kulicke & Soffa Industries. Teradyne added 2 15/16 to 54 1/4, KLA-Tencor added 1 11/16 to 46 11/16 and Applied Materials (AMAT: news, msgs) -- which will reveal its results later in the week and is expected to earn 68 cents a share in its third quarter, per First Call -- added 1 13/16 to 69 9/16. But Kulicke & Soffa (KLIC: news, msgs) continued on its downward trajectory, losing 3/8 to 16 1/8.
Financial stocks recovered from the selling pressure witnessed earlier in the session. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) added 0.1 percent after reaching fresh highs Friday. Among the stocks piercing fresh 52-week highs in intra-day action were J.P. Morgan, Citigroup, Merrill Lynch, Morgan Stanley Dean Witter and Dain Rauscher. Insurers were also higher, with the S&P Insurance Index ($IUX: news, msgs) up 0.3 percent. Aflac and American International Group were among the insurers registering a 52-week high on Monday.
One loser in the brokerage group was Bear Stearns (BSC: news, msgs), which fell 2 13/16 to 59 3/8. Bear came under pressure following a weekend article in Barron's suggesting that it may be unwise to bet on an acquisition of the company. The article referred to a Salomon Smith Barney report on Bear Stearns issued in late July, which indicated that the company acknowledged it would consider acquisition offers. See related story.
The homebuilding sector moved higher, benefiting from a Salomon Smith Barney upgrade of the group to a "buy" rating. The brokerage said a moderate decline in housing fundamentals is setting the stage for a rally over the next 12 months. See related Pulse item. D.R. Horton (DHI: news, msgs), up 1 5/16 to 17 3/4, MDC Holdings (MDC: news, msgs), up 1 9/16 to 22 3/8, and Pulte Corp. (PHM: news, msgs), up 3 to 28 1/18, all hit 52-week highs.
Treasury focus
Government prices were firmly in the red Monday, with the 10-year Treasury note off 1/4 to yield 5.94 and the 30-year bond down 12/32 to yield 5.74 percent. See Bond Report.
The only economic report on tap for Monday is June consumer credit. The highlights of the week include the second-quarter productivity report, the July retail sales report and the producer price index for July. View Economic Preview, economic calendar and forecasts and historical economic data.
The government market must also process $25 billion in new issuance: $10 billion in 5-year notes on Tuesday; $10 billion in 10-year notes on Wednesday; and $5 billion in 30-year bonds on Thursday.
In the currency arena, dollar/yen added 0.3 percent to 108.94 while euro/dollar added 0.2 percent to 0.9085. See latest currency rates.
In the commodity arena, September crude shed 64 cents to $29.32 after surging $1.01 on Friday while the Bridge CRB index lost 0.50 to 218.85.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
