<font color=Blue> MARKET SNAPSHOT--Steady advance for Dow, Nasdaq
Biotechs race higher
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:14 PM ET Aug 24, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Both blue-chip and tech shares flourished in a session characterized by slow trading and steady progress. Sectors such as biotech gave the market the power to advance for the fourth straight session.
The Nasdaq closed at its highest level since July 21.
"The background is good for a market advance and many groups --such as the semis and the biotechs -- are reasserting their leadership," said Donald Selkin, chief market strategist at Joseph Gunnar.
The averages are treading water, Selkin said, but there's a lot brewing beneath the surface.
"Feverish switching around between sectors has been the hallmark of the market this year," Selkin added.
Inside the tech arena, Internet, networking and chip stocks climbed. The broad market saw gains in biotech, airline and paper stocks while the most severe selling pressure was exerted on oil stocks -- which were among the biggest gainers Wednesday on the heels of a climb in crude oil prices. Interest-rate sensitive areas such as utility and bank stocks backpedaled.
The Dow Jones Industrials Average ($DJ: news, msgs) added 38 points, or 0.3 percent, to 11,182.
Upside movers within the blue-chip barometer included shares of Boeing -- up 6.8 percent -- General Motors , Honeywell, Hewlett-Packard and International Paper. Witnessing the heaviest losses were McDonald's, Procter & Gamble, Home Depot and ExxonMobil.
The Nasdaq Composite ($COMPQ: news, msgs) gained 42 points, or 1.1 percent, to 4,053 while the Nasdaq 100 Index ($NDX: news, msgs) shot up 52 points, or 1.4 percent, to 3,949.
The Standard & Poor's 500 Index ($SPX: news, msgs) edged up 0.2 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks put on 1.0 percent.
Volume checked in at 822 million on the NYSE and at 1.52 billion on the Nasdaq Stock Market. Breadth was mixed, with losers matching winners on the NYSE while advancers outnumbered decliners by 22 to 18 on the Nasdaq.
Where's the direction?
With sector rotation continuing at a frenzied pace, it's been hard to spot a trend.
"The market is directionless. Even more frustrating is the on-again-off-again rotation taking place among the sectors," said Hugh Johnson, chief investment officer at First Albany.
"There's no consistent trend emerging from the market. Participants continue to focus on companies they believe will deliver good earnings regardless of the performance of the U.S. economy," Johnson continued.
"You can't make the case for a bust in the economy and you can't make the case for a boom," he said. The not-too-hot, not-too-cold Goldilocks economy remains in place.
In this environment, Johnson said, you don't want to be completely in defensive stocks and you don't want to be entirely in economically-sensitive issues. As the market's view of the economy sways with each new piece of fresh news, so have investors' positions, he said.
Sector movers
The biotech sector was the winning group in the broad market, helping the Nasdaq hold above the 4,000 level.
Merrill Lynch's Biotech Holdrs (BBH: news, msgs), a basket of 20 biotech stocks, climbed 3.1 percent. Among the big gainers: Affymetrix (AFFX: news, msgs), up 8 1/2, or 13 percent, to 74, Human Genome Sciences (HGSI: news, msgs), up 12 percent, or 16 1/2 to 154 9/16, and Celera Genomics (CRA: news, msgs), up 8 5/16 to 91.
Robertson Stephens began coverage on Human Genome with a "buy" rating and a 12-month price target of $169 to $200 a share indicating he sees potential for the stock to increase in value, driven by its clinical development pipeline and its genomics database. See full story.
Semiconductor stocks took a break after advancing at a rapid pace over the past 10 days. The Philly Semiconductor Index ($SOX: news, msgs) slipped 0.1 percent. A.G. Edwards said Thursday that fundamentals in the group remain quite strong.
"The world economy, especially the Asia/Pacific [region], is considerably more healthy than it has been over the past several years. As a result, the sector is experiencing record unit demand," analyst Christopher Chaney said in a note to clients. He believes demand can support 40 percent growth in 2000 and sees growth touching 25 percent in 2001. Among Thursday's upside movers: Atmel (ATML: news, msgs) added 1 1/8 to 38 1/2; Micron Technology (MU: news, msgs) rose 1 1/2 to 92 1/4; and chip equipment maker Teradyne (TER: news, msgs) added 1 13/16 to 69 1/16. But Intel (INTC: news, msgs) shed 3/4 to 73 7/8 after reaching a new high on Wednesday.
Linux-related stocks blossomed in the wake of VA Linux Systems' scintillating earnings report.
The company (LNUX: news, msgs) shot up 17 percent, or 6 5/16 to 43 7/16, after reporting late Wednesday a fourth-quarter loss of 10 cents a share, less than the First Call estimate of a loss of 15 cents. Among other players in the Linux group, Red Hat (RHAT: news, msgs) climbed 2 3/4 to 25 9/16 while Canadian-based Corel (CORL: news, msgs) put on 1/2 to 3 21/32.
WR Hambrecht upped VA Linux to a "strong buy" rating following the company's stellar earnings report and set a $60 price target, saying the stock's current valuation does not reflect its solid progress and renewed positive outlook. WR Hambrecht said VA Linux exceeded their expectations for revenue growth rate, gross margins and movement towards profitability.
CS First Boston, meanwhile, raised its fiscal year 2001 revenue forecast for VA Linux from $271 from $323 million and reiterated its "buy" rating and 12-month price target of $65.
