MARKET TALK: Data Don't Support Lehman's GDP Views
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
11:11 (Dow Jones) Lehman says there's not been enough improvement in the
economy to justify its GDP forecasts, so they're being lowered. It's now
looking for a 2.5% GDP in 3Q, versus the prior estimate of 3%. 4Q is down to
3.5% from 4%. (MSD)
11:05 (Dow Jones) Two-year Treasury at 3.994%, is below 4% for first time
since Oct. 1998. Stocks are falling, and there are growing beliefs today
that the economy is getting much worse, and that the Fed may have more than
one bullet left in its rate-cutting gun. The move comes despite a
significant selloff in the dollar related to National Association of
Manufacturers screaming about the strong dollar. (SV)
10:59 (Dow Jones) Fear of fallout should General Electric's (GE) proposed
buy of Honeywell (HON) fail continue to drive the two's options Thursday. As
European regulators push for potentially deal-breaking concessions,
investors covered the upside for GE and sought downside protection in
Honeywell. With GE up $1.15 to $49, the July 50 calls traded more than
11,400 contracts, gaining 45 cents to $1.60 at the CBOE. Honeywell lost
$3.51 to $38.75. The July 40 puts traded 9,928 contracts, compared with open
interest of just 1,506, with these puts losing $1.50 to $3.60 at the Philly.
(KT)
10:55 (Dow Jones) The National Association of Manufacturers' pressure on
U.S. Treasury Secretary Paul O'Neill to state that further strengthening of
the dollar would continue to damage the U.S. economy has an immediate impact
on currencies. "The NAM has riled up the market quite a bit," said Greg
Salvaggio, VP trading at Tempus Consulting in Washington. GBP/USD is at
$1.3985; EUR/USD is $0.8580; USD/JPY is Y121.36; (JRH)
10:50 (Dow Jones) Credit Suisse First Boston analyst Gibboney Huske widened
her 2001 loss estimate on Polaroid (PRD) to $2.30 a share from 15 cents
because of revenue declines in its core instant film and camera business.
Huske, who has a hold rating on the stock, added that Polaroid will likely
continue to be in violation of its debt covenants and that waiver
negotiations on those covenants will likely weigh heavily on the stock.
(DDO)
10:45 (Dow Jones) The spread on GE-Honeywell deal is at $11 after widening
out to close to $15 earlier Thursday after a statement from GE sparked more
fears that the merger won't get past EU regulators. Even so, it appears
takeover traders haven't completely given up on the deal. If they had,
Honeywell would probably be trading in the low to mid-$30s - the price
analysts deem fair value for Honeywell sans GE. Honeywell did dip as low as
$36, but is currently trading at about $39. (JAW)
10:35 (Dow Jones) Sales seem to have a hard time dropping to the bottom of
the barrel, CS First Boston's Janice Meyer says of CBRL Group (CBRL). The
operator of Cracker Barrel Old Country Store and Logan's Roadhouse
restaurant chains reported same-store sales Thursday that were a bit better
than she expected. But the analyst says turning sales into profits remains
difficult. As for Logan's, Meyer says that continued softness indicates that
"competitors may be keeping the customers. Getting them back is apt to be
tough and may be costly." Look for a new share-repurchase program, since the
company has a strong cash position, she adds. (RLG)
10:29 (Dow Jones) Merrill Lynch analyst David Anders raised his 2002
earnings estimate on Harrah's Entertainment (HET) to $2.79 share from $2.50,
citing the impending acquisition of Harvey's Casino Resorts and the
elimination of the company's existing goodwill amortization. The analyst
added that his estimate doesn't give Harrah's full credit for cost savings.
