MARKET TALK: Quarter-Point Cut Now Fully Priced In, Again
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
11:27 (Dow Jones) August Fed funds show 25 BP cut fully priced in, with 12%
chance of 50 BP ease at August FOMC, trader says. Deferred months also
showing further cuts toward end of year, possibly two or three total,
including the one in August. (SPC)
11:22 (Dow Jones) Did Kraft Foods (KFT) beat Wall Street estimates for the
2Q by using a different number of outstanding shares than analysts? Some
suspect so. "I think it accounts for a couple of cents a share," says
Prudential's John McMillin after Kraft beat the consensus estimate by a
penny in announcing its first post-IPO results. "It's confusing," he says of
the issue, which involves shares before and after the recent offering. (RLG)
11:09 (Dow Jones) Greenspan's comments aren't leading to any shift in
monetary policy expectations. Economists are generally sticking to their
view that the Fed will go to 3.5% and that that will be it for this year.
(MSD)
11:00 (Dow Jones) "It was a pretty bearish speech on the economy in
general," says Michael Wallace, senior economist with Standard & Poor's on
Greenspan talk. Wallace says it could certainly influence prices "for more
than this afternoon" if earnings continue to behave as they have been. (CMN)
10:56 (Dow Jones) House Rep. asks about strength of dollar, Greenspan
responds that for "very good reasons" USD exchange rate should be discussed
only by Treasury Secretary. Dollar needs "a single spokesman." But adds that
it's "far more important for exporters what's happening overseas than what's
happening in [U.S.] markets." EUR/USD at $0.8715. USD/JPY at Y124.35. (JEN)
10:51 (Dow Jones) All eyes on IBM, which reports earnings later today. In
the options market, investors continued to be cautious as trading volume in
defensive puts has picked up. The ratio of outstanding puts to calls stands
at 0.96, rising from 0.88 at the start of this week and up from 0.72 about
three weeks ago. The tech heavyweight has seldom disappointed, but analysts
who feel the quarter is challenging have been trimming estimates, adding to
the uncertainty. Also, Dow is off more than 100 points Wednesday, and IBM is
off $3, or 2.8%, to $105.53. (KT)
10:46 (Dow Jones) Electronics Boutique Holdings (ELBO) registered to sell
2.5 million shares of its stock and 1.5 million shares on behalf of a
stockholder. Electronics Boutique currently has a float of approximately 7
million shares, meaning if the sale is completed, the float will increase by
66%, assuming the 600,000 share overallotment is exercised. Shares of the
company are off 4.9% at $33.57. (TC)
10:41 (Dow Jones) Look's like it's going to be tough going for Tsy traders
in the short end. Greenspan talks of the uncertainty of guiding monetary
policy and what could be more volatile interest rate moves. All of that
means traders are going to have to play the Fed guessing game even more,
because policy will be that much more volatile and fast moving. (MSD)
10:34 (Dow Jones) Fed's monetary policy report to Congress states that "even
though an appreciable recovery in the growth of economic activity by early
next year seems the most likely outcome, there is as yet no hard evidence
that this improvement is in train, and the situation remains very
uncertain." (JCC)
10:30 (Dow Jones) Prudential analyst Tim Anderson thinks Forest Laboratories
(FRX) "arguably has the best fundamentals within the pharmaceutical sector,"
due to a superior earnings growth rate, low generic exposure and potential
for increased earnings-per-share changes. He cited Forest's beating his 37c
1Q earnings estimate by three pennies as well as Forest's $238 million in
sales for depression medicine Celexa, which exceeded his $226
million-projection. Anderson raised his earnings estimate for fiscal year
2002 to $1.65 a share from $1.57, and for fiscal year 2003 to $2.12 from
$2.04. He boosted his price target to $92 from $75. (BMM)
10:25 (Dow Jones) Greenspan, citing the recent emergence of weakness among
U.S. trading partners in Europe, Asia and Latin America, says that "the
interaction of slowdowns in a number of countries simultaneously has
magnified the softening each of the individual economies would have
experienced on its own." (JCC)
10:21 (Dow Jones) Greenspan sees "downside risks to consumer spending over
the next few quarters," saying among other things that the decline in stock
market wealth that has occurred over the past year can be expected to
restrain the growth of household spending relative to income. (JCC)
10:18 (Dow Jones) Polaroid (PRD) announced it would be holding discussions
with its bondholders in early August to restructure its bonds, on which it
is foregoing interest payments, in a manner that will be best for retaining
value in the company in the long term. (MCB)
10:16 (Dow Jones) Greenspan says the pressure on corporate profits could
make capital spending weak and a "continued problem" for the economy. (MSD)
10:14 (Dow Jones) Stocks hold soft tone after Greenspan's prepared remarks -
the Q&A is often more interesting. Tough to overcome what generally looks
like bleak earnings scene, though rates are going lower, and maybe more than
we thought. Interpret that as you will. DJIA off 100 at 10503, Nasdaq off 36
at 2031, and S&P 500 drops 10 to 1203. (TG)
10:09 (Dow Jones) Greenspan's prepared remarks are just as prescribed by
analysts, leading to a slight firming in the dollar. But Q&A considered more
essential, as dollar will undoubtably be mentioned. USD/JPY at Y124.90.
EUR/USD at $0.8630. (JEN)
10:07 (Dow Jones) The Fed is expressing some worries about the overseas
economic downturn as well, but expects that a U.S. rebound coupled with
lower fuel prices and better policy will stabilize global developments.
(MSD)
10:04 (Dow Jones) FOMC has also raised its inflation forecast for 2001. In
February, looked for 1.75% to 2.25%, now looks for 2% to 2.5%, Both the
higher inflation forecast and the lower growth forecast for this year are
recognizing the reality to date. (JM)
10:03 (Dow Jones) Greenspan's House testimony has pretty much walked the Fed
party line, saying that interest rate cuts, joined with tax cuts, should
fuel a return to stronger growth levels by next year. But he appears to have
backed away somewhat from hopes the economy will do better over the shorter
term, and he's reiterated that risks remain. (MSD)
(END) DOW JONES NEWS 07-18-01
11:27 AM
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