MARKET TALK: Forget April Lows On Nasdaq - Think 1998
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
12:59 (Dow Jones) More soothing thoughts from Bernie Schaeffer, who has been
correctly bearish on this market for some time: There are plenty of things
to worry about right now, but his biggest fear is complacency. His target
for low on Nasdaq Comp is 1300-1350, saying 1998 low of 1357 should help
with support. Also notes that many big tech names often find support at half
of their all-time highs, and then crater another 50%. Nasdaq found some
support at half of 5132 high earlier, which is now long gone, so next 50%
pullback would lead to about 1300. Hard to believe, but that, in his
opinion, might not even be ultimate low for Nasdaq. (TG)
12:49 (Dow Jones) On average, the 61 domestic initial public offerings have
gained just 2% over their offering prices, according to Dealogic CommScan.
But there are some bright spots in individual sectors. Health care IPOs, for
instance, have gained on average 14%, while technology stocks have gained
10%. (RJH)
12:40 (Dow Jones) At $10.03 a share, down 9.48%, Compaq (CPQ) is currently
trading at a 9% discount to Hewlett-Packard's (HWP) $10.94 a share bid
(based on H-P's current share price of $17.29). If the deal closes
successfully on April Fools Day, that would represent a roughly 18%
annualized return on investment, double the return on most arbitrage bets.
But some arb traders say the deal offers at least double the risk, given the
unfavorable reaction by investors and the possibility of antitrust hurdles.
"How are people going to react if this thing sees an extended European
review?" asks one arb trader. "The companies haven't gone out of their way
to say much about antitrust issues except, 'Trust us.' Arbs aren't that
comfortable with the lack of handholding." (JAW)
12:31 (Dow Jones) Several securities analysts said in research notes on
Wednesday they believe third-quarter results will be rotten for investment
banks, but that may the trough for earnings per share declines at the firms.
UBS Warburg's Diane Glossman said, "we expect to see improvement in
underlying activity levels beginning in fourth quarter 2001 and into the
first half of 2002." (CUB)
12:22 (Dow Jones) Treasury Secretary Paul O'Neill Wednesday said that the
U.S. economy has already stabilized and is poised for a healthy rebound next
year. He also reaffirmed his belief in the so-called strong dollar policy,
saying it remains "continuous." The dollar gained against the yen but moved
little vs the euro. EUR/USD is at $0.8896; USD/JPY is at Y120.78; EUR/JPY is
at Y107.49. (JRH)
12:13 (Dow Jones) Amazon.com (AMZN) shares fell as much as 20% on heavy
volume to their lowest level since early-March 1998, without any news and
amid a host of ongoing concerns, according to an analyst. One trader pointed
to the possibility of large holders liquidating positions - Wednesday's
heavy block trading volume certainly doesn't rule that out. (KMM)
12:07 (Dow Jones) Stocks have been slip-sliding all summer, and now,
investor anxiety is finally catching up. On Tuesday, the CBOE's market
volatility index, or VIX, gained 0.76 to 29.42, inching near the top of its
usual range between 20 and 30. This fear gauge had not closed above 30 since
April 24. Meanwhile, protective puts also are trading heavily. At the CBOE,
the ratio of equity puts traded to calls rose to 0.83, above the 0.75 mark
some contrarians consider to be a bullish signal. The put/call ratio for
index options also is high at 2.90, above the 1.5 mark contrarians think is
bullish. (KT)
12:00 (Dow Jones) Cisco (CSCO) off 6%. Why? Well, maybe the overall tech
weakness is to blame, or disappointment over the Compaq/H-P deal, or
continued negative sentiment...or maybe the fact its CEO said the company
might not be around in a few years! OK, so that's a little disingenuous
(we'll assume his would be one of the companies doing the consolidating and
not folding up shop), but in this kind of environment, folks don't really
want to hear Chambers say the top 100 Nasdaq companies will disappear in
five years. (TG)
11:48 (Dow Jones) Entrada Networks (ESAN) says its available cash won't
support anticipated working capital needs for the next 12 months, including
the continued development of its storage area networks product line.
Entrada's cash position, combined with the company's recurring operating
losses, raise doubt about its ability to continue as a going concern.
Entrada is pursuing possible strategic alternatives, including an external
equity financing transaction, although there isn't any assurance a
transaction will occur. (RG)
11:45 (Dow Jones) Once the U.S. economy starts its upturn, the Fed will be
facing the risk of a still very tight labor market and possible acceleration
in housing prices, with some risk of Fed tightening policy in second half of
2002, says Ian Shepherdson, chief U.S. economist at High Frequency
Economics. (JNP)
11:35 (Dow Jones) All eyes will be on Bristol-Myers Squibb's (BMY)
25,000-patient Octave trial, testing cardiovascular drug Vanlev, when
results are revealed sometime between mid-September and mid-October. SG
Cowen analyst Steve Scala says the Octave trial results should key big
potential for Vanlev as long as incidence and severity of certain swelling
is rare. He believes Vanlev will not only have an acceptable side-effect
profile, but also that severe swelling was rarely seen in patients given the
drug. As a result, "Vanlev could be a big driver for Bristol-Myers,
potentially worth $2 billion in 2005." Bristol-Myers up 3%. (BMM)
11:25 (Dow Jones) Like other futures pits, Fed funds also watching equities,
trader says. Stock weakness so far allowing Oct. Fed funds to boost odds of
25 BP rate cut at Oct. FOMC. Such likelihood now up again at 63% vs. 43%
during Tuesday's selloff sparked by NAPM. (SPC)
11:20 (Dow Jones) Metromedia Fiber (MFNX) equity investors seem more
confident than bondholders on the company's prospects for completing a
much-needed financing package. While the stock's up 10 cents at $0.98, the
bonds are up just a half point to 27. The company says it secured another
$50 million - the last piece needed - but has received a one-day extension
to hammer out the overall deal. That's confusing investors, says a trader,
who adds, "Once things fall into place, which should be shortly, I think
we'll see the bonds pop a little more." (RTB)
11:09 (Dow Jones) "All fundamentals" point to further euro weakening, says
Carl Weinberg, at High Frequency Economics, noting that technical analysts
are also predicting this. "When technicals and fundamentals tell the same
story, we start to worry." He targets the euro at mid-80s by end of 3Q.
(GMM)
11:00 (Dow Jones) An extra $1.95 on the monthly bills of subscribers to AOL
Time Warner's (AOL) online service isn't hurting subscriber growth, JP
Morgan H&Q analyst Paul Noglows says. AOL raised its monthly fee to $23.90
from $21.95 beginning with the July billing cycle. When AOL announced the
price hike in May, it warned the move would hurt subscriber growth, with net
additions for 2001 possibly coming in 600,000 to 700,000 lower than the 4
million it previously predicted. But Noglows estimates AOL will hit 4
million additions for the year anyway, citing price hikes by competitors,
increased AOL marketing efforts, and a still relatively low price compared
with other services like cable TV. (PDL)
10:51 (Dow Jones) A 15.5% rise in MBA refinancing index and a 7.6% increase
in new purchases underscores the continued vitality of the housing market.
This was the week following the Fed's latest rate cut, which likely aided
borrowers' ability to take on new debt. (JM) |
