Nasdaq climbs as Dow fumbles...
Techs find some buyers while blue chips wobble
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 12:27 PM ET Mar 13, 2001
<<NEW YORK (CBS.MW) - Tech stocks gained traction Tuesday after suffering truly horrible losses on Monday. But the Dow Industrials extended losses after numerous short-lived attempts to stay in the plus column.
Checking sector action in the broad market, bank, oil service, gold, cyclical, retail, drug, airline and utility issues slumped while brokerage and biotech issues headed higher. Inside technology, hardware and software shares paced the Nasdaq's advance.
The Dow Jones Industrials Average ($DJ: news, msgs, alerts) erased 58 points, or 0.6 percent, to 10,150. Moving lower were shares of Coca-Cola, International Paper, Philip Morris and 3M.
General Electric (GE: news, msgs, alerts) - the Dow Industrials' ($INDU: news, msgs, alerts) biggest downside mover Monday with a near 10-percent loss - climbed 4.3 percent to $41.30.
GE told investors early Tuesday that it remains "prepared to deliver double-digit earnings growth in 2001," showing confidence in its ability to deliver first-quarter earnings per-share of 30 cents, up 15 percent from the same period last year.
"GE has always been the epitome of a company in absolute control and investors have been willing to pay for that. The pursuit of Honeywell is giving the impression of a lessening of control by GE," Merrill Lynch said in a note to clients. But at current prices, the brokerage said it thinks investors should have less doubts about whether to buy GE and views the stock a buying opportunity.
Other Dow stocks moving higher were shares of Honeywell -- which is being purchased by GE - Intel and Microsoft. And Boeing (BA: news, msgs, alerts) added 1.8 percent after Goldman Sachs upgraded the stock to its "recommended for purchase" list from a "market performer."
The Nasdaq Composite ($COMPQ: news, msgs, alerts) gained 28 points, or 1.5 percent, to 1,951 while the Nasdaq 100 Index ($NDX: news, msgs, alerts) put on 41 points, or 2.4 percent, to 1,721.
"The market's problems in the short run are at least as much psychological in nature as fundamental," opined Christine Callies, chief U.S. investment strategist at Merrill Lynch.
"We believe the amount of Fed ease necessary to revive the blue-chip indexes is considerably less than the amount of ease necessary to revive the economy. We continue to believe that Fed policy will succeed in placing a floor under the economy," Callies concluded.
Merrill's quantitative strategist Richard Bernstein observed that the Fed typically loses the tug of war between earnings and interest rates in the early stages of an ease cycle as earnings continue to decelerate.
The Standard & Poor's 500 Index ($SPX: news, msgs, alerts) erased 0.3 percent while the Russell 2000 Index ($RUT: news, msgs, alerts) of small-capitalization stocks shaved 0.9 percent.
Volume came in at 665 million on the NYSE and at 1.101 billion on the Nasdaq Stock Market. Market breadth was negative, with decliners outpacing advancers by 20 to 9 on the NYSE and by 19 to 15 on the Nasdaq.
Waiting for that bottom
One strategist mused over the lack of fear that has until now characterized market activity and how the fear factor is such a key ingredient in forming a bottom that'll finally hold.
"Over the past year, we have seen the Nasdaq move downward from 5,000 and the action during this descent has been steady and methodical. The decline was not accompanied by any real sense of panic and surrender and [it appeared inevitable that] this lack of psychological capitulation would yield to additional downside until the market began to shake up even the most head-strong tech player," commented Terry Danish, technical strategist at Investec Ernst & Co.
As the Nasdaq plunged throughout the past year, Danish continued, tech players were still willing to jump in, fearing that they may miss out on "the big turnaround." But that willingness to jump in on a moment's notice is fading, he said, as tech stocks have fallen in many cases to devastatingly low levels.
"Unfortunately, the psychological pendulum needs to swing from the excessive optimism of early 2000 to an equal degree of pessimism before the downside will have run its course. Without that, there can be no bottom," Danish concluded.
Sector and specific movers
The networking sector improved as Cisco Systems (CSCO: news, msgs, alerts) showed signs of stability, gaining 6.3 percent to $20.06. The Nasdaq bellwether has seen a gargantuan 22 percent lopped off in the past three trading sessions. Cisco CEO John Chambers said at the Merrill Lynch Global Communications Conference that there are no signs of a turnaround in new orders, which remain soft. Chambers didn't give any specific guidance about the company's revenue or earnings expectations for the third quarter and beyond. See full story.
In the wireless telecom sector, Sweden's Ericsson (ERICY: news, msgs, alerts) continued to descend after tumbling 25 percent on Monday after issuing a warning. Shares were down another 4 percent in recent action. But rival Nokia (NOK: news, msgs, alerts) added 4.1 percent while Motorola shaved 0.5 percent.
In a note to clients, Bear Stearns said it believes Nokia, Nortel Networks and Motorola are affected by the same issues that triggered Ericsson's warnings on Monday. "We anticipate that the spending cycle will begin in mid to late 2002 [and that] until then there will be minimal visibility," the brokerage said, adding that while near-term risks still exist, it believes Ericsson is attractively priced from a valuation perspective.
Motorola (MOT: news, msgs, alerts) announced Tuesday that it's slashing 7,000 more jobs in its wireless handset group and will take a first- and second-quarter special-item charge, though the amount was not disclosed. See full story.
In the broad market, airline issues slid in the aftermath of a profit warning from Delta Air Lines, sending the Amex Airline Index (XX:$XAL: news, alerts) down 4.1 percent. The company (DAL: news, msgs, alerts) , blaming a softening economy, said it now expects a first-quarter loss of 70 to 90 cents a share vs. the 46-cent profit expected by First Call/Thomson Financial. See full story. Within the group, UAL dropped 5.7 percent, AMR Corp. slid 4 percent and Southwest Airlines gave up 3.7 percent.
Tyco International (TYC: news, msgs, alerts) dropped nearly 11 percent following news that it's purchasing CIT Group (CIT: news, msgs, alerts) for approximately $9.2 billion in stock. CIT rallied 33.3 percent.
Treasury focus
Government prices took a breather on the heels of recent gains, with little reaction to the retail sales data.
February retail sales edged down 0.2 percent vs. expectations for a 0.4 percent increase. Excluding autos, retail sales fell 0.3 percent compared to forecasts for a 0.1 percent rise.
Tempering the weaker-than-expected February numbers was a large upward revision to the January figures. In fact, January retail sales were revised to show a 1.3 percent jump vs. the previously reported 0.7 percent increase. See full story and view Economic Preview and economic calendar and forecasts.
"It really was not a bad report. Yes, retail sales fell a bit in February -- but that is because January spending was up an incredible 1.3 percent. Even better, the details seen to point to a consumer who is really continuing to spend. So what can we conclude? It's the seasonal factors," said Joel Naroff, chief U.S. economist at Naroff Economic Advisors.
The 10-year Treasury note shaved 5/32 to yield ($TNX: news, msgs, alerts) 4.92 percent while the 30-year government bond erased 11/32 to yield ($TYX: news, msgs, alerts) 5.315 percent.
In the currency arena, dollar/yen erased 0.3 percent to 120.11 following Monday's rally while euro/dollar shaved 1.4 percent to 0.9138.>>
Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York. |
