<FONT COLOR=BLUE>MARKET SNAPSHOT--1:16 PM--Dow keeps gains but Nasdaq sputters
Biotechs, Net stocks under the gun
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 1:16 PM ET Oct 2, 2000
NEW YORK (CBS.MW) - The Dow Industrials chiseled out a gain Monday, but profit worries remained a concern as investors prepared for this month's onslaught of quarterly reports, causing additional distress for Nasdaq stocks.
"The market is still in 'reactive mode,' a trend that will bring only more volatility as the fourth quarter unfolds," commented Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray.
"The third quarter earnings season will actually surprise some as to its prowess [since] the fundamental warnings of the past three to six months have potentially made analysts and companies alike more conservative in their expectations going forward," Belski continued.
Inside technology, networking and computer hardware shares headed north while Internet and chip stocks slumped.
The broader market saw the heaviest selling pressure in the biotech sector, with around 6-percent losses in the some of the key sector indexes. Oil was among the few groups moving on the upside, buttressed by a $1.08 jump rise in crude oil futures to $31.92.
The Dow Jones Industrials Average ($DJ) added 21 points, or 0.2 percent, to 10,673 after rising as much as 71 points at its intra-day peak.
Moving higher were shares of Coca-Cola, General Motors, Exxon Mobil, J.P. Morgan and Philip Morris.
Capping further gains in the Dow were losses in shares of Boeing, International Paper, Eastman Kodak and Intel.
Boeing (BA) shaved 9.2 percent, or $5.88 to $58.63 after seeing its shares cut to a "neutral" rating from an "outperform" by Lehman Brothers. In a note to clients, Lehman said the stock is fully valued on aggressive earnings-per-share estimates and said the loss of Boeing's 30-year 747 monopoly adds risk to the company's earnings outlook.
Caterpillar was flat from its official NYSE of $33.75. The Dow-component (CAT) warned late Friday that third-quarter earnings will be roughly 15 percent below the Wall Street consensus estimate of 68 cents a share due to euro and pound weakness, higher energy costs, and severe price pressures, among others. But Caterpillar confirmed its outlook for 2000, which was unveiled in July.
The Nasdaq Composite ($COMPQ) lost 16 points, or 0.4 percent, to 3,656 while the Nasdaq 100 Index ($NDX) shaved 13 points, or 0.4 percent, to 3,557.
The Standard & Poor's 500 Index ($SPX) was up 0.6 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks edged down 0.6 percent.
Volume came in at 440 million on the NYSE and at 765 million on the Nasdaq Stock Market. Breadth was mixed, with winners outnumbering losers by 14 to 13 on the NYSE while decliners outpaced advancers by 22 to 16 on the Nasdaq.
Earnings outlook
As of Friday, third-quarter profit warnings totaled 257, up 25 percent from last year's levels, according to First Call. Still, though warnings were more numerous than usual, the magnitude of the downward revisions was fairly modest, the earnings compiler noted. Expectations for third-quarter earnings currently stand at 16.3 percent, down from the 18.1 percent expected on July 1.
The week's earnings news will be punctuated by reports from Micron Technology, Pepsico, Nautica, Net2Phone and Alcoa.
Separately, Trim Tabs said market liquidity turned negative due to the $7.5 billion in new offerings and the $1 billion in outflows from U.S. equity funds over the five days ended Sept. 28. And new offerings are about to let up, with another $7.5 billion or so scheduled for this week, according to CommScan. Trim Tabs remains cautiously bearish on the market even after four straight weeks of lower stock prices.
"Fund redemptions are not yet big enough to signal a sentiment reversal often seen at the end of a down leg. However, stock buybacks and new cash takeovers are improving and those are often early indicators [of a turnaround]," Trim Tabs said.
Sector movers
Biotech stocks suffered the biggest setback on Monday, with the Amex Biotech Index ($BTK) off a steamy 5.4 percent. A drop in shares of MedImmune was the culprit as the stock contended with a downgrade by Banc of America Securities to a "market performer" from a "buy" rating. The firm also cut its 2001 earnings-per-share estimates to 75 cents from 86 cents and to 98 cents a share from $1.15 in 2002. Shares (MEDI) tumbled 21 percent to $16.25 to $61.
Computer hardware stocks managed only a mild recovery following Friday's bloodletting in the wake of Apple's profit warning. The Goldman Sachs Computer Hardware Index ($GHA) chiseled out a 1.7-percent gain with Apple Computer (AAPL) up 6 cents to $25.81, Gateway (GTW) up 50 cents to $48.75 and Dell Computer (DELL) edging up 25 cents to $31.06. Banc of America Securities analyst Kurtis King said Friday's sell-off in the PC group could represent a bottom. "The shift to positive information flow in the coming weeks should lead to a rebound for the well-positioned names," the analyst told clients. Compaq and Gateway, he said, look like the best near-term PC trades.
In the latest merger news enveloping the financial sector, FleetBoston Financial Corp (FBF) announced Sunday it's acquiring Summit Bancorp (SUB) in a stock deal worth $7 billion in order to gain a greater foothold in New Jersey and in the metropolitan New York area. FleetBoston fell $3 to $36 while Summit added $1.31 to $35.69. Financial stocks traded lower Monday, with losses spread pretty evenly between brokerage and bank stocks. The S&P Bank Index ($BIX) lost 0.9 percent while the Amex Securities Broker/Dealer Index ($XBD) slipped 0.3 percent.
In earnings news in the retail sector, Walgreen said fourth-quarter profit from operations came in at 19 cents a share, in line with the First Call consensus estimate. Shares (WAG) fell 56 cents to $37.38. And Great Atlantic & Pacific Tea said second-quarter losses amounted to 14 cents a share versus the First Call estimate of a 16-cent loss. The stock (GAP) was off 6 cents to $11. Both stocks are components of the S&P Retail Index ($RLX), which gave up 0.3 percent.
Treasury focus
Treasurys slid, with the 30-year bond bearing the brunt of the selling pressure.
The 10-year bond fell 6/32 to yield ($TNX) 5.83 percent while the 30-year Treasury bond fumbled 24/32 to yield ($TYX) 5.93 percent. .
A raft of closely-watched economic reports are on this week's agenda. The capstone is the September employment report, which includes the release of non-farm payrolls, the unemployment rate and average hourly earnings. Also on deck: August new homes sales, construction spending, leading economic indicators, and factory orders.
In addition, the Federal Reserve will meet on Tuesday to decide the fate of short-term interest rates. But the upcoming meeting hasn't kept Wall Streeters awake at night with virtually no one anticipating a change to the current fed funds rate target of 6 1/2 percent. The central bank hasn't tweaked the rate since its rare 50-basis-point move on May 16.
On tap Monday was the September National Association of Purchasing Management Index, which came in at 49.9 percent, little changed from the August reading of 49.5 percent. The prices paid index rose a smidgen to 58.1 percent from 56.2 percent.
Also out: August construction spending, which rose 1.4 percent, well ahead of the consensus forecast. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, the dollar saw its value rise against both the yen and the euro. In recent dealings, dollar/yen edged up 0.5 percent to 108.72 while euro/dollar gave up 0.5 percent to 0.8793. |
