MARKET TALK: Big Spike In XO Commun Short Interest
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
12:15 (Dow Jones) Short interest in XO Communications (XOXO) up nearly 75%
in most recent month to a total of 24 million shares. Much of the increased
short selling likely connected to a volatility trade by hedge funds and
arbitrageurs who recently went "long" by purchasing a big chunk of a recent
XO Communications $517.5 million convertible bond deal. They hedged the
position to lock in the interest payment on the bonds by shorting the stock.
(RDS)
12:06 (Dow Jones) VeriSign (VRSN) showed why it's one of the leading
Internet companies when it reported solid 4Q results Wednesday. But its
shares are down 7% Thursday after Thomas Weisel and ING Barings cut their
ratings. Analysts from the firms say VeriSign shares are too highly valued -
they're trading at about 120 times projected 2001 earnings. Moreover, there
are signs of a slowdown: Sales of new Web addresses by VeriSign's Network
Solutions unit fell sequentially for the first time in its history in 4Q.
(PDL)
12:01 (Dow Jones) EUR/USD back above $0.9200. The bounce may have been
triggered by Greenspan's comment on growth slowing dramatically, a trader
said. USD/JPY at Y116.84. (JEN)
11:51 (Dow Jones) Fed Funds futures, which earlier dipped to a 60% chance of
a 50 BP Fed cut next week, have reignited back to an 84% chance. A deeper
look into Greenspan's intentions, and his suggestion that there will be
little conflict between fiscal and monetary policy, has helped the markets
considerably. (SV)
11:45 (Dow Jones) Stocks may be getting bounce on feeling half-point cut is
still coming. Greenspan's zero-growth comment and idea that taxes and rates
can be cut in tandem helping. DJIA up 70 at 10718, Nasdaq down 51 at 2807
but coming off lows, and S&P 500 down 1 at 1362. (TG)
11:41 (Dow Jones) In Q&A, Greenspan saying 1Q economy "probably very close"
to zero growth. Officials have made it clear they're willing to do whatever
it takes to keep economy from slipping into recession, so remark could fit
into half-point scenario priced into markets. (BB)
11:35 (Dow Jones) Treasurys had a complete about-face and are back in the
green after Greenspan notes tax cuts and rate cuts won't necessarily
conflict with one another. The 10-year note, which went from 5.27% to 5.36%
in the knee-jerk to Greenspan, has now traced back to 5.29%. (SV)
11:24 (Dow Jones) General Electric (GE) got another big supporter on Wall
Street, as Bear Stearns launched coverage with buy and 12-18 month price
target of $75. "GE is a growth company with, we believe, many years of
double-digit top line gains ahead," said analyst John Inch. Hard to believe,
but GE could use the help. After years of strong stock performance, GE stock
ended 2000 lower than it began and, at around $46, is off almost 4% so far
this year. Blame the Honeywell Internatonal (HON) merger, the economic
slowdown and Jack Welch's departure. But Inch thinks "all will be
effectively managed." GE up 50 cents to $46.81. (CCW)
11:17 (Dow Jones) Another analyst warns ahead of Sapient's (SAPE) earnings
tonight that its shares have gotten ahead of themselves given the lack of
earnings visibility. The stock has almost doubled since the Web consultancy
warned of a 4Q miss on Jan. 4. SG Cowen's Moshe Katri keeps strong buy
rating but cuts forecast of 2001 revenue growth to 22.7% from 25% and EPS to
52 cents from 55 cents. (MLP)
11:14 (Dow Jones) March S&Ps and Nasdaq continue to act soft, as several
traders say the market might need to work on idea that next week's FOMC
could only hold a 25 bp rate cut. "That would be a disappointment," says a
Nasdaq trader. One S&P trader says some investors might hold out hope for a
50 bp cut, but if it doesn't occur, "we could see a lot of selling at the
end of the month," he says. (DMC)
11:06 (Dow Jones) After bouncing then wavering near flat, JC Penney (JCP)
slips into red along with other big retail chains, except for Gap (GPS),
which benefited from an earlier upgrade. JCP's promised financial details on
store closings, layoffs and other restructuring is about what some expected
and amounts to a $275 pretax charge in 4Q. JCP off 1%. (GC)
11:02 (Dow Jones) Treasurys steadily paring back part of their
post-Greenspan losses, as participants ponder whether fact that Greenspan
advocates tax cut sooner rather than later might signal his concern about
