<FONT COLOR=BLUE>MARKET SNAPSHOT--Across-the-board rebound for shares
PPI up 0.9%; Retail sales also up 0.9%
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 11:09 AM ET Oct 13, 2000
NEW YORK (CBS.MW) - Even with a double dose of strong economic news, U.S. shares advanced nicely out of the gate Friday as investors nibbled on tech stocks, which have taken a veritable drubbing over the past weeks.
Inside the market, all tech sector registered gains, lead by computer hardware, chip and networking shares. In the broader market, bank and brokerage stocks recovered nicely following Thursday's bruising sell off, as did retail stocks.
Moving lower were oil and oil service shares, as crude prices took a respite following Thursday's rally in the wake of intensified hostilities in the Middle East. November crude futures fell 71 cents to $35.35. Gold shares also declined as gold prices took a breather, falling $3.90 to $274.9.
The Dow Jones Industrials Average ($DJ) rose 93 points, or 0.9 percent, to 10,127.
Goldman Sachs' influential chief investment strategist Abby Joseph Cohen said that while volatility in the market has intensified, little of fundamental nature specific to the U.S. economy or corporate performance has changed in recent weeks.
Recent stock market weakness, Cohen said in a note to clients, has been catalyzed by several factors, including earnings estimate revisions and mutual fund portfolio adjustments linked to the Oct. 31 end of the tax year. Both of these events, she said, tend to impede share prices during the early autumn.
But stock prices have fallen notably and stock valuation has improved, Cohen observed. She believes the S&P 500 is 15 percent undervalued based on the Oct. 12 closing prices.
"There is little in our usual analytical tool kit to assess whether the declines in stock prices adequately discount the potential economic risks of violence in the Middle East," Cohen said.
"However, if we are correct that the S&P 500 is now about 15 percent undervalued based on expected fundamental performance, a sizable risk premium has already been built into stock prices. This is a fairly large buffer against fundamental disappointments," Cohen concluded.
The Nasdaq Composite ($COMPQ) piled on 69 points, or 2.3 percent, to 3,144 while the Nasdaq 100 Index ($NDX) climbed 80 points, or 2.6 percent, to 3,085.
The Standard & Poor's 500 Index ($SPX) gained 1.4 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks added 0.4 percent.
Volume came in at 382 million on the NYSE and at 631 million in the Nasdaq Stock Market. Market breadth was mixed, with decliners outpacing advancers by 13 to 11 on the NYSE while losers matched winners on the Nasdaq.
Separately, Trim Tabs said all equity funds saw outflows of $1.4 billion in the week ended Oct. 11 versus inflows of $2.3 billion in the prior week. Equity funds investing primarily in U.S. stocks witnessed outflows of $1.1 billion versus outflows of $2.5 billion in the previous week.
Inside Friday's data
September retail sales rose 0.9 percent versus the expected 0.6 percent - the largest gain since February. Excluding autos, retail sales were still up a healthy 0.7 percent compared to the expected 0.5 percent rise.
The producer price index climbed 0.9 percent in September versus the expected 0.5 percent increase while the core, which excludes the volatile food and energy components, added 0.3 percent compared to the 0.1 percent increase expected by a survey of economists conducted by CBS.MarketWatch.com. and view Economic Preview, economic calendar and forecasts and historical economic data.
John Lonski, chief economist at Moody's Investors Service, believes the strength seen in the September retail sales numbers won't be sustainable.
"How can sales be so strong when companies are complaining about weak sales and declining pricing power?" Lonski questioned.
But if another strong gain shows up in the October figures, Lonski said, the market will begin fretting about the strength of the economy and its potential inflationary impact.
"Between June and September, core sales rose at a 9 percent annualized rate, which does not sit well with the market view that consumers are a spent force. They aren't," exclaimed Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The market didn't sell off on the strong data, Lonski said, since so many forces are currently driving prices. Investors, he added, need to see how the events play out in the Middle East and the results of the presidential election to get a better handle on how the market will perform.
Specific movers
Juniper Networks (JNPR) climbed $7.39 to $207 after posting better-than-expected results after the close Thursday. The company registered a profit from operations of 17 cents a share in its third quarter versus the First Call estimate of 9 cents a share.
And Union Carbide (UK) fell $1.06, or 2.9 percent, to $35.50 after warning late Thursday that rising raw material and energy prices would cause it to miss Wall Street's earnings estimates in the third quarter. The company said it'll likely make 20 cents in the quarter versus the First Call estimate of 57 cents a share.
Treasury arena
Treasury prices lost ground as the strong economic data hit the market.
The 10-year Treasury note added 3/32 to yield ($TNX) 5.72 percent while the 30-year bond shed 15/32 to yield ($TYX) 5.84 percent.
In the currency arena, dollar/yen rose 0.1 percent to 107.60 while euro/dollar lost 0.1 percent to 0.8614.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
