<font color=BLUE>MARKET SNAPSHOT--Dow sputters, Nasdaq wobbles
Financials dip in face of Chase-J.P. Morgan union
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 1:01 PM ET Sep 13, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - The Nasdaq saw early gains evaporate Wednesday as earnings jitters unnerved investors. The Dow Industrials remained firmly in the red as two of its components --Intel and Hewlett-Packard -- suffered significant setbacks.
A Banc of America Securities downgrade of Intel and Advanced Micro Devices to a "market perform" from a "strong buy" weighed on sentiment, though a jump in shares of Rambus (RMBS: news, msgs), up 7 percent, limited damage in the chip sector, with the Philadelphia Semiconductor Index ($SOX: news, msgs) off 0.1 percent. Rambus is benefiting from news that Japan's NEC Corp. signed licensing agreements to use Rambus' memory designs. See full story.
Inside the market, utility, airline and biotech stocks blossomed while oil and oil service shares slipped as crude oil prices stabilized following Monday's surge. Financial stocks, meanwhile, backpedaled in the face of the Chase Manhattan-J.P. Morgan merger.
The Dow Jones Industrials Average ($DJ: news, msgs) shaved 82 points, or 0.7 percent, to 11,151.
Aside from Intel and H-P, selling in shares of Alcoa, Citigroup, Home Depot and Philip Morris pressured the Dow. The blue-chip barometer's gainers included shares of Honeywell, Caterpillar, Merck and Boeing.
The Nasdaq Composite ($COMPQ: news, msgs) lost 11 points, or 0.3 percent, to 3,836 while the Nasdaq 100 Index ($NDX: news, msgs) added 10 points, or 0.3 percent, to 3,677.
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 0.2 percent.
Separately, volume stood at 588 million on the NYSE and at 924 million on the Nasdaq Stock Market. Market breadth was shabby, with losers beating winners by 16 to 11 on the NYSE and by 21 to 16 on the Nasdaq.
Earnings jitters
The latest profit warning in the technology sector came from SCI Systems (SCI: news, msgs). The company said it expects first-quarter earnings to come in at 34 cents a share versus the First Call estimate of 38 cents a share, blaming seasonal weakness in consumer electronics and finished personal computer demand for the shortfall. Still, the electronics manufacturer said it stands by earlier guidance of earnings-per-share of $1.70 and $1.74 for the full year. Shares plunged 22 percent, or $12.44 to $43.50. See full story.
Shares of SCI Systems' direct competitors fell in tandem. Solectron (SLR: news, msgs) erased $1.94 to $44.31, Celestica (CLS: news, msgs) dropped $2.31 to $73.38 and Flextronics (FLEX: news, msgs) shaved $3.88 to $79.
Some PC stocks fell on the SCI news, with Hewlett-Packard (HWP: news, msgs) down $3.75 to $107.25 while Compaq (CPQ: news, msgs) slipped 3 percent, or 94 cents to $30.56. The Goldman Sachs Computer Hardware Index ($GHA: news, msgs) erased 0.7 percent.
From a seasonal point of view, September and October are not good months for the stock market, observed Peter Boockvar, equity strategist at Miller, Tabak & Co.
With the SCI warning, market watchers wonder which company will be the next to reveal they'll miss estimates, Boockvar said. And the recent jump in oil prices is quickly becoming a problem for the market, creating additional nervousness.
Sector movers
Financials stocks - on a rampage in recent weeks courtesy of merger news and speculation of future unions - came under some mild selling pressure Wednesday as Chase Manhattan (CMB: news, msgs) confirmed it's snapping up Dow-component J.P. Morgan (JPM: news, msgs). The transaction values J.P. Morgan shares at $207.
The merged entity, to be named J.P. Morgan Chase & Co., will have assets totaling around $660 billion. See full story.
The Amex Securities Broker/Dealer Index ($XBD: news, msgs) dipped 0.1 percent, while the S&P Bank Index ($BIX: news, msgs) erased 0.2 percent.
Shares of financial companies viewed as potential takeover targets -- such as Bear Stearns (BSC: news, msgs) and Lehman Bros. (LEH: news, msgs) - slid Wednesday after enjoying huge run-ups recently. Bear fell $1.38 to $70.25 while Lehman shaved $4 to $154.50.
"Buying a brokerage stock at this point is playing an arbitrage game. It's not investing. It's simply betting on who will be next on the merger platform," Boockvar commented.
Meanwhile, shares of Knight Trading Group (NITE: news, msgs) saw their shares swell 20 percent, or $5.88 to $35.31, on talk that the largest Nasdaq market maker is a takeover target. See related story.
Treasury focus
Treasury prices gained some minor ground but came well of session highs as the Nasdaq recovered after faltering immediately after the start of trading.
The pricing of a $4.5 billion reopening of a Fannie Mae deal created a slight bid in the government market as underwriters unwound the hedge trades placed to protect them from interest rate swings.
A $5.0 billion sale from Spain's Telefonica is next on the plate of large offerings slated for pricing this week.
The 10-year Treasury note added 5/32 to yield ($TNX: news, msgs) 5.76 percent and the 30-year Treasury bond rose 12/32 to yield ($TYX: news, msgs) 5.74 percent. See Bond Report.
On the economic docket, Wednesday saw the release of the August import price index, which added 0.2 percent as natural gas and petroleum prices climbed. Excluding petroleum prices, import prices edged up 0.1 percent. Export prices, meanwhile, fell 0.3 percent, the third straight decline. See full story.
Additionally, the second-quarter current account deficit came in at a $106.1 billion versus the downwardly revised $101.5 billion deficit in the first quarter. See full story. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency sector, dollar/yen (C_JPY: news, msgs) edged up 0.3 percent to 107.15 while euro/dollar (C_EUR: news, msgs) eked out a 0.2 percent gain to 0.8655. The euro reached an all-time low of 0.8545 in intraday trading on Tuesday.
.Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
