<font color=blue>MARKET SNAPSHOT--Dow climbs while Nasdaq slumps
J.P. Morgan rise fuels blue-chip barometer
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 12:24 PM ET Sep 6, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - A merger announcement in the financial services arena and speculation that the group will see more consolidation sent bank and brokerage stocks into the plus column, helping the Dow Industrials reap handsome gains.
The Nasdaq remained in a slump for a second consecutive session as chip stocks took a hit in the wake of a downgrade of Micron Technology and more selling pressure for Intel shares.
"People are questioning earnings in technology," said Peter Boockvar, referring to the events causing the drops in Intel and Micron Technology. The techs had a nice run in August, rendering them more vulnerable to potential speed bumps, he added.
People will scrutinize what companies say about revenue growth and future earnings in the third quarter, Boockvar said. And as the pre-announcement period for the third quarter approaches, he said the market will become more vulnerable.
Within the broad market, utility, retail, oil and paper shares also reaped gains while drug and biotech shares continued to sputter.
The Dow Jones Industrials Average ($DJ: news, msgs) rallied 76 points, or 0.7 percent, to 11,337.
J.P. Morgan pulled the Dow higher with its 7 percent gain. Also leading the pack were shares of Honeywell, American Express, International Paper and 3M. Among the names moving lower were Citigroup, Coca-Cola and Intel.
The Nasdaq Composite ($COMPQ: news, msgs) shed 65 points, or 1.6 percent, to 4,077 while the Nasdaq 100 Index ($NDX: news, msgs) erased 61 points, or 1.6 percent, to 3,925.
The Standard & Poor's 500 Index ($SPX: news, msgs) edged down 0.3 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks slipped 0.7 percent.
Volume came in at 362 million on the NYSE and at 653 million on the Nasdaq Stock Market. Market breadth was mixed, with losers matching winners on the NYSE and decliners outnumbering advancers by 21 to 14 on the Nasdaq.
Sector movers
The announcement of a merger and expectations that the group will see more unions fueled the financial sector's fire Wednesday. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) climbed 2.5 percent while the S&P Bank Index ($BIX: news, msgs) rose 2.1 percent.
Citigroup (C: news, msgs) announced it's purchasing Associates First Capital Corp. (AFS: news, msgs) in a stock transaction valued at about $31.1 billion. Under the terms of the deal, Associates shareholders will get 0.7334 common shares of Citigroup for each share of Associates. The deal gives Associates shareholders 10 percent of Citigroup and the merger will be accretive to Citigroup's earnings by at least 10 cents a share in the first year of combined operations. See full story. Associates skyrocketed 41 percent, or $11.50 to $39.50 while Citigroup slipped $1.38 to $56.19.
Adding fuel to the merger speculation fire that was heightened by last week's buyout of Donaldson Lufkin & Jenrette (DLJ: news, msgs) by CS First Boston, German weekly Wirtschaftswoche reported that Deutsche Bank AG is in talks to acquire J.P. Morgan. The company declined to comment and Deutsche Bank told FT MarketWatch that it had no comment. See related item. The Dow component (JPM: news, msgs) climbed 6.4 percent to $170.25.
In the meantime, online brokerages are getting a boost from a string of upgrades in the group. Ameritrade (AMTD: news, msgs) rose 12.4 percent to $20.94 while E-Trade (EGRP: news, msgs) put on 9 percent to $19.69.
CS First Boston raised its rating on Ameritrade to a "buy" from a "hold" with a $35 12-month price target and upped E-Trade to a "buy" from a "hold" with a $35 price target. The brokerage said that at current valuations, it believes Ameritrade represents an attractive opportunity, the best since October 1998. And Ameritrade could attract attention as a potential target in the current environment dominated by merger and acquisition activity. The stock could also benefit as trading volumes recover after the summer lull, CS First Boston said.
CS First Boston also believes E-Trade represents the best buying opportunity since Oct. 1998 and sees upside potential in the stock from rebounding volumes and consolidation interest. CIBC WorldMarkets, meanwhile, upped Ameritrade to a "buy" from a "hold" with a $25 price target.
In the tech arena, Micron Technology fell 10.2 percent, or $8 to $70.50, dragging the Philadelphia Semiconductor Index ($SOX: news, msgs) down by 4.3 percent. Donaldson, Lufkin & Jenrette lowered its rating on the stock to an "underperform" from a "buy" due to a much earlier-than-expected fall in DRAM spot prices.
In a note to clients, Merrill Lynch said it continues to believe that there is inventory in the system that'll place pressure on the DRAM spot market in the near term but also continues to believe that this is not a meaningful indicator as to what earnings will look like for Micron several months out.
And shares of Intel continued their descent, falling $1.50 to $67.75. On Tuesday, Intel (INTC: news, msgs) slipped over 6 percent after U.S. Bancorp Piper Jaffray's Ashok Kumar reduced his rating on the chip kingpin to a "buy" and questioned whether it can engineer a soft landing.
Treasury focus
Treasurys slid, with buyers still sidelined Wednesday as they prepared for a deluge of issuance in the corporate arena and digested the recent run-up in prices.
The 10-year Treasury note fell 7/32 to yield ($TNX: news, msgs) 5.72 percent and the 30-year bond dropped 14/32 to yield ($TYX: news, msgs) 5.70 percent. See Bond Report.
On the data docket, second-quarter productivity was upwardly revised to show a growth rate of 5.7 percent from the previously reported 5.3 percent increase. And unit labor costs slipped by 0.4 percent in the second quarter compared to the previously reported 0.1 percent decrease. See full story.
The figures are more evidence that productivity gains are outstripping wage increases and keeping inflation at bay. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen (C_JPY: news, msgs) inched 0.1 percent higher to 105.85 while euro/dollar (C_EUR: news, msgs) fell 0.9 percent to 0.8817.
Turning to the commodity arena, October crude rose 9 cents to $33.92 while the Bridge/CRB index added 0.46 to 230.21.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
