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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (36887)	5/14/2001 8:14:26 AM
From: Dealer	Read Replies (1) \| Respond to of 65232

M A R K E T .. S N A P S H O T -- Shares set to backpedal By Julie Rannazzisi, CBS.MarketWatch.com Last Update: 8:02 AM ET May 14, 2001 NEW YORK (CBS.MW) -- Stocks are bracing for some modest downside at the open Monday a day ahead of the Federal Open Market Committee's decision on interest rates. The majority on Wall Street continues to expect the overnight Fed funds rate to be cut by 50 basis points, despite a surprising rise in retail sales Friday. "In the wake of the dreadful April employment report, a 50-basis-point easing Tuesday seemed more or less a done deal. But Friday's report of stronger-than-expected retail sales and a rise in the Michigan sentiment index has muddied the waters," commented Ian Shepherdson, chief U.S. economist at High Frequency Economics. Shepherdson noted that a 25-basis-point rate cut would represent a clear signal that the end of the rate cuts is now near. But with the likelihood that the May employment report will show payrolls falling at a faster pace than was seen even in the depths of the 1990/91 recession, the economist is betting on a more aggressive 1/2 percent decrease in rates. Still, with both headline and core inflation now rising and wage increases accelerating, Shepherdson believes 4 percent will prove to be the floor on the Fed funds rate. "To avoid early overheating in the coming upswing, the Fed needs to stop cutting rates long before the coincident indicators turn up." June S&P 500 futures slipped 4.40 points, or 0.4 percent, and were trading roughly 1.70 points below fair value, according to figures provided by HL Camp & Co. Nasdaq futures, meanwhile, shaved 14.50 points, or 0.8 percent. In shares changing hands before the official opening bell, Dow stock Hewlett-Packard (HWP) lost 19 cents to $26 in London pre-market activity. Analysts had some cautious comments on H-P ahead of the company's quarterly results this week. Laura Conigliaro of Goldman Sachs said in a research note that H-P's businesses remain weak, with pricing a particular issue in its PC segment. This week will see a plethora of earnings reports from the retailers, including results from Home Depot, Wal-Mart, Kmart and Gap. Some key tech companies will also unleash their results, including Hewlett-Packard, Dell Computer and Applied Materials. With 90 percent of the S&P 500 having reported -- and using estimates for the remaining 10 percent -- the year-over-year earnings decline is at 6.5 percent, First Call/Thomson Financial said. First Call said the earnings decline for the second quarter continues on track to be deeper than that of the first quarter, with expectations having dropped to a decline of 11.4 percent. And estimates for the third quarter now stand at a decline of 2.8 percent. In the government market, prices continued to decline following horrendous showings over the past couple of trading sessions -- which have been particularly bruising for the inflation-sensitive long end. The 10-year Treasury note was off 7/32 to yield ($TNX) 5.48 percent while the 30-year government bond erased 7/32 to yield ($TYX) 5.875 percent. On the economic front, Monday will see the release of April industrial production, seen slipping by 0.2 percent, and capacity utilization. March business inventories will also be out and are expected to have declined by 0.2 percent. View Economic Preview and economic calendar and forecasts. In the currency arena, dollar/yen gained 0.3 percent to 122.90 while euro/dollar edged down 0.1 percent to 0.8745. -------------------------------------------------------------------------------- Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York.