MARKET TALK: Global Economy Needs More Than Rate Cuts
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
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12:03 (Dow Jones) "The quick fix of reflationary interest rate cuts is not
the panacea for a Brave New World in need of fundamental reform," says
economist Stephen Roach of Morgan Stanley. "It is high time to face up to
the heavy lifting that is needed to make globalization work. Until that
occurs, I suspect the global economy will remain more recession prone than
ever." (JCC)
11:51 (Dow Jones) The 2Q earnings season is off to a robust start, says
Brown Brothers Harriman. Of 12 S&P 500 technology companies that reported
through Friday, seven posted upside earnings surprises while just two missed
expectations. Upsiders included Advanced Micro Devices (AMD), Motorola (MOT)
and Palm (PALM). (KJT)
11:34 (Dow Jones) Comdisco (CDO) bonds traded down slightly but are back to
unchanged on the day at around 78 cents after the company said it was filing
for bankruptcy protection. Dealers say there was an interest to snap up the
bonds as recovery at the unsecured level is expected to be good. (CSE)
11:25 (Dow Jones) Steve Kim, who helped initiate and manage Merrill Lynch's
(MER) equity derivatives coverage, has been hired by Credit Suisse First
Boston as a managing director and head of North American equity derivatives
and quantitative strategy. CSFB also named Philipp Kauer, a director, to the
position of head of European equity derivatives strategy, where he will
develop a similar coordinated approach for European clients. (KT)
11:16 (Dow Jones) A little primer on what is a big week for economic data
and monetary policy, from UBS' Maury Harris: Another drop in factory output,
a stall in housing starts and an extremely weak Federal budget report will
reinforce image of a stressed economy, he says. The volatile,
hard-to-predict Philly Fed index could be the riskiest release of the week.
Greenspan's testimony should include scale-back of growth outlook, but
bigger question is how he will package his comments. Also, he'll be hard
pressed to defend forecast for sustained high US productivity growth in
light of slowing pace of past year. (TG)
10:59 (Dow Jones) Viacom's (VIA, VIAB) CBS television network sold the least
amount of advertising among the majors during the recent upfront market, and
is probably banking on scatter sales, according to SG Cowen's weekly Media
Money Manager research note. CBS may be taking the bet that rates will be
higher in the last quarter of the year. "This appears to be a big but
calculated bet on the economic recovery, and that consumers will be taking
their $300 rebate checks and spending them," says the note. (BS)
10:42 (Dow Jones) What would Holden Caulfield think? Amazon.com (AMZN) has
been hyping Monday's 50th anniversary of the publishing of "The Catcher in
the Rye." The online store says it's selling the classic American novel for
its 1951 price of $3. There's a catch, however: That three bucks would have
scored you a first-edition hardcover 50 year ago, but today it only gets you
the paperback. (RS)
10:33 (Dow Jones) A federal investigation of Apria Healthcare Group's (AHG)
billing documentation could result in liability up to $9 billion for the
company, according to an Apria filing with the SEC. Apria said the probe, by
the U.S. Attorney's office in Los Angeles, was the result of litigation
filed by individuals on behalf of the government. Apria said the U.S.
Attorney hasn't informed Apria on whether it will join the lawsuit. The
company said any claims are unwarranted and it will "vigorously defend
against any attempt to impose material liabilities or penalties." Shares off
12%. (TC)
10:25 (Dow Jones) Everybody loves eBay (EBAY). In addition to WR Hambrecht's
kind words, Lauren Cooks Levitan of Robertson Stephens says current business
trends and recent initiatives prompted her to raise her 2001 cash EPS
estimate to 41 cents from 40 cents, and lift her price target on the stock
to $85. She also sees upside for the company's 2Q results, skedded for
release this Thursday. (RS)
10:15 (Dow Jones) Entrada Networks (ESAN) sees lower revenue in its legacy
products line due to the economic slowdown, and will implement a
cost-cutting plan including a 20% headcount reduction. The company sees
revenue from its legacy products during the 2Q of between $2 million and
$2.2 million, compared with $6 million for the same period last year,
according to an SEC filing. Entrada also expects revenue from legacy
products to continue to be affected by the performance of its major OEM
customers in upcoming months. (CD)
10:03 (Dow Jones) "We forecast that the 10-year Treasury yield will fall to
4.7% by year-end," says GKST Economist Brian Wesbury. "We also expect the
Federal Reserve to stop cutting rates after a 25 basis point rate cut in
August. At 3.5%, the Fed will have done enough to boost the economy, but not
cause inflation." (JCC)
9:57 (Dow Jones) Merrill's Tom Astle has come up with a new model to
calculate the amount of excess optical component inventory and the time it
will take to reduce this to reasonable levels. The model suggests there may
be up to $4 billion of excess inventory, which will take until next year's
1Q to reduce to normal levels. Results support firm's near-term caution on
most names in the space, and long-term optimism on larger, well-funded tech
leaders like JDSU. (TG)
9:43 (Dow Jones) More weakness on tap for Nymex crude futures, extending
last week's losses. With little market-moving news, technicals are seen
setting price direction. Concerns about soft oil demand, rekindled by IEA
and EIA reports, continue to weigh on market, as do worries that
emerging-market turmoil may spill over into energy. Traders await Tuesday's
API data. Aug crude, down 30c at $26.29 on Access, has support at $26.22;
resistance is seen at $26.98. (MXF)
9:38 (Dow Jones) The market's recent strength has done nothing to change the
position of some analysts. "To me, the collapse in tech has not run its
course, and earnings estimates for this year and next for both tech and
non-tech still look way too high," says Barton Biggs, global markets
strategist with Morgan Stanley. (KJT)
9:30 (Dow Jones) Drkoop.com (KOOP) is pursuing financing of between $3
million and $6 million that likely will consist of a new series of preferred
stock to address its liquidity needs. Drkoop.com said the preferred stock
will have a conversion price at a discount to the current market price of
its common stock. Drkoop.com shares closed Friday at 16 cents a share. (CD)
9:23 (Dow Jones) "Trade may be the 'sleeper issue' that could come back to
challenge the strong U.S. dollar later this year," say economists at Bank of
Tokyo-Mitsubishi. (JCC)
(END) DOW JONES NEWS 07-16-01
12:04 PM
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