MARKET TALK: World Economy Moving Into Recession: Yardeni
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
11:56 (Dow Jones) "The U.S. economy might continue to skirt recession. The
global economy, on the other hand, is falling into one now," says Deutsche
Banc Alex. Brown's Ed Yardeni. The message from commodity prices is clear:
the global economy is sinking fast. (TG)
11:48 (Dow Jones) Western Digital (WDC) filed a lawsuit against Cirrus Logic
(CRUS) relating to a wafer purchase agreement between the companies. The
lawsuit, filed July 5 in the Superior Court of the State of California,
Orange County, alleges breach of contract, breach of the covenant of good
faith and fair dealing, declaratory relief, restitution and unfair trade
practices, among other issues. The plaintiffs, which include Western
Digital's Malaysian subsidiary, are seeking damages in excess of $60
million. Cirrus shares flat at $17.25. (CD)
11:33 (Dow Jones) Sanmina (SANM) expects revenue for the fiscal 4Q to be
flat to down 5% compared with the 3Q. Sanmina reported revenue of $776.6
million for the 3Q ended July 1. Citing a slowdown in the electronic
manufacturing services industry, Sanmina also expects to record a
restructuring charge of $175 million to $200 million in the 4Q related to
reductions in capacity, including a 15% to 20% reduction in printed circuit
board fabrication capacity throughout North America. Shares up 1% to $21.44.
(RG)
11:24 (Dow Jones) Another day, more doubt that optical switch maker Ciena
(CIEN) can stand practically alone as an overachiever in the midst of a
recession in telecom equipment spending. UBS Warburg analyst Nikos
Theodosopoulos lowered fiscal 2001 and 2002 earnings per share estimates to
72 cents and 80 cents from 73 cents and $1.10, respectively, and kept the
stock at a hold. "This is due to our lower expectations for long-haul DWDM
sales and gross margin given fundamentals," he says. Ciena reports 3Q
results Thursday. (JDB)
11:15 (Dow Jones) Poor relative performance of homebuilding shares over past
several weeks could be good sign for stocks, says Merrill's Chris Callies.
Relative peaks in this group often occur at a trough in GDP and interest
rates, and near a peak in relative earnings momentum for homebuilders.
Earnings growth for homebuilders may still remain healthy - the implication
being that the earnings growth for weaker sectors should improve. If signals
are right, nice returns still likely from consumer cyclicals. (TG)
11:02 (Dow Jones) American Enterprise Institute Economist John Makin says
"it is time for economists to quit touting a second half recovery. Otherwise
they will look as foolish as equity 'analysts' who, every week, have revised
downward their earnings forecasts by 2% or more as negative 'surprises'
about prospective profits have flowed in." (JCC)
10:54 (Dow Jones) Telekom Indonesi (TLK) jumps 9.1% to $6.70 on optimism
over the market-friendly cabinet appointments in the fledgling
administration of Megawati Sukarnoputri (with that name, she'd make a good
energy analyst). ADR trader notes Telekom Indonesi trades as a proxy for the
rather illiquid Indonesian market. (CAR)
10:46 (Dow Jones) Home Depot (HD) continues to show solid expense control,
and could possibly beat consensus by a penny when it reports 2Q earnings
Tuesday, says Alan Rifkin of Lehman Brothers. He estimates sales of $14.4B,
with same-store sales boosted to flat levels by higher lumber prices. Home
Depot has seen good response from a new push into energy-conservation
products, Rifkin says. Looking ahead, he says sales and earnings will
accelerate from improvements in customer service and merchandising, easier
second-half comparisons, and an improved economy in early 2002. (JMC)
10:38 (Dow Jones) Cendant (CD) continues to expand its travel empire as
consolidation rolls on in the online travel sector. Cendant, which
franchises highway lodging staples such as Howard Johnson and owns the Avis
Group car-rental company, announced Monday it plans to acquire Internet
travel outfit Cheap Tickets (CTIX) for $425 million in cash, or $16.50 a
share. Shares of Cheap Tickets are up almost 40% on the news, at $16.32. In
June, Cendant agreed to buy electronic travel reservations service Galileo
International (GLC). Last month, Barry Diller's USA Networks (USAI)
announced it would buy a controlling stake in Cheap Tickets rival Expedia
Inc. (EXPE) to add to USA's growing portfolio of travel-related companies.
(RS)
10:28 (Dow Jones) Earnings-estimate cuts keep rolling in for online brokers.
Keefe, Bruyette & Woods analyst Russell Keene lowered his fiscal fourth
quarter estimate on Ameritrade Holding (AMTD) to a loss of 2 cents a share
from breakeven. The cut arrives after Ameritrade said Friday that trading
activity weakened in July. Brokers are feeling the pinch of the weak stock
market and the seasonally slow summer months. "The operating environment is
weaker than anticipated," said Keene. Separately, J.P. Morgan's Michael
Freudenstein lowered third-, fourth-quarter, and 2001 estimates on Charles
Schwab Corp. (SCH), "to incorporate a still lower level of trading
activity," Ameritrade shares are unchanged at $6.26, while Schwab is off
2.7% at $13.25. (GFC)
10:22 (Dow Jones) Stocks trying to hold onto slight gains in the early
going, unable to really gather momentum on some bullish tech thoughts from
Goldman. Of course, there is some not-so-bullish tech commentary from
Lehman. Anyway, this week is loaded with potentially big earnings and
economic news, so a little caution in front of these reports, combined with
a summer Monday, probably makes for a pretty lame session. SOX up 0.9%. DJIA
off 4 at 10411, Nasdaq Comp up 7 to 1963, and S&P 500 flat at 1190. (TG)
(END) DOW JONES NEWS 08-13-01
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