current state of economy, and hence still need for quick and aggressive rate
cut, says government bond strategist. (JNP)
10:58 (Dow Jones) USD/JPY touches new intraday low at 116.32, rebounds to
116.51. EUR/USD also resumes climb, now at 0.9194. (RF)
10:56 (Dow Jones) Well-known fiber-optic stocks are trading lower after
Corning Inc. (GLW) warned the economic slowdown would likely affect its
first quarter results. Investors are paying more attention to that guidance
than they are to the news Corning handily beat 4Q estimates when it reported
Wednesday. Ciena Corp. (CIEN) was recently 5% lower, Corning was off 13%,
JDS Uniphase (JDSU) was down 8% and Nortel Networks Corp. (NT) was 3.1%
lower. JDS reports later tonight. (RS)
10:52 (Dow Jones) Treasurys stabilizing at lower price levels after sharp
fall following Greenspan remarks, with 10-year now down 21/32 since he
spoke, down 15/32 on session at 102 26/32, yield up 6 bp at 5.37%. (JNP)
10:50 (Dow Jones) Traders don't see the losses in March S&Ps and Nasdaq
expanding in a.m. session. "It really seems to be the market is testing its
range," floor trader says. "We're seeing some bids come in (at the lows in
S&Ps)." If markets can hold, a rebound is possible. Merrill Lynch seen as a
seller in S&Ps prior to Greenspan. (DMC)
10:47 (Dow Jones) Federal Funds futures pricing in lower odds since
Greenspan spoke of 50 bp rate cut at end of Jan., as chances of 25 bp cut
seen rising. About 60% chance of 50 bp cut now, according to Bondtalk.com
analyst. (JNP)
10:46 (Dow Jones) Thinking that "the more stimulus you get from tax cut, the
less you need from the Fed" puts pressure on bond futures, fixed-income
strategist says. But Fed "needs to plunge ahead based on how they read the
economy." (SPC)
10:43 (Dow Jones) More bad news on the IPO front. Xenogen, which makes
products used in biotechnology and pharmaceutical research, will sell now
its IPO at about $9 a share, according to underwriter UBS Warburg. Price
talk had been between $10 and $12 a share. Instead of pricing after the
close today, pricing is now delayed to Tuesday. (RJH)
10:41 (Dow Jones) A federal jury in Brooklyn, N.Y., begins its fourth day of
deliberations in the Falise tobacco trial. During the deliberations,
according to Credit Suisse First Boston analyst Bonnie Herzog, one juror
apparently sent a note to presiding U.S. District Court Judge Jack Weinstein
saying some of the jury's 12 members must have lied when they swore they
could be impartial throughout the trial and reach a fair verdict. Even
still, R.J. Reynolds (RJR) General Counsel Charles Blixt says he is
"optimistic the jury is going to come to a conclusion" and that "we remain
optimistic we're going to get a favorable verdict." (CEG)
10:39 (Dow Jones) Slight slip in EUR/USD after Greenspan's prepared
testimony made public, with little reaction in USD/JPY. Because of media
reports of Greenspan support for tax cuts, testimony came as no surprise and
positions squared. Bounce in EUR and JPY well before Greenspan. If interest
rate levels, economic outlook discussed in Q&A, potential for currency
movement. (RF)
10:37 (Dow Jones) Short end of Treasurys curve badly hit in sell-off, with
2-year yield up to 4.90% since Greenspan's tax cut remarks. Participants now
see 25 bp rate cut more likely than 50 bp cut, says fund manager. (JNP)
10:36 (Dow Jones) High Frequency Economics economist Ian Shepherdson says
Greenspan testimony "makes us even more convinced that a package worth up to
$1 trillion will be passed before summer." If made retroactive to beginning
of year, could give economy boost by mid-year, he adds. (BB)
10:34 (Dow Jones) Moody's has more bad news on short-term credit quality.
Short-term ratings hit with 12 downgrades and no upgrades in January, with
10 of the downgrades tied to California's power crisis. (DA)
10:31 (Dow Jones) Safeway (SWY) getting whacked in Thursday's trading, off
9% intraday. Could it be the ghost of Y2K? Traders say Wall Street is
wondering if the supermarket giant faces tough comparisons with year-earlier
quarter, when the Y2K alarmists would have been stocking up on provisions
for the apocolypse to come. In fact, the same-store comparables, not the
results reported Thursday, which topped forecasts, are behind the selloff.
More details after company's 11 a.m. conference call. (ROB)
(END) DOW JONES NEWS 01-25-01
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