MARKET SNAPSHOT--Nasdaq ends well of highs
Dow turns negative -- Intel drop weighs
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 4:14 PM ET Dec 1, 2000
NEW YORK (CBS.MW) - Tech stocks lost some support late in the day as nervous investors became less aggressive, taking the Nasdaq well off session highs. The Dow Industrials also slumped, with an 10-percent drop in shares of Intel heavily weighing on the blue-chip barometer.
"There was no reason to believe that [the early Nasdaq rally] was more than just a bounce from deeply oversold conditions," said Clark Yingst, market analyst at Prudential Securities.
A positive is that capitulation is underway, though Yingst said he believes it hasn't run its full course.
Peter Boockvar, equity strategist at Miller, Tabak & Co., said many signs are pointing to capitulation, including the deluge of downgrades from Wall Street analysts on Thursday.
But the road ahead remains a tough one. "The market will have to get through the pre-announcement period. I don't believe Gateway's and Altera's situation was unique. We'll get more warnings," Yingst said.
Inside the market, paper, chemical, brokerage and biotech stocks mustered gains while investors snubbed drug, healthcare, retail, bank and utility issues. Oil service shares recovered, interrupting a four-day losing streak. January crude slipped $1.80 to $32.02 as reports that Iraq has stopped loading crude for export were offset by concerns that the U.S. may tap into its oil reserves to make up for shortfalls.
The Dow Jones Industrials Average ($DJ) shed 40 points, or 0.4 percent, to 10,373.
Pushing the Dow into the minus column were shares of Intel, Boeing, SBC Communications, McDonald's, Eastman Kodak, Merck and Johnson & Johnson.
The Nasdaq Composite ($COMPQ) added 47 points, or 1.8 percent, to 2,645 after rising as much as 152 points in intra-day dealing while the Nasdaq 100 Index rose 43 points, or 1.7 percent, to 2,549.
Dain Rauscher's Robert Dickey said the market is certainly oversold enough to begin a year-end rally.
But the Nasdaq, Dickey continued, has not been able to string together three up days in a row since August and this kind of action is necessary, alongside a break through resistance at 3,000, in order for the trend to turn positive for a longer period.
The Standard & Poor's 500 Index ($SPX) edged up 0.23 point while the Russell 2000 Index ($RUT) of small-capitalization stocks swelled 2.4 percent.
Volume was heavy at 1.19 billion on the NYSE and at 2.21 billion on the Nasdaq Stock Market. Market breadth was positive, with advancers outnumbering decliners by 19 to 10 on the NYSE and by 25 to 15 on the Nasdaq.
Separately, Trim Tabs reported that all equity funds witnessed outflows of $400 million over the five days ending Nov. 29 vs. outflows of $3.3 billion in the previous week. And equity funds investing primarily in U.S. stocks saw inflows of $100 million versus outflows of $1.9 billion in the prior week.
J.P. Morgan ups equity portion
J.P. Morgan upped its equity portion in a model portfolio to 60 percent from 50 percent, lowering its cash and bond positions equally by 5 percent.
J.P. Morgan's Doug Cliggott said the S&P 500 is 9 percent below "fair value" based on current earnings. The index began the year over 50 percent overvalued using the same criteria, he said.
But Cliggott stressed that he's not attempting to call a market bottom here. "We still see downside risk to 2001 earnings-per-share expectations, especially in the technology and financial sectors."
In the meantime, Merrill Lynch's chief investment strategist Christine Callies said that although investors remain concerned about the deceleration in corporate profits and capital spending, the preconditions for a market trough are accumulating.
"Among these are the build-up in investment cash on the sidelines, slight declines in long-term interest rates, widely-distributed moderate profit growth, and rising pessimism among index options traders," Callies said in a note to clients. "The fundamental backdrop still seems comparatively benign and is thus not an obstacle to a market recovery."
In separate action, UBS Warburg's chief strategist Ed Kerschner added Broadcom, Celestica, Juniper Networks, Quest Diagnostic, Perkinelmer, Tellabs, Texas Instruments and Verizon Communications to its highlighted stock list while removing Lucent Technologies and Pharmacia.
Chip focus
Though analysts continued to take negative actions on chip stocks and the Philly Semiconductor Index ($SOX) was up only 0.5 percent as Intel took a veritable beating.
CSFB lowered its 2001 earnings-per-share estimate on chip stalwart Intel (INTC) to $1.66 from $1.75 to reflect continued weakening demand fundamentals within PCs. The stock lost 63 cents to $37.44 following an 11-percent hit on Thursday.
