<font color=BLUE>MARKET SNAPSHOT--Triple-digit loss for Dow
Nasdaq positive; brokerages, B2B stocks rally
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:15 PM ET Aug 30, 2000 NewsWatch
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NEW YORK (CBS.MW) - Investors snubbed blue-chip issues Wednesday, keeping the Dow solidly in the red throughout the trading day, while the Nasdaq managed to eke out a gain for the third consecutive session.
Despite Wednesday's setback, one market watcher remains bullish on the Dow.
"The Dow is still in good shape technically," said Robin Griffiths, chief technical analyst at HSBC Securities. The blue-chip-barometer, he said, has broken out of a downtrend and remains on an upward trajectory.
"The Dow's downward move appears to be more related to near-term technical bearishness and low volume than anything else," said Sam Stovall, senior investment strategist at Standard & Poor's. "People are just taking some profits."
The broad market's bright spot was the continued rally in brokerage stocks in the wake of Credit Suisse First Boston's announced purchase of Donaldson, Lufkin & Jenrette.
Other upside movers in the overall market were bank, biotech and utility shares while retail, oil and transportation shares backpedaled. A rally in the Internet sector gave the Nasdaq the impetus needed to stay in the plus column, with smashing gains scored in the business-to-business group. The tech group's sour spots included semis and computer stocks.
The Dow Jones Industrials Average ($DJ: news, msgs) lost 112 points, or 1.0 percent, to 11,103.
Holding down the Dow were shares of Coca-Cola, Home Depot, General Electric, United Technologies and Wal-Mart. Moving higher were shares of Honeywell, J.P. Morgan and Boeing.
The Nasdaq Composite ($COMPQ: news, msgs) added 21 points, or 0.5 percent, to 4,103 while the Nasdaq 100 Index ($NDX: news, msgs) edged up 16 points, or 0.4 percent, to 3,968.
The market has recently seen a slow, steady grind higher, which has effectively moved the averages to higher ground, said Joe Liro, market analyst at Stone & McCarthy Research Associates.
The fundamental backdrop for the stock market is still exceptional, Liro acknowledged. Even as the U.S. economy moderates, he said, profit growth will remain solid.
Equities had to absorb some high-profile earnings pre-announcements for the second-quarter and there's some trepidation heading into the third-quarter pre-announcement period. That's the market's main hurdle over the past few weeks, observers say.
Stovall said the quality of third-quarter earnings will also be an issue.
"Some of the second-quarter's earnings were good but padded by investments gains. And people remain concerned about revenue growth," Stovall added.
The Standard & Poor's 500 Index ($SPX: news, msgs) lost 0.5 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks edged up 0.5 percent.
Volume was respectable, coming in at 817 million on the NYSE and at 1.52 billion on the Nasdaq Stock Market. Breadth was marginally negative, with losers outpacing winners by 15 to 14 on the NYSE and by 21 to 19 on the Nasdaq.
Financials rally
Ending speculation, which began early Tuesday, Credit Suisse First Boston announced it's purchasing Donaldson, Lufkin & Jenrette in a $11.5 billion deal. Credit Suisse will pay $90 for each share of DLJ, representing a premium of about 10 percent. See full story.
"It's a continuation of a trend that we've seen in the past years. We're seeing more and more consolidation on the sell-side of the business," Liro said.
"In terms of strategy, it's a fairly logical move for both sides," he noted.
"The only thing that will stop this trend is when everyone will have bought everyone else," Liro continued.
"There will be more and more pressure on the remaining people on the dance floor to find partners. We know who the candidates are, there are always negotiations going on," Liro concluded.
"The CSFB-DLJ transaction will be a positive influence on the stock market, and the coming technology companies' earnings will be stronger than people think," said Mike Holland, president of Holland & Co.
A rally in brokerages stocks ensued, with the Amex Securities Broker/Dealer Index ($XBD: news, msgs) up 2.2 percent following an over 5-percent rally on Tuesday.
DLJ (DLJ: news, msgs) rose 5.0 percent to $88.25 after surging 25 percent on Tuesday. But shares of DLJDirect (DIR: news, msgs), which surged on Tuesday, tumbled 21.6 percent to $8.63. The merger agreement, in fact, doesn't include DLJ's online brokerage arm, which will remain outstanding and continue to trade on the New York Stock Exchange.
"DLJ Direct will continue to be publicly traded, valued on the fundamental performance of its online brokerage operations. With the shares rising 39 percent Tuesday in anticipation of DLJ being acquired, we believe the shares could fall back to the $7 to $8 level we believe to be fair value," Merrill said in a note to clients.
