<font color=blue> MARKET SNAPSHOT--Shares mixed on merger Monday
By Greg Morcroft & Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 10:44 AM ET Sep 11, 2000 NewsWatch
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NEW YORK (CBS.MW) - U.S. stocks were mixed Monday as the Dow headed slightly higher amid Nasdaq losses.
In early trade the Dow rose 5.92 points to 11226.57. The Nasdaq resumed its sell-off from last week, shedding 37.91, or 1 percent, to 3940.43.
There were several mergers and acquisitions announced Monday, including another financial sector deal for Goldman Sachs.
Goldman said it is buying market maker Spear, Leeds & Kellogg for $6.5 billion in cash and stock, capping a sizzling summer of financial industry mega-mergers. The deal will expand its retail operations and boost it trading of Nasdaq stocks.
Goldman (GS: news, msgs) shares posted a robust $6 per share gain to $130.25 on its plans to buy Spear, Leeds & Kellogg for $10 billion. The financial sector rallied on the move. See full story.
Shares of Hewlett-Packard (HWP: news, msgs) fell along with most of the broader technology sector after the computer giant confirmed plans to buy PricewaterhouseCoopers' consulting business for about $17.5 billion.
Meanwhile, the oil sector continues to a large issue for investors, and shares of oil and oil service companies were strong, with the AMEX oil index up 2.7 percent and the CBOE oil index up 2.8 percent. The Philadelphia Exchange's Oil Services index rose 3.8 percent.
The Organization of Petroleum Exporting Countries said Sunday that it would increase total daily output from 10 members, excluding Iraq, by about 3 percent to 26.2 million barrels a day.
Crude futures rose sharply early Monday amid concerns that OPEC's three-percent production hike only legitimizes the cartel's current overproduction and won't be enough to build inadequate U.S. supplies.
On the New York Mercantile Exchange, October crude rose $1.12 to $34.75 a barrel. October heating oil climbed 2.11 cents to 101.60 cents a gallon.
Dura Pharmaceuticals jumped Monday after Elan Corp announced it had entered into an agreement to buy the company in a transaction valued at $1.8 billion.
Under terms of the deal, Dura shareholders will receive 0.6715 of Ireland-based Elan's ADSs for each Dura share they own. Based on Friday's closing price, the offer, at approximately $35.01 per share, represents a 22 percent premium. Dura said its board has unanimously accepted the merger, and is recommending shareholders to do the same.
Cyberonics (CYBX: news, msgs) powered up $8.44 to $24.25. Medtronic (MDT: news, msgs) confirmed that it has made a proposal to buy the company for $26 a share in stock. That represents a 62 percent premium over Cyberonics's closing price on Friday, and $2.25 below its 52-week high. Medtronic said it made its proposal in a letter dated July 17 to Robert Cummins, Cyberonics' chief executive. A letter to the company's board was sent on Aug. 9.
The Dow Industrials ended the week off a mere 0.2 percent and is down 2.4 percent for the year. The Nasdaq, meanwhile, fell 6 percent last week and is off 2.2 percent for the year.
Earnings and data watch
This week's does of economic news will come in the form of the retail sales report for August, industrial production and capacity utilization as well as those closely-watched inflation indicators: the producer and consumer price indexes.
The figures presented during the past couple of months have painted a uniform picture of the economic landscape: that of growth that's tapering off to a more sustainable, non-inflationary pace. The market's perception that the Federal Reserve can afford to stay on hold for the remainder of the year needs to be confirmed by this next batch of numbers.
This week's limited dose of earnings news includes reports from Solectron, Value City Dept. Stores, Best Buy, Pier 1 Imports, Kroger, Biomet, Oracle, Adobe Systems, Red Hat, Verity, Nike, Dress Barn and General Mills.
First Call notes that a greater amount of large companies have been reporting negative pre-announcements for the third quarter. However, the earnings compiler said there's still no clear indication that these downward revisions will turn out to be more than normal once the pre-announcement period concludes.
First Call said estimated earnings growth for S&P 500 companies in the third-quarter currently stands at 17.1 percent, down from the 18.8 percent expected on July 1.
Friday's trading activity
The Nasdaq fell on its face Friday as chip stocks were smacked amid investor worries over the group's revenue growth going forward. The widespread selling pushed the Nasdaq to its first close below the 4,000 level in almost three weeks.
With market participants concerned about the quality of third-quarter earnings, the market has been unable to make any headway this week to follow up on last week's buying spree.
"We've been locked in a range," said Liro of Stone & McCarthy Research Associates, of the sideways action that has characterized the market in the past week.
In the broad market, a profit warning from National Discount Brokers hobbled the online brokerage sector. Also pressuring the market was a drop in shares of oil service and paper stocks. Within technology, computer hardware, Internet and networking shares retreated alongside the semis.
The Dow Jones Industrials Average ($DJ: news, msgs) subtracted 39.22 points, or 0.3 percent, to 11,220.65.
DuPont (DD: news, msgs), the biggest drag on the Dow Thursday in the wake of its earnings warning, continued to slip, shedding 3.1 percent to $40.81.
Also keeping the Dow in the red were losses in shares of Honeywell, General Motors, IBM, Intel and Walt Disney. Keeping the blue-chip barometer's losses in check were gains in shares of Home Depot, Wal-Mart, SBC Communications and Citigroup.
The Nasdaq Composite ($COMPQ: news, msgs) tumbled 119.90 points, or 2.9 percent, to 3,978.45 and the Nasdaq 100 Index ($NDX: news, msgs) slid 139.87 points, or 3.5 percent, to 3,813.49.
"After we get third-quarter earnings warnings out of the way, the market's bellwethers are likely to provide more leadership. The confession period is having a big effect on shares," Sheldon of Spencer Clarke said.