Oil stocks took a break following their advance on Wednesday on the heels of a rally in oil prices. Airline stocks, on the other hand, recovered from their fall during the previous session and the Amex Airline Index ($XAL: news, msgs) added 1.9 percent. In the commodity arena, October crude fell 39 cents to $31.63 after rallying on Wednesday following the release of API supply data revealing another surprising drop in inventories. The Bridge/CRB index added 0.35 to 220.87.
Morgan Stanley Dean Witter said it remains positive on the energy group but would focus new money on BP Amoco (BP: news, msgs) and Conoco (COC.A: news, msgs), as ExxonMobil (XOM: news, msgs) and Chevron (CHV: news, msgs) have reached the brokerage's price objectives. Morgan Stanley believes the outlook for crude is positive for 2000 and 2001. "With supply growth likely to be flat among countries that are not members of OPEC, we expect spare capacity to dwindle among OPEC members. Inventories are likely to remain low in 2001," the brokerage said in a note to clients.
After faltering on Wednesday, paper stock regained their composure and the Philadelphia Forest and Paper Products Index ($FPP: news, msgs) climbed 1.9 percent. International Paper (IP: news, msgs), one of the downside movers during the previous session, added 1 to 32 1/16. The Dow-component said it has entered into exclusive negotiations with Finland's Metsa-Serla for the sale of IP's stake in Zanders Feinpapiere. IP said it would sell more than $3 billion in assets under a plan to strengthen its core businesses. See full story.
Among other movers, Westvaco (W: news, msgs) added 1 to 27 15/16. The company posted third-quarter earnings of 69 cents a share, beating the First Call estimate by 2 pennies.
Big movers
Bausch & Lomb (BOL: news, msgs) warned of a shortfall for its fiscal 2000 and 2001 earnings. The company expects 2000 earnings at $2.69 to $2.72 per share and at $2.87 to $2.92 a share for 2001. First Call had expected 2000 earnings-per-share to come in at $3.15 and 2001 results at $3.84. The miss was blamed on a slowdown in the company's vision care segment as well as increasing price pressure on U.S. generic pharmaceutical products. The stock tumbled 33 percent, or 18 1/2 to 37 1/4. The company was downgraded by Goldman Sachs to a "market performer" and removed from the recommended-for-purchase list. Deutsche Banc Alex. Brown also lowered the company to a "market perform" from a "buy" and Salomon Smith Barney cut the stock to a "neutral" from a "buy" rating. See full story.
Next Level Communications (NXTV: news, msgs) was the biggest downside mover on the Nasdaq, diving 54 percent, or 50 to 41 9/16 and setting an all-time low. Lehman Brothers shaved its rating on the stock to a "neutral" from a "buy." See Ratings Game. In a note to clients, Lehman raised concerns over the company's relationship with Qwest Communications (Q: news, msgs), saying he believes it's likely Qwest will not move forward aggressively with US West's plans to deploy VDSL products that had been started prior to its acquisition by Qwest. And Merrill Lynch lowered its rating on the clobbered stock to "near-term accumulate" from a "near-term neutral," indicating that even with Thursday's sell-off, the stock will probably still be overvalued. Merrill noted that Qwest represents about 70 percent of Next Level's revenues this year and would have represented 50 percent of next year's revenues.
J.D. Edwards (JDEC: news, msgs) reported after the close Wednesday a third-quarter profit from operations of 2 cents a share, beating the First Call estimate of 1 cent a share and well ahead of the 7-cent loss posted in the year-ago quarter. ING Barings called the results outstanding in a research note and said total revenues came in at the high end of the pre-announced range at $261 million. ING said the company still lacks in valuation versus its competitors by over 50 percent while it continues to gain significant market share. The stock dropped 1 1/2, or 6.6 percent, to 22.
Treasury focus
Treasurys meandered close to the unchanged mark, relinquishing the bulk of their earlier gains. The market briefly picked up some steam on the heels of weaker-than-expected economic data buy found no buyers to sustain the upward push.
The 10-year Treasury note was flat to yield ($TNX: news, msgs) 5.725 percent and the 30-year bond added 2/32 to yield ($TYX: news, msgs) 5.69 percent. See Bond Report.
On the economic docket, Thursday saw the release of durable goods orders for July, which plunged a surprising 12.4 percent compared to expectations for a 5.4 percent drop. Excluding defense, durable goods fell 6.8 percent. See full story. The fall in the figure was due to a record drop in transportation orders -- which tumbled 31 percent - driven primarily by the aircraft sector.
"After soaring to new heights in June, the demand for aircraft and parts crashed and burned in July. When we look at transportation as a whole, orders have been relatively flat this year, which is especially glaring when we consider that total durable goods orders are up nearly 10 percent so far," commented Joel Naroff, chief economist at Naroff Economic Advisors.
"Durable goods orders growth seems to be slowing slightly, enough to give a hint that manufacturing activity may moderate in the months ahead. But neither is it clear how much of a production cutback we will see nor is it obvious how quickly that will show up," Naroff concluded.
In other news, weekly initial claims added 4,000 to 314,000. . View Economic Preview, economic calendar and forecasts and historical economic data
Separately, the minutes of the June 27-28 Federal Open Market Committee meeting revealed that all members voted to hold rates steady, indicating that the effects of the six rate hikes since June 1999 still needed to work their way into the U.S. economy. But many members said economic data indicated an additional firming of rates may be warranted in the future, according to the minutes. See full story.
In the currency arena, dollar/yen (C_JPY: news, msgs) continued its descent following Wednesday's severe sell-off, with the pair off 0.1 percent at 106.91. Euro/dollar (C_EUR: news, msgs) edged down 0.1 percent to 0.9017. View latest currency rates.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