The financial arena was chock full of green on Wednesday, with J.P. Morgan (JPM: news, msgs), up $5.81 to 154.81, among the Dow Industrials' upside movers. The stock was upped by ING Barings to a "buy" rating from a "hold" and a $200 12-month target was set. Within the brokerage arena, Lehman Brothers (LEH: news, msgs) added $2.75 to $143.25 and Bear Stearns (BSC: news, msgs) climbed $2.13 to $65.25. Both are potential takeover candidates.
Bank stocks rose as well, with the S&P Bank Index ($BIX: news, msgs) up 1.0 percent. Morgan Stanley Dean Witter believes the group is currently sporting reasonable valuations and recommends owning the stocks because of these reasonable valuations relative to the market. Companies favored by Morgan Stanley include FleetBoston Financial (FBF: news, msgs), Comerica (CMA: news, msgs) and Chase Manhattan (CMB: news, msgs). All three companies rose, led by Chase, up 94 cents to $52.81.
Sector movers
Chip stocks were the sore spot for the tech sector as the Philadelphia Semiconductor Index ($SOX: news, msgs) headed lower for the fourth straight session, losing 1.8 percent on Wednesday. Rambus (RMBS: news, msgs) slid for the fourth straight session, losing $3.50 to $77.13. The stock lost ground on Tuesday after Micron Technology filed a lawsuit against the company on Monday claiming violations of Federal antitrust laws and infractions relating to certain Rambus patents. On Wednesday, South Korea's Hyundai Electronics Industries said it filed a U.S. federal lawsuit against Rambus, claiming that its products don't infringe on Rambus' patents. Read full story. Micron (MU: news, msgs) lost $1.69 to $85.56.
Semiconductor kingpin Intel (INTC: news, msgs) shed $1 to $73.06 while Advanced Micro Devices (AMD: news, msgs) dipped 56 cents to $34.19. National Semiconductor (NSM: news, msgs) bucked the trend, rising $2.06 to $42.44. Bear Stearns reiterated its "buy" recommendation on the stock and $115 price target, saying that analog fundamentals remain strong and that the stock is undervalued.
Internet stocks were the shining stars within the technology group Wednesday as the Goldman Sachs Internet Index ($GIN: news, msgs) put on 4.5 percent and Merrill Lynch's Internet Holdrs (HHH: news, msgs), a basket of 20 Net stocks, rose 3.4 percent. One of the big winners in the group was Amazon (AMZN: news, msgs), which piled on $3, or 7.6 percent, to $42.63. Goldman Sachs reiterated its "trading buy" rating on the stock, indicating it wasn't concerned about the company's revenue outlook. See related Pulse item.
Other Net stocks reaping nice gains were shares of Inktomi (INKT: news, msgs), which added 6.3 percent, or $7.56 to $126.75, in the wake of an initiation by Lehman Brothers with a "buy" rating and a $150 price target. CMGI (CMGI: news, msgs) tacked on 13 percent, to $45.75 and Yahoo (YHOO: news, msgs) edged up 69 cents to $121.69. It was initiated by CS First Boston with a "buy" rating.
Business-to-business stocks were also extremely sought after Wednesday, with Merrill's B2B Holdrs (BHH: news, msgs) up an impressive 6.1 percent. The Merrill trust is up 19.5 percent for the month as interest in the group has picked up substantially following the summer lull but remains off 44.9 percent since it began trading on Feb. 29 and is down 54.6 percent from its peak of 113.50 set on March 10. Wednesday's frontrunners included Commerce One (CMRC: news, msgs), up 16 percent to $60.75, Internet Capital Group (ICGE: news, msgs), up 14 percent to $35.63, and Ventro (VNTR: news, msgs), up 17 percent to $15.06.
Treasury focus
Government prices recovered late in the session, with the 10-year Treasury note up 2/32 to yield ($TNX: news, msgs) 5.80 percent and the 30-year bond adding 2/32 to yield ($TYX: news, msgs) 5.745 percent. See Bond Report.
Yields are hovering at their lowest level in about a year as investors' confidence that the Fed will be out of the picture for the next months has swelled. This has brought on some profit-taking on the part of bond dealers this week.
On the economic front, Wednesday's sole piece of economic news came in the form of July leading economic indicators, which edged down 0.1 percent for the third straight month, in line with expectations of economists surveyed by CBS MarketWatch.com. See full story and view Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen (C_JPY: news, msgs) climbed 0.4 percent to 106.45 while euro/dollar (C_EUR: news, msgs) edged up 0.1 percent to 0.8933.
The market has kept a close eye on commodity prices following the latest supply figures from the American Petroleum Institute. Late Tuesday, the API said crude-oil stocks rose 5.3 million barrels in the week ended Aug. 25 to a total of 286 million. The data came in higher compared to analysts' expectations for a 3.7 to 4.1 million-barrel rise. See full story. October crude added 58 cents to $33.32 in volatile action while the Bridge/CRB index gained 0.80 to 225.34.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
