<FONT COLOR=BLUE>MARKET SNAPSHOT--Stocks rise as buyers find value
By Martin Cej, CBS.MarketWatch.com
Last Update: 3:13 PM ET Oct 20, 2000
NEW YORK (CBS.MW) - U.S. stocks rose Friday as investors judged a near two-month rout had dropped share prices to levels that more accurately reflect the outlook for slower economic and profit growth in coming quarters.
The Nasdaq Composite Index, Dow Jones Industrial Average and Standard & Poor's 500 Index were all on course to notch their first weekly gain in seven weeks.
Investors and analysts waded through a flood of fresh earnings reports, weighing them against evidence that higher interest rates, surging oil prices and a foundering euro are slowing economic growth. Oil prices rose again as violence flared in the Middle East.
Better-than-expected profit for online auctioneer EBay helped stoke demand for Internet-related issues Friday, though a warning from Swedish telecommunications equipment giant Ericsson of falling handset sales in the next quarter slowed a broader rally in the tech sector.
Merck shares rose after the drugmaker reported surprisingly strong third-quarter earnings, though its profit failed to spark demand for other stocks in the sector.
A profit warning from Circuit City today and a cautious fourth-quarter outlook from Sears, Roebuck & Co. Thursday weighed on retailing shares. Shares of Honeywell and United Technology were halted in afternoon trading amid reports the two have terminated merger talks.
"Confidence has returned to the market, but it's still a little premature to call this the bottom," said Darrell Anderson, a portfolio manager at Calgary-based Mawer Investment Management. Anderson runs the firm's U.S. portfolios.
"The pre-warnings are out of the way and third-quarter earnings were very good for the most part," Anderson said. "The market seems to have adjusted to the belief that growth has decelerated."
"We are fully invested," he added.
The Dow Jones Industrial Average ($DJ) rose 53 points, or 0.4 percent, to 10,195 after yesterday surging 168 points. The world's bellwether stock measure dropped 114.69 points Wednesday to close below the 10,000 level for the first time since March. Other bellwether share measures also plunged Wednesday.
"What was lacking in the market was absolute fear, a total capitulation, but it happened Wednesday," said Barry Hyman, chief investment strategist at Weatherly Securities in New York. "Wednesday washed out the market."
"There's still concern looking ahead and you should still show caution, but now's a time to express guarded optimism," he said.
The Nasdaq Composite Index ($COMPQ) rose 66 points to 3,484, building on its 7.8 percent rally Thursday. The Standard & Poor's 500 Index ($SPX) rose 0.8 percent.
Advancers outpaced decliners by a modest 5 to 4 on the New York Stock Exchange and by 7 to 5 on the Nasdaq market. Some 929 million shares changed hands on the NYSE and 1.7 billion on Nasdaq.
Scandinavian impact
Ericsson's U.S.-traded shares (ERICY) plunged $2 to $12, or 14 percent, after it warned that its consumer products division, the bulk of which is mobile handsets, is expected to post full-year losses of about 16 billion kronor ($1.592 billion), about double the 7.5-billion to 9-billion kronor loss anticipated by analysts.
The warning came after the Ericsson said third-quarter net income rose 50 percent to 5.5 billion Swedish kronor. It also came a day after Finnish rival Nokia revealed better-than-expected earnings in the most recent quarter and forecast record profit for the next.
Nokia (NOK) shares rose 94 cents to $39.06, adding to yesterday's 27-percent rally.
Nokia's report also renewed confidence in semiconductor shares, which had been hammered in the wake of a revenue warning from industry heavyweight Intel.
Intel (INTC) warned in late September that sluggish European economies would slow its sales growth in the region. That was followed promptly by a profit warning from Apple Computer and others.
Combined, the series of profit or revenue warnings fanned fears that a weak euro, booming energy costs and slowing economies would stunt profits. In response, investors fled technology stocks. The Nasdaq Composite Index plunged 25 percent from the end of August to its low for the year on Wednesday.
Mawer's Anderson argued that while higher oil prices will indeed hit consumers, profit growth will continue, albeit at a more moderate, manageable pace.
"High oil costs are trickling down into higher costs, and though it won't show up in CPI figures, it will show up in GDP numbers," Anderson said. "The average person is feeling the impact at the gas pump and heating bills this winter will bite into discretionary income."
"The market is reasonably valued here," he concluded.
Internet gains
EBay (EBAY) jumped $5.56 to $62.75 and rose as high as $66.50. After Thursday's closing bell, the online auctioneer said profit from operations rose to 7 cents a share from earnings of a penny in the year-earlier quarter. The result beat the average estimate of analysts surveyed by First Call by 3 cents. Revenue rose 94 percent over last year to $113.4 million, while registered users increased by 2.9 million to 18.9 million. See full story.
Analysts at WR Hambrecht and Lehman Brothers reiterated their "buy" recommendations on the stock.
EBay's earnings prompted demand for other Internet-related issues. At Home (ATHM) soared 9 percent and Lycos (LCOS) jumped 3.8 percent, helping to lift the Goldman Sachs Internet Index ($GIN) 4.5 percent.
Online brokerages rallied for a second day on the back of surprisingly strong earnings from E-Trade. The Amex Broker/Dealer Index ($XBD) jumped 4.5 percent.
Elsewhere, shares of United Technologies' (UTX) dropped 10 percent and Honeywell shares (HON) jumped 15 percent before being halted in afternoon trading. The companies, which confirmed last night that they were in merger talks, were reported to have terminated those talks. According to Reuters and Dow Jones, Honeywell is mulling another offer.
Earnings news
Investors applauded Merck & Co.'s third-quarter profit, which rose 22 percent, driven by stronger sales of drugs, the company said Friday.
Merck (MRK) said net income rose to $1.84 billion, or 78 cents a share, up from $1.54 billion or 64 cents, earned in the same period a year ago. Revenue jumped 29 percent to $10.57 billion. The shares rose $3.19 to $80.75.
Coca-Cola (KO) shares slipped even as it surpassed Wall Street's third quarter profit estimates on a 4 percent rise in worldwide case volume. The stock slid nearly 4 percent.
Coke said it earned 43 cents on a reported basis and 42 cents before non-recurring items. A survey of analysts by First Call forecasted earnings of 41 cents per share. The world's No. 1 beverage company, said it's "comfortable" with its guidance on volume and earnings-per-share expectations for 2000 and 2001.
Among other stocks active on the back of earnings was Emulex (EMLX). The company reported first-quarter earnings of $12.9 million, or 33 cents a share, up from last year's profit of $6.8 million, or 18 cents a share, and 7 cents ahead of the average estimate analysts polled by First Call. Emulex shares rose $17 to $165.
Microsoft (MSFT), which sparked yesterday's rally with its better-than-expected earnings, rose $3.63 to $65.50.
Bonds provided little support for equities. The 10-year Treasury note ($TNX) was flat at 100 21/32 to yield 5.66 percent. The 30-year bond ($TYX) rose 2/32 at 107 5/32 to yield 5.74 percent. |
