<FONT COLOR=BLUE>MARKET SNAPSHOT--Dow slides; Nasdaq gains whittle away
Tame economic news fails to help
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:20 PM ET Sep 14, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - A batch of economic data supporting the notion of a sidelined Fed failed to inspire the bulls Thursday as the Nasdaq gave up the lion's share of its gains in late afternoon trading. Selling in the Dow Industrials, with the index nearly posting triple-digit losses, weighed on sentiment as renewed earnings jitters kept enthusiasm at bay.
"Worries about third- and fourth quarter earnings continue to hover over the market," said Jay Suskind, director of trading at Ryan Beck & Co. "This is certainly a stock picker's market."
The techs have acted ambiguously, according to Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
"People are trying to figure out if there's validity to the Nasdaq's advance in August. It will be crucial to see how the market reacts to good news [in the very near-term]," Belski said, referring to Thursday's economic numbers. "Otherwise, the market will just be trapped by daily company news."
Inside the broad market, most sectors dripped in red ink. Utilities paused to catch their breath after the fabulous run enjoyed over the past months. Retail, paper, bank, airline and transportation issues also descended. The brokerage sector was one of the few managing as advance.
The tech sector witnessed the greatest gains in the networking, Internet and computer hardware arenas. However, semis lost their luster as Intel and Advanced Micro Devices -- the market's sore spots on Wednesday - saw early gains dissipate Thursday. Intel was upgraded by ABN Amro to a "buy" from "outperform" after seeing its rating lowered on Wednesday by Banc of America Securities.
Heavy losses in shares of Microsoft (MSFT: news, msgs), off 3.6 percent to $65.81, also weighed on the major averages.
The Dow Jones Industrials Average ($DJ: news, msgs) erased 94 points, or 0.8 percent, to 11,087.
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.
The biggest downside movers included Intel, Microsoft, Wal-Mart, Coca-Cola, Alcoa and Philip Morris. The Dow's frontrunners included Eastman Kodak, United Technologies, Home Depot and Hewlett-Packard. The latter was one of the biggest downside movers on Wednesday.
Consumer products companies descended following a couple of analyst downgrades. Colgate-Palmolive (CL: news, msgs) was lowered 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. Gillette (G: news, msgs) down 4.1 percent, or $1.19 to $29.63, was lowered to a "hold" rating and cut from Edward Jones "model portfolio." Also moving lower were shares of Dow-component Procter & Gamble (PG: news, msgs), off 3.1 percent, or $1.94 to $60.56, and Clorox (CLX: news, msgs), off $1.63 to $36. See The Ratings Game.
The Nasdaq Composite ($COMPQ: news, msgs) added 19 points, or 0.5 percent, to 3,913 while the Nasdaq 100 Index ($NDX: news, msgs) slipped 4 points, or 0.1 percent, to 3,737.
Oracle (ORCL: news, msgs), which received an upgrade from Morgan Stanley Dean Witter to a "strong buy" from "outperform," climbed 2.7 percent to $84. The company will also unleash its first-quarter results after the close, with earnings-per-shares of 13 cents expected by First Call. (EBAY: news, msgs)
The Standard & Poor's 500 Index ($SPX: news, msgs) slipped 0.3 percent while the Russell 2000 Index ($RUT: news, msgs) of small-capitalization stocks gained 1.0 percent.
Separately, volume was again heavy, checking in at 1.01 billion on the NYSE and at 1.68 billion on the Nasdaq Stock Market. Market breadth was mixed, with advancers matching decliners on the NYSE while winners beat losers by 22 to 17 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.
Sector movers
Brokerage shares reclaimed some of the terrain lost on Wednesday thanks to a better-than-expected earnings report from Bear Stearns. The Amex Securities Broker/Dealer Index ($XBD: news, msgs) added 1.1 percent while the S&P Bank Index ($BIX: news, msgs) was off 0.3 percent. Many bank stocks remained under pressure. Chase Manhattan Bank (CMB: news, msgs) and J.P. Morgan (JPM: news, msgs), which announced their intentions to merge, both declined, off 31 cents to $50.38 and $1.69 to $179.81, respectively. Chase was upped to a "hold" from a "sell" by CS First Boston.
Bear Stearns (BSC: news, msgs) made $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 $70.25 after dropping 3.7 percent on Wednesday. Merrill Lynch, Lehman Brothers and Goldman Sachs were all higher in the wake of the report.
Internet stocks were the biggest gainers within technology, as the Goldman Sachs Internet Index ($GIN: news, msgs) tacked on 3.6 percent and Merrill's Internet Holds (HHH: news, msgs) climbed 2.7 percent, driven by a jump in shares of Inktomi (INKT: news, msgs), up 15 percent to $125.18. The company more than made up for Wednesday's losses on the heels of its purchase of FastForward Networks. Within the Net group, business-to-business stocks soared, with smashing gains in shares of Ariba, Commerce One and PurchasePro.
Treasury focus
Treasury prices took a nosedive after a short-lived positive reaction to the morning's batch of positive economic news. Investors fled from the 30-year bond, with vicious curve steepening taking place.
The 10-year Treasury note erased 13/32 to yield ($TNX: news, msgs) 5.785 percent and the 30-year Treasury bond tumbled 1 1/8 to yield ($TYX: news, msgs) 5.81 percent. See Bond Report.
In the meantime, the bond market is processing a heady $5 billion offering from Spain's Telefonica, which launched late Wednesday and priced early Thursday. The deal, priced around expectations, contained tranches in the 5-, 10-, and 30-year sectors.
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 0.3 percent gain to 107.34 while euro/dollar (C_EUR: news, msgs) added 0.5 percent to 0.8643. 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.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
