U.S. stocks to open lower on economic worries
20:13, Wednesday, 28 November 2001
(Updates prices, adds details)
By Haitham Haddadin
NEW YORK, Nov 28 (Reuters) - Stocks are set to fall at the
open on Wednesday as investors worry that a two-month run-up on
Wall Street may not be justified by economic fundamentals.
"The market's rallied for two months, up tremendously off
the bottom," said Prudential Securities analyst Larry Wachtel.
"It's going to shake out. It's overbought and was going to
shake out. Throw any number at it or any piece of news, and it
was going to do that and it's continuing."
Stocks fell on Tuesday as consumer confidence dropped for a
fifth consecutive month in November, spurring investors to sell
on fears the recent Wall Street rally had gone too far, too
fast. The rally from three-year lows hit on Sept. 21, in the
wake of the attacks on the World Trade Center and the Pentagon,
has lifted major indexes between 20 and 35 percent.
Anecdotal evidence of potential further weakness is
expected later in the day when the Federal Reserve's beige book
on regional economic activity is issued at 2 p.m. (1900 GMT).
"It will tell us exactly what we all know, that the economy
continues to soften and that doesn't' prevent the Fed from
cutting interest rates," said Wachtel. "All the beige book will
tell us is that the economy is in recession."
Early on Wednesday equity index futures suggested stocks
were headed for a lower open. December futures for the S&P 500
index fell 6.50 points to 1,144 while futures for the Nasdaq 100 shed 20.50 points to 1,595.50, signaling a decline of about
1.25 percent at the open. Futures for the Dow Jones industrials
shed 55 points at 9,825.
The indicative Dow Jones industrial average <.DJII>, which
is based on prices of Dow stocks trading in Germany's Deutsche
Boerse U.S. market segment, fell 20.90 points, or 0.30 percent,
to 9,842.70.
The Nasdaq-100 pre-market indicator fell 11.29 points or
0.70 percent, based on trading ahead of the open in the
tech-laden index's biggest stocks.
It is unclear when the United States will climb out of
recession but a rebound likely will come in the near future,
Federal Reserve Bank of St. Louis President William Poole said
late on Tuesday.
Poole said he expected the struggling U.S. economy to
rebound within a matter of months or quarters, but did not
provide a more specific timeline for a turnaround.
Poole's comments came a day after a panel of economists at
the National Bureau of Economic Research announced that the
United States was in a recession that began in March. The panel
is considered the official arbiter of U.S. business cycles.
Among the big earlier movers, SRI/Surgical Express Inc.
<STRC.O> tanked after the medical supplies company said it
restated third-quarter results, cutting reported earnings
below Wall Street estimates. It also said it lost customers and
failed to expand business as it had anticipated.
SRI/Surgical shares plunged to $15 in pre-open U.S. trading
vs. a close of $24.98 on Tuesday.
Shares of beleaguered energy trade Enron Corp. <ENE.N> fell
to $3.80 from a close of $4.14 on the New York Stock Exchange.
Enron and rival Dynegy Inc. <DYN.N> hammered away at new terms
for their proposed merger late Tuesday, and sources said talks
included a buyout offer half the original price.
Sources close to the negotiations said the new
stock-exchange ratio is likely to fall into the range of 0.12
to 0.15 Dynegy shares for each Enron share, and Enron had
tentatively accepted the lower end of that range. But a source
cautioned that the talks were still very active and the terms
very fluid.
In other news, Texas Instruments Inc. <TXN.N> expects
fourth-quarter revenues to be down about 10 percent from the
third quarter, and sees a fourth-quarter loss of about 9 cents
per share, Chief Executive Officer Tom Engibous said late on
Tuesday, reconfirming the company's earlier guidance. Shares
closed at $32.58 on Tuesday.
Internet content delivery provider Akamai Technologies Inc.
<AKAM.O> early on Wednesday said fourth quarter losses should
fall within estimates and its previously stated guidance.
Akamai's shares rose to $6.33 pre-open vs. a close of $6.27.
Flextronics International Ltd. <FLEX.O> headed higher after
the contract manufacturer said business was "good" and it was
comfortable with quarterly estimates. Shares rose to $26
pre-open from its Nasdaq close of $25.55.
In overseas markets, European stocks slipped back by
mid-morning on Wednesday as weaker overnight equity prices on
Wall Street and in Asia added to gloom over the timetable for
global economic recovery.
Prices held their ground in early trade but then
surrendered. By 1013 GMT, the FTSE Eurotop 300 index of
pan-European blue chips was off 0.98 percent and the narrower
DJ Euro Stoxx 50 index was 1.02 percent lower.
Tokyo's Nikkei average closed nearly 3 percent lower on
Wednesday after another corporate failure hurt sentiment and a
retreat on Wall Street prompted profit-taking in high-tech
issues including Canon <7751.T>.
"Just as we had rallied sharply and foreign markets rallied
sharply, they are pulling back this morning and we are pulling
back," Wachtel said. "The market is going to open lower and
probably go into a profit-taking phase for the next couple of
days."
On Tuesday, the blue-chip Dow Jones industrial average
<.DJI> fell 110.15 points, or 1.10 percent, to end at 9,872.60.
The Nasdaq Composite Index <.IXIC> shed 5.26 points, or 0.27
percent, to 1,935.97 and the broad Standard & Poor's 500 Index
<.SPX> lost 7.92 points, or 0.68 percent, at 1,149.50.
((Wall Street Desk, 646-223-6114))
(c) Reuters Limited 2001
REUTER NEWS SERVICE |
