<FONT COLOR=BLUE>MARKET SNAPSHOT--Techs on a roll while Dow languishes
PPI off 0.2%; retail sales up 0.2%
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 11:35 AM ET Sep 14, 2000 NewsWatch
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NEW YORK (CBS.MW) - With the help of a batch of benign economic numbers Thursday, technology issues flexed their muscles for the second straight session while Dow stocks came under pressure due to a drop in may of its old-economy components, particularly consumer stocks.
The incredibly favorable wholesale inflation data and soft retail sales report gave additional credence to the market's belief that the Fed will stay on the sidelines for the rest of the year. Interest-rate sensitive areas of the market such as the financials gained ground, led by the banks.
Inside the broad market, utility shares paused to catch their breath after the fabulous run seen over the past months. Paper, airline and transportation issues dipped while biotech stocks were well bid.
The tech sector witnessed the greatest gains in the networking and chip sectors. Intel and Advanced Micro Devices, the sore spots for the semis on Wednesday, enjoyed modest gains on Thursday. Intel benefited from an upgrade by ABN Amro to a "buy" from "outperform" on Thursday.
The Dow Jones Industrials Average ($DJ: news, msgs) erased 55 points, or 0.5 percent, to 11,125.
McDonald's (MCD: news, msgs) fell $1.43 below Wednesday's official NYSE close to $26.88. After the close Wednesday, Dow-component McDonald's (MCD: news, msgs) said that weaker foreign currencies would have an adverse effect on its earnings, reducing per-share estimates by as much as seven cents. First Call had expected McDonald's to earn $1.51 per share in 2000.
Also heading south were shares of Coca-Cola, Boeing, Procter & Gamble and Walt-Disney. The Dow's frontrunners included Hewlett-Packard and Intel - which were the biggest downside movers on Wednesday.
Consumer products companies descended following a downgrade of Colgate-Palmolive (CL: news, msgs) by Deutsche Banc Alex. Brown to a "market perform" from a "buy" rating. Rising energy prices and the weak euro are expected to adversely affecting third-quarter earnings. Colgate tumbled 14.6 percent, or $8.19 to $48. Also moving lower were shares of Dow-component Procter & Gamble (PG: news, msgs), off 3.1 percent, or $1.94 to $60.56, Gillette (G: news, msgs) down 4.1 percent, or $1.19 to $29.63 and Clorox (CLX: news, msgs), off $1.63 to $36.
The Nasdaq Composite ($COMPQ: news, msgs) rallied 87 points, or 2.3 percent, to 3,981 while the Nasdaq 100 Index ($NDX: news, msgs) climbed 88 points, or 2.4 percent, to 3,829.
The Standard & Poor's 500 Index ($SPX: news, msgs) advanced 0.4 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks gained 0.9 percent.
In earnings news, Bear Stearns (BSC: news, msgs) said it earned $1.32 a share in its third quarter, well ahead of the First Call estimate of $1.19 a share and the $1.19 earned in the same quarter last year. Shares added $1.25 to $70.25 after dropping 3.7 percent on Wednesday.
Separately, volume checked in at 285 million on the NYSE and at 458 million on the Nasdaq Stock Market. Market breadth was slightly positive, with winners outpacing losers by 12 to 11 on the NYSE and by 21 to 12 on the Nasdaq.
Soft landing in store?
The producer price slipped 0.2 percent, much less than the expected 0.2 percent rise. The core, which excludes the volatile food and energy components, added 0.1 percent, also less than the projected 0.2 percent increase. The PPI has risen 3.3 percent in the past 12 months while the core rate is up 1.5 percent. See full story.
And the market got more confirmation that retail spending in on the wane. Retail sales edged up 0.2 percent versus the 0.4 percent rise expected by economists with consumers witnessing some temporary relief from higher gasoline prices in the month of August. Excluding autos, retail sales edged up 0.3 percent. See full story.
"There was a slowing in household spending in August, but the question still remains whether it was temporary or the start of a real economic slowdown," said Joel Naroff, chief economist at Naroff Economic Advisors.
The economic data continue to support the accepted notion that the U.S. economy is heading for a soft landing -- with less torrid, more sustainable growth that will keep inflationary pressure under wraps.
The soft landing scenario is, of course, the best one for stocks and bonds. One cloud on the horizon, however, is the swelling price of oil, which could seep into the core rate of inflation and pressure the Fed to hike rates down the road. So far, however, the inflation gauges have remained remarkably tame in the face of higher oil prices. Thursday's numbers reinforce the view that the Fed can stay on hold for the remainder of the year.
Thursday's PPI was favorable across the board, with no evidence of problems developing in the pipeline, according to Peter Kretzmer, senior economist at Banc of America Securities. But with gasoline and heating oil prices heading up in September, it'll be inevitable to see these increases reflected in next month's figures, he said.
Treasury focus
Treasury prices turned lower after a short-lived positive reaction to the morning's batch of positive economic news.
The 10-year Treasury note erased 1/32 to yield ($TNX: news, msgs) 5.75 percent and the 30-year Treasury bond shed 25/32 to yield ($TYX: news, msgs) 5.79 percent. See Bond Report.
In the meantime, the bond market will be processing a heady $5 billion offering from Spain's Telefonica, which launched late Wednesday.
In other news, weekly jobless claims added 13,000 to 324,000. See Economic Preview, economic calendar and forecasts and historical economic data.
In the currency sector, dollar/yen (C_JPY: news, msgs) eked out a 0.1 percent gain to 107.07 while euro/dollar (C_EUR: news, msgs) added 0.2 percent to 0.8618. As expected, the Bank of Japan opted to leave short-term rates unchanged following August's move to put an end to its zero-rate policy.
The euro rallied after the European Central Bank disclosed it would sell foreign currency reserves in the order of euro 2.5 billion to buy euros but the lion's share of the gains have dissipated. However, the central bank stressed the move did not correspond to an intervention to support the beleaguered currency but was just ordinary reserve management. In other news, the ECB left interest rates steady at its policy-setting meeting Thursday.
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Julie Rannazzisi is markets editor for |
