MARKET TALK: Still 30% Chance Of Recession, Sohn Says
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
11:26 (Dow Jones) Sung Won Sohn, chief economist with Wells Fargo, says the
recent employment trend is consistent with the view that the economy is
"scraping the bottom and showing some signs of improvement. Nevertheless,
the economy is not out of the woods yet," says Sohn. "The probability of a
recession is still about 30%." (CMN)
11:18 (Dow Jones) Things don't look so hot now, but one thing major stock
averages have going for them is that they didn't jump out to early gains.
This week has seen a few sessions start with nice promise, only to fade. The
Nasdaq may be short-term overbought, which could hinder a snapback, but
there also could be some recovery room later in the session. DJIA off 90 at
10460, Nasdaq off 32 at 2055, and S&P 500 slips 11 to 1208. (TG)
11:10 (Dow Jones) i2 Technologies (ITWO) said Thursday it may write down a
chunk of the value of Aspect Development, which it bought for $9.3B in stock
at the height of the tech boom last March. SG Cowen expects i2 to take $5B
non-cash charge to write off goodwill from that deal this quarter. A healthy
amount considering i2's market cap is $4B. (MLP)
11:05 (Dow Jones) Financial futures strategist for Merrill Lynch, David
Horner, says bond yields shouldn't go up a lot from here. While further weak
data should cushion a further upturn in bond yields, anticipation of the
tax-cut effect should boost the economy and weigh on them, he says. (CMN)
11:00 (Dow Jones) Charles Blood of Brown Brothers Harriman becomes the
latest strategist to ratchet down earnings expectations for S&P 500 members.
Blood now expects the companies to earn $50, not $52.50, this year, and
$54.50, not $57, next year. But Blood remains firmly bullish. "Stock prices
lead earnings, not the other way around," he says. (KJT)
10:54 (Dow Jones) At the end of July, nearly 65% of analyst ratings were in
"buy" or "strong buy" categories. Only 1.5% were in "sell" or "strong sell"
regions. So reports Chuck Hill of Thomson Financial/First Call. "That means
the number of buys of all kinds were 47 times the number of sells of all
kinds," Hill said in recent Congressional testimony. "That much of a
positive bias is hard to justify." Last August, that ratio was about 99 to
1. (NL)
10:45 (Dow Jones) Wachovia (WB) is holding a 10:30 a.m. shareholder meeting,
where they are expected to announce the results of the vote to approve its
proposed merger with First Union (FTU). A preliminary count showed
shareholders approving the $14.18 billion sale by a narrow margin, which
would leave hostile bidder SunTrust (STI) all by its lonesome. Let's just
hope they didn't use butterfly ballots. Stay tuned. (TAS)
10:34 (Dow Jones) Payrolls have not changed the view on what Fed will do at
the August meeting, says Gerald Lucas, senior government strategist with
Merrill Lynch. And after that, Fed will be in "wait-and-see" mode. He says
data to watch are retail sales and capacity utilization, to see if they will
signal the manufacturing sector has bottomed out. (CMN)
10:26 (Dow Jones) PG&E's (PCG) bankrupt utility unit Pacific Gas & Electric
Co. has $873 million in total defaulted commercial paper outstanding as of
June 30 and is also in default on $938 million in outstanding borrowings
under its bank credit facility. In addition, the utility hasn't made any
payments on its bank loan or defaulted commercial paper during the quarter.