CSFB also lowered earnings estimates for 2001 on some semiconductor equipment makers -- with Applied Materials (AMAT), KLA-Tencor (KLAC), Novellus and Lam Research (LRCX) on the brokerage's list - since capital spending growth in 2001 is expected to be flat to up just 5 percent. Within the group, AMAT fell 2 percent to $39.63.
And Robertson Stephens lowered its rating on KLA-Tencor to a "buy" from a "strong buy." The stock added 5.5 percent to $29.
Meanwhile, Novellus (NVLS) said late Thursday that revenue and earnings-per-share are expected to be in line with expectations. Shares added 3.4 percent to $26.88.
And Atmel (ATML) reaffirmed its guidance for the for the fourth quarter, indicating that very strong demand exists for its devices. Shares climbed 6.8 percent to $10.31.
Communications chip are fared well. Within the group, Vitesse Semi (VTSS), up 17 percent, reaffirmed its guidance for 2001 while Applied Micro Circuits (AMCC), up 10 percent, reaffirmed guidance for the current quarter, according to CS First Boston.
Sector movers
PC stocks regained some of their footing Friday after witnessing a veritable rout on Thursday on the heels of Gateway's profit warning. Gateway saw its shares gain 40 cents to $19.40, Dell Computer rose 25 cents to $19.50 and Compaq climbed 91 cents to $22.41, pushing the Goldman Sachs Hardware Index ($GHA) up 5.9 percent. Compaq (CPQ) announced Friday that it has authorized the repurchase of $1 billion of its stock.
Drug stocks slumped following two downgrades in the group from UBS Warburg. The brokerage lowered its ratings on Pharmacia (PHA) and Schering-Plough (SGP) based on valuation relative to the group and the S&P 500. The former fell 4 percent while the latter shaved 3.5 percent.
Internet advertising stocks had to digest some cautious comments from SG Cowen Friday. Cowen said secular changes are underway in Internet advertising, noting that fourth-quarter demand is weak and that visibility on 2001 getting worse. SG Cowen added that it believes America Online (AOL) is relatively immune to these changes but that Yahoo (YHOO) and DoubleClick (DCLK) are not immune, lowering 2001 estimates on the two companies. AOL rose 2.6 percent, Yahoo fell over 7 percent while DoubleClick traded at flat levels.
The electronics manufacturing services group checked in with neat gains Friday. Merrill Lynch said its believes the market strongly overreacted to concerns regarding the impact on inventory. Merrill told investors to use the current weakness as a buying opportunity, citing companies like Celestica (CLS), Flextronics (FLEX), Solectron (SLR), Sanmina (SANM), Jabil Circuit (JBL) and C-Mac Industries. Jabil added 15.8 percent, with CSFB raising its rating on Jabil to a "strong buy" from a "buy."
Individual movers
Micron Electronics (MUEI) fell 14 percent to $4.59 following a 16.7 percent drop on Thursday. The company warned late Thursday that it expects first-quarter earnings-per-share to miss the Wall Street estimate, blaming the recent downward trend in DRAM industry pricing. Further, slower holiday consumer PC sales will have a negative impact, the company said.
CS First Boston lowered its rating on BroadVision (BVSN) to a "buy" from a "strong buy" given slowing sequential license growth and the upcoming transition to a new product architecture. The stock fell $3.63 to $19. It was one of the few stocks trading on the downside in Merrill Lynch's Internet Infrastructure Holdrs (IIH), which rallied 6.4 percent.
Raytheon (RTNB) saw its shares plunge 21 percent to $27.75 after telling investors that earnings per share for 2001 will be lower than Wall Street's expectations.
Treasury action
Government prices sputtered, with long issues bearing the brunt of the selling. A 2-year is currently trading about 90 basis points below the current fed funds target of 6.50 percent.
The 10-year Treasury note was off 5/32 to yield ($TNX) 5.51 percent while the 30-year government bond erased 13/32 to yield ($TYX) 5.635 percent.
In economic news, the November National Association of Purchasing Management Index came in at 47.7 percent versus the expected 48.5 percent. And October construction spending rose 0.9 percent versus expectations for a 0.3 percent increase. View Economic Preview, economic calendar and forecasts and historical economic data.
Cornering the currency market, dollar/yen rallied 0.8 percent to 111.26 while euro/dollar interrupted its four-day winning streak, climbing 0.3 percent to 0.8742.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York. |