Anders kept his buy rating and 12-month price target of $45 a share on
Harrah's. (DDO)
10:18 (Dow Jones) Federal legislation introduced in Congress Wednesday could
prove a boom to rural hospitals and other health care providers, according
to CSFB analyst John Hindelong. The Rural Health Care Improvement Act of
2001 attempts to equalize disparities between Medicare reimbursements for
rural and urban hospitals by eliminating caps on rural Medicare DSH payments
and aligning base inpatient payment rates for rural hospitals with urban
facilities. Companies such as Lifepoint Hopsitals (LPNT), Community Health
(CYH), Province Healthcare (PRHC) and Health Management associates (HMA)
stand to benefit. (JJO)
10:12 (Dow Jones) Kraft (KFT) has broken issue - falling below its $31
offering price - the day after it held its $8.7 billion IPO. This is never a
good sign, and, in the case of Kraft, likely reflects continued investor
disappointment that the deal was priced so aggressively. Stock off 4% at
$30.05. (RJH)
10:07 (Dow Jones) Reliant Energy (REI) shares are adding modestly to an
almost 13% loss Wednesday. The market appears to still be digesting the
company's revised guidance. Apparently, Wall Street's outlook for the
company didn't fully reflect the impact the Texas deregulation plan would
have on its regulated business. (CCC)
10:00 (Dow Jones) Fed's Ferguson says the U.S. is in a period of "sub-par"
economic growth, but that he is optimistic about the outlook for
productivity. (FL)
9:57 (Dow Jones) At 4.01%, the two-year Treasury is hovering at its lowest
level since October 1998. Granted, there was a global financial crisis then
and Funds were at 4.75%. But the level is seen as significant. It's a sign
that weaker economic data could be changing the market's view on an endpoint
for the Fed, and arguments for a quick recovery are losing steam. (SV)
9:48 (Dow Jones) Cabot Oil & Gas (COG) shares may be under pressure Thursday
after the company said the natural gas price realizations Wall Street is
using for its earnings models are too high, said Jefferies & Co.'s Frank
Bracken. He expects several of Cabot's peers to make similar announcements
in the coming weeks. Bracken's estimate, which used a lower-than-consensus
gas price assumption, will remain unchanged. (CCC)
9:44 (Dow Jones) Honeywell (HON) just opened, down 12% at $37.25. DJIA off
97 at 10773. GE higher by 2% at $48.76, and United Tech (UTX) off 2% at
$78.51. (TG)
9:31 (Dow Jones) Nymex crude seen opening unchanged, but may move lower,
under pressure from comments by OPEC Sec-Gen Lukman Wednesday that cartel
may need to raise output at July 3 meeting regardless of whether Iraq
resumes exports. Bearish news offsets large crude stocks draw caused by
storm delays. Support for July crude, -1c at $28.83/bbl in overnight trade,
is pegged at $28.50. (MSX)
9:18 (Dow Jones) The PPI and jobless claims data were reasonably positive
for the dollar but the forex market has shown no reaction. Euro is holding
around 85 cents and the dollar is around Y122. "Euro is trading in a tight
range," says one analyst. EUR/USD is $0.8499; USD/JPY is Y121.93; USD/GBP is
$1.3900. (JRH)
9:14 (Dow Jones) It now looks improbable the GE/HON deal is going to get
done after GE's proposed divestiture, the "final offer." Stock futures were
weak to begin with and are moving a bit lower on this news. GE shares likely
to move higher, Honeywell's in the other direction. GE is confident
operating earnings will grow by double digits this year. (TG)
9:08 (Dow Jones) Ingram Micro (IM) miss shows U.S., which was expected to
pick up, remained flat over past six weeks, says Lehman's Dan Niles. He
believes IT spening will not dramatically improve in 2H because only 37% of
PC units are shipped into U.S., with 23% in Western Europe, 26% in Japan and
Asia-Pacific and 14% in rest of the world. "We believe expectations remain
too high for the computing industry," he says. (TG)
8:57 (Dow Jones) Of the three indicators released at 8:30 a.m., jobless
claims may have been the most worrying. While claims declined by 12K to
428K, the prior week may have been distorted by Memorial Day, and both weeks
taken together depict a worsened jobs market. As of early June, the jobless
rate still seems to have been climbing. (JM)
(END) DOW JONES NEWS 06-14-01
11:12 AM |
