MARKET TALK: Chance Of Another Rate Cut Down To 60%
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
11:10 (Dow Jones) October Fed funds extend losses. Analyst says odds of 25
BP rate ease at October FOMC sliding roughly below 60% vs. 80% to 90% last
week. (SPC)
11:07 (Dow Jones) Selloff in Tsys continues, as they break above key yield
levels. 30-year now down more than a point in price, yielding 5.44%. 10-year
yield jumps through 4.92% key level, up to 4.94%, hurt by some shift into
stocks as DJIA rises by 1.3%. (JNP)
11:01 (Dow Jones) While all sectors and size categories within the S&P 500
posted negative returns in August - the index fell 6.3% - techs and
financials led the pack down, Prudential notes. Nothing too interesting
about that. But, the firm says technology has now fallen behind financials
in terms of weighting within the index. (TG)
10:52 (Dow Jones) Hewlett-Packard (HWP) boss Carly Fiorina just got what may
prove to be the most important - not to mention amusing - question of the
HWP-Compaq (CPQ) conference: "Do you like Mario Monti; do you respect Mario
Monti." Monti is Europe's competition boss, and given Europe's tough,
deal-breaking stance on other big deals, most notably GE/Honeywell,
antitrust hurdles could be tougher there. Fiorina says she's meeting Monti
soon. (GC)
10:45 (Dow Jones) NAPM report is "clearly and unambiguously consistent with
a near-term return to robust growth in manufacturing production," says Ian
Shepherdson, chief US economist at High Frequency Economics. "The recovery
starts right here; further Fed easing is unnecessary," he says. (JNP)
10:40 (Dow Jones) Hewlett-Packard's (HWP) planned $25 billion acquisition of
Compaq Computer (CPQ) ranks the biggest "friendly" merger involving a U.S.
target since October 2000 when General Electric (GE) announced a $50 billion
bid for Honeywell (HON), says Richard Peterson, chief market strategist with
Thomson Financial. But "bear-hug" bids remain tops so far this year,
including Comcast's (CMCSK) $44.4 billion offer for AT&T Broadband and
Echostar's (DISH) $30.4 billion offer for Hughes Electronics (GMH). (JAW)
10:31 (Dow Jones) NAPM adding to belief that "U.S. recovery has more legs,"
says Dustin Reid, at UBS Warburg. The bank - traditional dollar bulls -
downgraded one-month EUR/USD forecast this morning (before NAPM) to 88 cents
from 93 cents, arguing "probability of further (EUR) downside is high."
(GMM)
10:26 (Dow Jones) UBS Warburg cut its U.S. capital expenditure estimates for
telecom equipment to an expected decline of 14% in 2002 from a previous
forecast of a 5%-10% drop. In response, UBS Warburg lowered its financial
estimates and price targets for the following network equipment vendors:
Tellabs (TLAB), Nortel Networks (NT), Lucent Technologies (LU), Juniper
Networks (JNPR), and Tekelec (TKLC). (BED)
10:20 (Dow Jones) Ad spending continues to fall, according to Taylor Nelson
Sofres' CMR, a firm that tracks that very metric. According to the firm, ad
spending for all media fell 5.9% for the first half of the year, compared to
first-half revenue in 2000. CMR estimates that total ad spending for 1H 2001
came in at just under $47.5 billion, compared with $50.4 billion for the
same timeframe a year earlier. (BS)
10:14 (Dow Jones) For Tsys strategists, strong NAPM report, particularly new
orders, calls into question whether Fed will cut rates by 25 BP in October,
and although it is still too early to tell, bottom of rate cutting cycle
could even be the current 3.5% Fed funds target rate, pending more economic
data, especially employment, says Gemma Wright, director of strategy at
Barclays Capital in NY. 10-year now down 19/32 on session at 100 23/32,
extending losses, yield up at 4.91%. (JNP)
10:09 (Dow Jones) Fed funds slide in wake of NAPM, with Oct. contract down
3.5 BP and said to be discounting odds of 25 BP rate cut in Oct. Earlier,
contract was trading just 1.5 BP lower. (SPC)
10:06 (Dow Jones) Big, surprising jump in August NAPM seems to have lit fire
under stocks. Employment component also up nicely and new orders way up.
DJIA higher by 80 at 10033, Nasdaq gains 10 to 1815, and S&P 500 higher by 7
to 1140. (TG)
10:00 (Dow Jones) The Chicago Fed National Activity Index for July stands at
-0.50 compared with -1.87 in June. The bank says the chance of recession has
"decreased noticeably." (FL)
9:56 (Dow Jones) Hopes that a strong day for equities would boost the dollar
have so far been dashed. The DJIA is unchanged and the dollar is easier
against both euro and yen from a few hours ago. EUR/USD is at $0.8995;
USD/JPY is at Y118.87; EUR/JPY is at Y106.92. (JRH)
9:50 (Dow Jones) Hewlett-Packard (HWP) getting Compaq (CPQ) at decent price,
JP Morgan says, but adds that different business models, current
market-share-war environment, possible brand confusion, and different
management structures leave firm cautious on deal. Street seems to agree:
H-P off 10%, Compaq adds 1%. (TG)
9:41 (Dow Jones) Nymex crude futures expected to open 10 cents a barrel
lower in a technical pullback from Friday's rally (Oct. closed 65c higher at
$27.20 in abbreviated, pre-holiday trade). Oct. crude, down 11c at $27.09
overnight, has support at $26.51-$26.65; resistance is pegged at
$27.55-$27.65. (MXF)
9:36 (Dow Jones) Keefe Bruyette & Woods insurance analyst Cliff Gallant
downgraded Safeco Corp. (SAFC), citing "modest near-term success and a lack
of clarity longer term." Gallant said the insurer's new management team
appears to be on the right track in restructuring and re-underwriting the
company, but the turnaround process is likely to be slow in producing strong
returns on equity. (CUB)
9:28 (Dow Jones) The third shoe just dropped for Minneapolis financier Irwin
Jacobs. Jacobs, the former corporate raider who ended up with some egg on
his face for vociferously supporting troubled software maker AremisSoft
(AREME) and financial-services laggard Conseco (CNC), was also a big and
vocal investor in Internet telephony company Clarent (CLRN). Now, Clarent
says it may have overstated earnings in the first two quarters and has
placed three execs on leave pending an investigation. (RJH)
9:17 (Dow Jones) Ahead of retailers' same-store sales reports later this
week, Linda Kristiansen of UBS says Wal-Mart (WMT) is seeing better traffic
trends and, recently, product mix improvement. Also working on margin
erosion by better managing markdowns and possibly focusing on middle-price
points - the latter a concern for Target (TGT). But the analyst still seems
to be cautious on WMT and retail in general, given her "hold" on the stock
and a $50 price target for a stock that's already at $48. (GC)
(END) DOW JONES NEWS 09-04-01
11:11 AM
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