(JM)
10:13 (Dow Jones) Preliminary PC motherboard and notebook shipments from
Taiwan for July look better than expected, Merrill says. However, firm is
not interpreting the numbers as indicative of improving end-user demand,
with checks indicating demand is still weak. Instead, Merrill calls
improvement seasonal build around back-to-school coupled with easy June
comps. (TG)
10:05 (Dow Jones) NAPM says the service sector economy contracted in July
after a modest expansion the prior month. The July index stood at 48.9
versus 51.2 in June. Prices paid moved to 49 from 55.5 the prior month,
while employment losses moderated to 46.4 from 45.1 in June. (MSD)
9:59 (Dow Jones) Stocks losing some more ground. Data have investors in flux
- signs of imminent recovery, or temporary lull before economy really tanks
- and that has stocks in limbo, as well. Techs cooling after mini rally. SOX
off 2%, Nasdaq Computer index eases 1.5%. Just four Dow names - Disney,
Coke, Boeing, and Honeywell - moving higher. DJIA off 72 at 10480, Nasdaq
eases 19 to 2068, and S&P 500 falls 8 to 1212. (TG)
9:44 (Dow Jones) Some Tsys strategists are musing whether the U.S.
unemployment rate, which printed a clearly lower-than-expected 4.5% in July
report, may not rise above the psychologically important 5% level when the
current economic downturn reaches its weakest point. Clearly bad news for
Tsys, still lower on session but off their lows following their initial
post-employment report selloff. (JNP)
9:36 (Dow Jones) Nymex crude is expected to open unchanged to 10 cents a
barrel lower in a corrective move from Thursday's rally. There was no
market-moving news overnight. Tropical Storm Barry, cited as a bullish
factor Thursday, has weakened slightly as it moves through Gulf of Mexico.
Trading expected to be quiet ahead of weekend. Sept. crude, down 11c at
$27.60 overnight, has support at $27.10-$27.20; resistance is seen at
$27.90-$28.05. (MXF)
9:25 (Dow Jones) At a hearing Thursday afternoon, bankrupt Winstar
Communications (WCIEQ) won court approval of a settlement between its
Winstar Wireless affiliate and Qwest Communications (Q) that reduces by 85%
its quarterly payments to Qwest. Under terms of the agreement, Winstar will
pay up to $1.5 million a quarter for the circuits it uses and be allowed to
return unused and unneeded circuits essentially without penalty or
termination costs. Winstar had been paying Qwest $9 million a quarter. (TB)
9:17 (Dow Jones) UBS Warburg analyst Christopher Dixon said Walt Disney's
(DIS) 3Q results were "clearly disappointing" on the broadcast side, but the
company did better than expected in theme parks and film entertainment
units. Disney continued to cut costs in the quarter and accumulated $700
million of free cash flow by the end of the quarter, which should help in
fiscal 2002, he said. While it's unknown as to when consumer spending and
advertising sales will recover, companies like Disney that are focused on
cost cutting and containment will do well when consumer and advertising
dollars pour in again, Dixon says. (DDO)
9:11 (Dow Jones) Gilead (GILD) shares have been under pressure lately on
concerns about regulatory risk to lead HIV drug. Lehman says FDA risk to
product is now discounted in stock price, and firm further expects
"excellent newsflow" from company over next several quarters. While the
stock has been hit as other company's have received FDA setbacks in recent
weeks, the risk of prolonged delay is lower for this drug than for most
others, Lehman says. Reiterates strong buy, $65 target. (TG)
9:01 (Dow Jones) The adult male unemployment rate declined from 4.0% to
3.9%, while the adult female unemployment rate edged up from 3.8% to 3.9% as
well. The teenage unemployment rate rose from 14.3% to 14.8%. A year ago the
teenage rate was 13.4%, adult women were at 3.7%, and the rate for adult men
was 3.2%. (JM)
8:57 (Dow Jones) In simplistic, what-does-it-mean-for-market terms, the July
jobs data seem to help neither stocks nor bonds. The report wasn't strong
enough to tellingly convince of an economic bottom being made. Such a report
would have boosted the hopes of earnings-challenged companies and the stock
market. But the report wasn't weak enough to make economic seers
significantly gloomier. Such a report would have raised hopes of a more
aggressive Fed and helped bonds. What we got from jobs data simply damps
spirits and implies a long, bumpy road to economic recovery. (NL)
(END) DOW JONES NEWS 08-03-01
11:27 AM |
