<FONT COLOR=BLUE>MARKET SNAPSHOT--Dow climbs as retail issues fly
But chip plunge stings Nasdaq
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:10 PM ET Nov 27, 2000
NEW YORK (CBS.MW) - The Nasdaq saw early gains dissolve Monday as a string of less-than-friendly comments from Wall Street analysts kept tech investors cautious. But the Dow Industrials managed a respectable advance as retail stocks flew, starting the holiday shopping season with a bang.
Inside the broad market, investors also feasted on biotech, drug, gold, bank and cyclical issues but snubbed oil service, utility, chemical and brokerage shares.
Within technology, a tumble in chip stocks held down the Nasdaq, with the Philly Semiconductor Index ($SOX) off a bruising 7 percent. Also deep in the red: networking, fiber-optic and business-to-business shares.
Todd Gold, technical strategist at Gruntal & Co., said he continues to use Nasdaq strength to unload tech shares. "The Nasdaq gapped on the upside Monday morning but failed to follow through. We've seen this kind of action time and time again."
Stuart Freeman, chief equity strategist at A.G. Edwards & Sons, said the good news for the market is that earnings expectations have already been pared and that valuations have corrected accordingly.
"Investors should now be acquiring companies with strong, persistent, and reliable earnings growth records," Freeman continued. Among the strategist's favorite industry groups are semiconductors, selected communications equipment companies, non-bank financials, entertainment, hospital supplies and pharmaceuticals.
The Dow Jones Industrials Average ($DJ) put on 80 points, or 0.8 percent, to 10,550. The index's frontrunners included Wal-Mart, Home Depot, American Express, Philip Morris, 3M, Boeing and Alcoa.
General Electric (GE) ended off 19 cents to $49.19. The Dow company announced Monday that it has named Jeffrey Immelt as the company's president and chairman-elect, effective immediately. Immelt will succeed John Welch upon his retirement at the end of 2001. Immelt was President and CEO of GE Medical Systems.
The Nasdaq Composite ($COMPQ) fell 23 points, or 0.8 percent, to 2,880 while the Nasdaq 100 Index shaved 60 points, or 2.1 percent, to 2,769.
Goldman Sachs' Laura Conigliaro and Rick Sherlund said Monday that they are constructive on tech stocks but convinced that tech investors should stay with the highest quality names despite the widespread valuation contractions.
"We've focused our attention on two groups of companies: defensive names that can absorb shock waves better in a compressing tech tape and high quality growth names that should remain leaders going forward," Goldman said in a note to clients. Among the brokerage's current choices: Cisco Systems, Corning, EMC, I2 Technologies, Solectron, Sun Micro, Veritas, Automatic Data Processing, Concord EFS and Amdocs.
The Standard & Poor's 500 Index ($SPX) gained 0.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks edged down 0.16 point.
"Very often renewed advances begin after stocks have fallen out of favor and are at a point where investors have given up on them," observed Robert Dickey, chief technical strategist at Dain Rauscher Wessels.
"With the market at a deeply oversold level, many of the stocks that have fallen sharply will bounce back over the next month. Whether the moves can carry the stocks higher [for more] than a month or two depends on the quality of the rallies and how they react into the fourth quarter reporting season in January," Dickey concluded.
Volume stood at 923 million on the NYSE and at 1.67 billion on the Nasdaq Stock Market. Market breadth was mixed, with advancers beating decliners by 15 to 13 on the NYSE while losers outpaced winners by 23 to 18 on the Nasdaq.
Fund flows
Trim Tabs said U.S. equity funds had inflows of $1.8 billion in the two days ending Nov. 22 for a monthly rate of $19.3 billion. And aggressive growth funds had inflows of $1.1 billion.
Trim Tabs said it maintains its bullish posture. "We stick with our year long stance of being long those companies growing free cash flow and being short those stocks that either need to sell shares to survive or where options are near 10 percent of the existing outstanding," the tracker of fund flows said.
Liquidity in December could be stronger than usual if stock fund distributions prove to be light and if the new offering calendar dwindles, Trim Tabs concluded.
Sector movers
After ho-hum action on "Black Friday," retail stocks ratcheted nifty gains Monday as shares reacted favorably to evidence that the first weekend of the holiday shopping season began with a bang. The S&P Retail Index ($RLX) climbed 5.2 percent, with Dow-company Wal-Mart (WMT) tacking on 7.9 percent to $48.75 after indicating that sales for Friday, Nov. 24 totaled over $1.1 billion. Wal-Mart said it believes comparable sales for the fourth quarter will be in the three to five-percent range. And Sears (S), which was also pleased with store traffic, saw its shares advance 7.4 percent to $32.08. Merrill Lynch estimates a two- to four-percent increase in same-store sales for specialty retailers as the group kicked off the holiday season with aggressive marketing.
Internet stocks swelled for a second straight session, with some e-tailers again leading the charge. EToys (ETYS), for example, jumped 13 percent following a 48-percent surge on Friday. Stalwart Yahoo (YHOO) jumped 4.7 percent to $42.75 after announcing that transaction volume on Nov. 24 increased more than two times from the same time last year. In other news, the government reported that Internet retail sales rose over 15 percent in the third quarter versus the second quarter.
Chip stocks took a hit Monday, extending losses in afternoon dealings. Communications chip maker Broadcom (BRCM) tumbled 13.7 percent to $101.13 after Salomon Smith Barney reduced its price target on the stock to $200 from $300, citing signs of flattening orders.
And Altera (ALTR) and Xilinx (XLNX) saw their shares drop 10.6 percent and 14.4 percent respectively after Lehman Brothers lowered its earnings-per-share estimates on the two companies. Micron Technology (MU) fell 4.4 percent to $39.44 even after seeing its shares upgraded to a "strong buy" from a "buy" rating. Intel (INTC) was a bright spot, however, climbing 2.1 percent amid positive comments from US Bancorp Piper Jaffray's Ashok Kumar. The analyst said there's the possibility of a modest upside to the current 4 to 8-percent quarter-over-quarter revenue growth guidance and noted that the stock looks attractive on a relative valuation basis.
Business-to-business stocks slid, pushing Merrill Lynch's B2B Holdrs (BHH) down 4.3 percent, following downgrades by Wit SoundView of both Ariba (ARBA) and Commerce One to a "hold" from a "buy" rating. Ariba plunged 12.3 percent to $68.75 despite a positive afternoon note from Merrill Lynch indicating that the company is perhaps the fastest growing software company in history. Commerce One (CMRC) fell $3 to $36.25, erasing earlier gains that came following news the B2B outfit is powering a new, regional e-marketplace in Korea to provide a full range of e-commerce products and services.
In merger activity, Agilent Technologies (A) announced it's acquiring software provider Objective Systems Integrators (OSII) for $17.75 a share, or $665 million. Objective Systems climbed $4, or 30 percent, to $17.50 while Agilent shed 13 cents to $50.81.
Treasury action
Treasury prices slouched, again reacting negatively to a second straight session of gains in the stock market.
The 10-year Treasury note slipped 2/32 to yield ($TNX) 5.625 percent while the 30-year government bond slid 15/32 to yield ($TYX) 5.71 percent. .
On the economic front, Monday saw the release of October existing home sales, which fell 3.9 percent to a 4.96 million rate. Tuesday will see the release of November consumer confidence and October durable goods orders. View Economic Preview, economic calendar and forecasts and historical economic data.
Cornering the currency market, the dollar interrupted its four-day winning steak against the yen, shedding 0.5 percent to 110.57, while euro/dollar rallied 1.4 percent to 0.8513. |
