M A R K E T..S N A P S H O T--10:19 AM..Major averages rebound
Market enjoys across-the-board gains
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 10:19 AM ET Dec 18, 2000
NEW YORK (CBS.MW) - The major averages rallied Monday, with gains spread across the board, one day ahead of the Federal Reserve's policy-setting meeting.
Within the tech arena, most tech sectors gained ground, led by the chip and software group. The Internet sector was the notable exception, weighed down by a fall in shares of America Online after its merger partner, Time Warner, warned that it'll post disappointing fourth-quarter results.
Moving up in the broad market: oil service, financial, biotech retail and cyclical issues. The only red spots on quote screens were seen in the drug and gold segments.
Dow Jones Industrials Average ($DJ) rallied 182 points, or 1.7 percent, to 10,617. The blue-chip barometer's frontrunners included Boeing, Citigroup, Home Depot, Honeywell and Philip Morris.
Microsoft (MSFT) edged up 38 cents to $49.56 after taking a drubbing Friday in the aftermath of a profit warning - only the second in its entire history.
The Nasdaq Composite ($COMPQ) climbed 58 points, or 2.1 percent, to 2,711 while the Nasdaq 100 Index put on 81 points, or 3.2 percent, to 2,631.
Among the Nasdaq's big-cap upside leaders Monday were shares of Oracle, up 8.5 percent, Qualcomm, up 8 percent, and JDS Uniphase, up 4.5 percent.
The Standard & Poor's 500 Index ($SPX) rose 1.5 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks added 1.4 percent.
Volume came in at 212 million on the NYSE and at 395 million on the Nasdaq Stock Market. Market breadth was positive, with winners beating losers by 16 to 8 on the NYSE and by 18 to 14 on the Nasdaq.
Separately, U.S. equity funds saw inflows of $982 million in the three days ending Dec. 14 for a monthly rate of $6.5 billion. Funds got a whopping $8.8 billion infusion last Tuesday but lost $5.6 billion on Thursday. The fund flow tracker believes that a shrinking supply of shares, coupled with a growing amount of cash, will have to result in a big stock market rally once all the tax selling and capital gains distributions from equity funds stop.
Waiting for the Fed
The Fed's interest rate-setting arm will meet on Tuesday, with investors widely expecting the central bank to drop its current tightening bias in favor a neutral stance on rates, which would indicate that economic risks are now balanced versus the previous view that inflation represented the bigger threat.
Fed Chief Alan Greenspan's friendly comments on Dec. 5 lent credence to the view that a neutral standing on rates will be in store. However, should the stock averages head into the meeting on a sharply higher note, many market watchers believe shares could have a "sell the news" kind of reaction -- the same one witnessed last week when the five-week long fight for the presidency ended.
In the meantime, the profit warnings continue to pour in. On Friday, First Call pegged the number of warnings from tech companies for the fourth quarter at 64 -- or 18 percent of all negative pre-announcements. And the number of S&P 500 companies that have warned stood at 101, about twice of those for the fourth quarter of 1999 at this same stage, according to the earnings compiler.
The tech sector, First Call said, represents the main drag on overall earnings expectations for the S&P 500. Since the start of the fourth quarter, expectations for tech earnings growth have dropped from 29 percent to 9 percent.
Specific movers
Time-Warner (TWX) said its fourth-quarter results will be adversely affected by disappointing box office performance of its "Little Nicky" release, softness in cable advertising revenues and weaker music sales. The company is consequently reducing expectations for 2000 EBITA growth to 11 percent from the previous 12- to 13-percent estimate. The stock dropped 3 percent to $70.60.
Meanwhile, America Online (AOL), Time-Warner's merger partner, said it's on track to post fourth-quarter advertising/commerce revenues in line with Wall Street estimates. Last Thursday, the two companies saw their proposed merger approved by federal antitrust regulators. AOL fell 3.6 percent to $47.20.
Gillette (G) announced a restructuring plan to reduce costs that will result in an 8-percent reduction of its workforce. Gillette expects the program to generate savings of over $125 million annually. The plan will result in a one-time after-tax charge of 40 cents a share in the fourth quarter. The stock added 69 cents to $34.50.
And Aetna (AET) said Monday it'll slash 5,000 jobs as part of a restructuring program to improve profitability. Aetna expects to take $370 million in fourth-quarter charges, some of which are related to the restructuring. Shares rose $1.13 to $34.13.
In the meantime, Cicuit City Group (CC) checked in with a third-quarter loss from operations of 32 cents a share, vs. the First Call estimate for a loss of 33 cents a share. The company had warned that it would post a loss on Dec. 6. The stock added 31 cents to $10.69.
Treasury action
Treasury prices held on to modest gains in thin trading activity.
The 10-year Treasury note added 6/32 to yield ($TNX) 5.16 percent while the 30-year government bond rose 1/32 to yield ($TYX) 5.42 percent.
This week will see a string of economic releases, all generally second-tie in nature. They include: the October trade balance; November housing starts and building permits; the November Treasury budget statement; the final revision to third-quarter gross domestic product; the December Philadelphia Fed Index, November durable goods orders; November personal income and personal consumption expenditures. View Economic Preview, economic calendar and forecasts and historical economic data.
Cornering the currency market, dollar/yen fell 0.4 percent to 112.11 while euro/dollar inched up 0.1 percent to 0.8959. |
