J MARKET TALK: Economist Sees Risk In Too Many Rate Cuts
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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12:28 (Dow Jones) "We currently look for 100 basis points of additional Fed
easing and 75 bp of rate cuts from the European Central Bank over the next
several months," says MSDW economist Stephen Roach. "The risk is that both
central banks could do more." (JC).
12:12 (Dow Jones) The Standard & Poor's 500 has been shifting in and out of
bear market territory - a 20% drop from its high - much to the consternation
of investors. Blame Standard & Poor's Corp., one analyst says. "In the last
two years, the number of technology stocks in the S&P 500 has gone from 59
to 86," said Arnold Berman, chief technology strategist at Wit SoundView.
"Have the folks at Standard & Poor's been anxious to add some technology
juice to their benchmark," only to see the effort backfire? Not surprisingly
that kind of talk doesn't go over well at Standard & Poor's. "We try to
reflect what the market is," said Elliott Shurgin of S&P Index Services.
"I'd say the percentage of techs in the market and the percentage in the S&P
500 are pretty equal." (KJT)
11:58 (Dow Jones) U.S. Bancorp Piper Jaffray analyst Safa Rashtchy believes
an outside investment in Yahoo! (YHOO) is the most likely of the possible
scenarios for the company's impending announcement. A warning of soft 1Q
results becomes less likely the longer the trading halt in Yahoo! shares
lasts, he says. And Rashtchy doubts rumors of a merger with eBay (EBAY),
saying eBay doesn't need Yahoo because it has a secure lock on the online
auction market. An investment from a media company like Vivendi Universal
(V) makes the most sense because it could help restore investor confidence
in Yahoo, and would give Yahoo important international distribution. (PDL)
11:49 (Dow Jones) Affymetrix Inc. (AFFX) shares fell after the company
warned in an 8-K filing to the SEC that it found errors in a tool used in
analyzing mouse cells and tissues. Taking action, Affymetrix has redesigned
new arrays, contacted customers, and estimates the replacements could cost a
total of up to $4 million. Analysts aren't too concerned because the
analysis instrument makes up a small portion of the sales and the company is
capable of replacing and supplying the new tool within a few weeks. Shares
fell 8%. (BMM)
11:38 (Dow Jones) Growth is nearly at a standstill, but the economy is not
contracting, so this month marks the 10th anniversary of the historic U.S.
expansion. How is Merrill Lynch marking the milestone? By lowering its
earnings expectations for Standard & Poor's 500 companies. The companies
will now show a 2% decline in profits from last year, says Merrill chief
economist Bruce Steinberg. "Unhappy tenth." (KJT)
11:30 (Dow Jones) Compaq (CPQ) has acted well lately, but the stock has some
roadblocks to overcome if rally is to extend, says Jocelyn Drake, of
Schaeffer's Investment. Resistance at $23, and if shares manage to take out
that, next layer rests at $25, which also happens to be stock's 10-month and
20-month moving average. Compaq off 1.9% at $21.78. (TG)
11:22 (Dow Jones) Internet security experts say the latest e-mail virus,
'NakedWife,' appears to have been created at an insurance company in Brazil.
Anti-virus software companies, which analyzed and created shields to protect
their customers from the worm Tuesday, informed law enforcement authorities
that the virus' code included Brazilian footprints. (RR)
11:09 (Dow Jones) Is someone betting that the worst is over in the PC
sector? At least one investor bought a large number of Gateway Inc.'s (GTW)
out-of-the-money, bullish call options that expire in September, likely
expecting Gateway stock to rise above $22.50 by mid-September. The stock
today was at $17.36. At the American Stock Exchange, which captured the bulk
of the trade, Gateway's September 22.50 calls were at $2.30 on volume of
12,500 contracts, compared with open interest of just 116. (KXT)
11:05 (Dow Jones) Goldman Sachs economists, saying personal tax refunds so
far this tax filing season are posting only sluggish year-to-year gains,
said weak refund season "would erode household purchasing power at a very
unfortunate time," just as businesses and policy makers look for a
consumption rebound to keep conomy growing. (JC)
10:59 (Dow Jones) Institutional money market funds have so far seen inflows
for this year that are $100 billion over historical averages, says Merrill
Lynch. Cash should continue to mount on the sidelines going forward, they
say. (MSD)
10:50 (Dow Jones) Halt in Yahoo! (YHOO) has the speculators out in force.
Traders say they've heard rumors of alliance with eBay (EBAY), but aren't
buying it. Specialist who trades eBay options says he's also heard rumor,
but eBay's bullish calls aren't very active. One would also think eBay would
be halted along with Yahoo!. Speaking of which, Yahoo! has been halted for
an awfully long time. eBay up 5% at $42.38.
10:41 (Dow Jones) Big revision to Jan. existing homes sales. The National
Assn. of Realtors revised its January existing home sales report to show a
3.8% increase, not the 6.6% decline reported in late Feb. Jan. annual sales
rate 5.13M compared to 4.65M originally reported. NAR blames computer
problems. Revisions suggest even more resilience in housing than originally
expected. (BB)
10:33 (Dow Jones) A safe place for investors to park their money is the
high-profile entertainment sector. Lehman Brothers analyst Stuart Linde says
that even with the current economic uncertainty, large-cap entertainment
companies should generate free cash flow of about $7 billion in 2001, up
from $4 billion in 2000. He urged investors to stick with companies that can
leverage their brands across multiple platforms and operate low capital
expenditure business models. He started Viacom (VIA, VIAB), Liberty Media
Group (LMGA), Crown Media Holdings (CRWN), and Six Flags Inc. (PKS) with
strong buy ratings and Walt Disney Co. (DIS) with a buy rating. (DDO)
10:27 (Dow Jones) The complaint filed by the FTC alleging systematic
predatory lending practices against Associates First Capital, now part of
Citigroup Inc. (C), would have occurred prior to Citi's acquisition of the
financing company, said analyst Diane Glossman at UBS Warburg. "Although it
is difficult to handicap any potential financial settlement at this
juncture, we'd expect any such damages to be reflected in the restructuring
charge taken in conjunction with the acquisition and not impact Citi's
ongoing operations," she said. Glossman reiterated her strong buy and would
use weakness on news as buying opportunity. Citi up 1% at $49.12. (TAS)
10:18 (Dow Jones) Still waiting on Yahoo! (YHOO) news. Merrill's Blodget
says it's conceivable company could be next in line of big preannouncers,
but also says current company targets of $220M-$240M in revenue and earnings
of 4c-7c a share are conservative, even considering slump in economy and
advertising. Shares halted, last trade $20.50. (TG)
(END) DOW JONES NEWS 03-07-01
12:28 PM
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