Sheldon remains positive on the market over the next several months. He believes stable interest rates and relatively strong earnings will continue to underpin prices.
Liro, while optimistic on the market's prospects for the fourth quarter, remains concerned about the rising price of oil, which he believes will heavily weigh on the economy and consumer spending going forward.
The Standard & Poor's 500 Index ($SPX: news, msgs) erased 0.5 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks slipped 1.3 percent.
Volume checked in at 961 million on the NYSE and at 1.48 billion on the Nasdaq Stock Market. Market breadth was sloppy, with decliners pouncing on advancers by 15 to 13 on the NYSE and by 25 to 15 on the Nasdaq.
Separately, Trim Tabs reported that all equity funds had outflows of $800 million during the week ended September 6 versus inflows of $5.6 billion during the previous week. Equity funds investing primarily in U.S. stocks had outflows of $500 million compared with inflows of $5.4 billion in the prior week. In the meantime, bond funds had inflows of $700 million compared with outflows of $900 million in the prior week.
Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray, observed that money market funds scored their largest inflow since the week of August 2 but suggested to not read too much into the drastic slowdown in equity inflows in the latest week.
Belski notes, in fact, that the current data includes the holiday shortened trading week. "Given the current ambiguous market conditions, coupled with the phantoms of recent Septembers and Octobers (1997, 1998 and 1999), we believe that the stock piling of cash is a major positive for the market heading into the fourth quarter," he concluded.
Sector Movers:
The biggest downside movers were witnessed in the chip equipment segment. Among the losers: Teradyne (TER: news, msgs), off 7.3 percent to $57.38, KLA-Tencor (KLAC: news, msgs), off 8.8 percent to $55.75, and Kulicke and Soffa Industries (KLIC: news, msgs), down 8.1 percent to $15.69.
The online brokerage arena took its lumps as National Discount Brokers warned of an earnings shortfall. The company (NDB: news, msgs) said it expects to report a loss of 6 to 9 cents a share in its fiscal first quarter versus the First Call estimate for a gain of 9 cents a share. NDB said that while total revenues increased over the previous year, revenues in the first quarter of fiscal 2001 were negatively impacted by adverse market conditions. The stock dropped 22.3 percent, or $8 to $27.81. Other losers in the group included Ameritrade (AMTD: news, msgs), off 5.4 percent to $19.69, and E-Trade (EGRP: news, msgs), off 4.3 percent to $18.25. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) shed 0.7 percent.
Other interest-rate sensitive sectors such as the banks and the utilities gained significant ground. Bank stocks have posted gains throughout the week, with consolidation speculation providing the group with a healthy bid. The S&P Bank Index ($BIX: news, msgs) rose 2.3 percent Friday and has risen 5.5 percent this week. The Dow Jones Utilities Average ($UTIL: news, msgs), meanwhile, reached a record Friday, touching an intraday high of 386.30 and ending up 2.7 percent.
Oil and oil service shares slumped on the heels of a hefty drop in crude oil prices Friday. October crude, in fact, shaved $1.76 to $33.63 after reaching fresh 10-year highs on Thursday. Concerns that Saudi Arabia will lead OPEC in agreeing to increase production at this weekend's meeting in Vienna brought out the sellers. The Saudi Arabia oil minister said OPEC would do its part to bring oil prices down to its targeted range between $22 and $28 a barrel. See full story. The Philadelphia Oil Service Index ($OSX: news, msgs) fell 2.1 percent, with Halliburton (HAL: news, msgs), down 2.6 percent to $51.06, and Schlumberger (SLB: news, msgs), off 1.4 percent to $82.50.
Retail shares have staged an impressive rebound since the start of the month, rising for five straight trading sessions. The S&P Retail Index ($RLX: news, msgs) rose 3.1 percent, getting help from an upgrade of a number of retailers by Morgan Stanley Dean Witter. The brokerage upped its ratings to an "outperform" from "neutral' on Limited (LTD: news, msgs), Abercrombie & Fitch (ANF: news, msgs) and TJX Companies (TJX: news, msgs), all of which rose heartily. The rise in retail stocks limited the damage on the Dow Industrials Friday as both Home Depot and Wal-Mart checked in with healthy gains.
See After Hours for post-market trading activity.
Treasury focus
Bond prices caught a slight bid Friday, with gains concentrated in the long end of the Treasury curve, as weakness in the equity arena and dollar strength provided some support.
Friday saw the release of July consumer credit, which grew 7.7 percent or $9.4 billion. View Economic Preview, economic calendar and forecasts and historical economic data.
The vacuum of fresh news to chew on this week has kept Treasurys within the narrowest of confines. But next week carries with it a plethora of data -- including the inflation figures and the retail sales report -- which may help the market plot a move.
The 10-year Treasury note added 5/32 to yield ($TNX: news, msgs) 5.735 percent and the 30-year bond rose 9/32 to yield ($TYX: news, msgs) 5.705 percent. See Bond Report.
In the currency arena, dollar/yen (C_JPY: news, msgs) climbed 0.9 percent to 106.04 while euro/dollar (C_EUR: news, msgs) lost 0.5 percent to 0.8676.
The yen responded negatively to rating agency Moody's Investors Service's downgrade of Japan's sovereign debt rating to an "Aa2" from an "Aa1." A negative outlook was also maintained. In Feb. 2000, Moody's put Japan's debt under review for a possible downgrade. The rating agency said the downgrade Friday was prompted by policy shortcomings and structural problems that have resulted in a level of government indebtedness that has become the highest, relative to GDP, among the advanced industrial economies. Read the full story.
Greg Morcroft is New York news editor of CBS.MarketWatch.com.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com |
