WSJ.COM: Lacking Inspiration, Year's Early Gains Dwindle
10 Jan 13:46
By Erin Schulte
The Wall Street Journal Online
NEW YORK (Dow Jones)--Stocks were weak Thursday despite some encouraging
unemployment data. Analysts said the good news was already baked in, and
investors found few new reasons to extend the rally that kicked off 2002 on a
bullish note.
In early-afternoon trading, the Dow Jones Industrial Average fell 52 points
to 10042 after losing 56.46 points in the previous session, while the Nasdaq
Composite Index gave up 4.80 to 2040.10 after declining 10.85 points on
Wednesday.
Other indexes were mostly lower. The S&P 500 Index edged down 1.30 to
1153.90, the New York Stock Exchange Composite Index gave back 1.10 to 585.90
and the Russell 2000 Index inched down 1 point to 493.70.
Bonds rose and the dollar was weaker.
Strategists said the declines aren't surprising given the market's runup in
the past few months. Since the beginning of the fourth quarter, the Dow is up
about 14%, the Nasdaq is up 36% and the S&P 500 Index is up 11%.
Many say those strides were based on the expectation of good news ahead on
the economic and corporate-profit fronts. Now that some of that good news is
trickling in, such as today's better-than-expected unemployment report and some
positive retail-sales data, analysts say investors shouldn't expect another
big rally.
"You have to put it within the context of that three-month move -- all the
numbers are immaterial relative to that," said Larry Wachtel, market strategist
at Prudential Securities. "You have to go into a digestive period."
In fact, small selloffs can be healthy for the stock market, to prick
greed-based rallies that could leave the market bloated and price-earnings
ratios inflated. "[An uninterrupted rally] would throw you into a bubble once
again, and no one wants a bubble," Wachtel said.
Early Thursday morning, the Labor Department reported that the number of
Americans filing new unemployment claims fell to 395,000 in the week ended Jan.
5 from 451,000 a week earlier. Economists surveyed by Thomson Global Markets
anticipated 410,000 claims in the latest period.
Ian Shepherdson, chief U.S. economist for High Frequency Economics, said
that while weekly data tended to be volatile, the data were encouraging
nonetheless.
"Nothing is ever definitive with weekly data, especially during the holiday
season, but these numbers do strongly suggest that the unexpected increases in
claims in the past two weeks were nothing more than noise," Shepherdson said.
"Other numbers, like the Challenger survey, confirm that layoffs are slowing,
and there is every reason now to expect claims to continue falling."
Among retailers that have posted results so far, Wal-Mart Stores said that
sales at stores open at least a year rose 8% in the five weeks ended Jan. 4,
while net sales surged more than 16% to $28.84 billion. Its shares edged
higher.
Department-store operators saw less business in December, but the sales data
were better than pessimists had feared. Federated Department Stores, which
runs Macy's and Bloomingdale's, said same-store sales dropped 8.6% in the five
weeks ended Jan. 5, as opposed to the double-digit drops forecast. Total sales
fell 8.7% to $3 billion. Its shares gained 1.6%.
Meanwhile, Sears, Roebuck recorded a 2.4% decline in same-store sales last
month and a 1.6% decrease in total revenue. Its shares rose 4%.
Not all retail stocks benefited, though. Blue Light Special Kmart saw its
shares tumble 14% after it said December same-store sales fell 1% and warned
results for the fiscal year ended Jan. 2 will fall short of analysts' earnings
view of a penny a share. The company added that it is in discussions with
creditors.
In addition to studying the jobless and retail-sales reports, Wall Street
awaits pearls of wisdom from Federal Reserve Chairman Alan Greenspan. The Fed
chief is scheduled to deliver a speech at a summit in California later in the
day.
Among individual stocks to watch, Ford Motor's restructuring plan could call
for write-downs of as much as $4 billion and result in the elimination of at
least two plants, nearly 10,000 Ford jobs and thousands of contractor positions
over the next two years. Its shares sank 6.1%.
Dow component General Motors saw its shares slip 1.3% after it boosted its
fourth-quarter profit estimate to 60 cents a share, up from its previous
guidance of 50 cents a share. The company also said it expects to turn a profit
in 2002, but not before making "significant" cost cuts and trimming capital
spending.
Wireless and communications stocks spent another day in the red. Motorola
declined 5.8% after it said it will cut 2,000 manufacturing jobs as it
consolidates production in a few sites around the world to cut costs. Deutsche
Telecom slipped 2.1% after it said it will lower some of its mobile phone rates
to attract more customers in Germany.
Meanwhile, the Justice Department announced that it will pursue a criminal
investigation of Enron, saying a task force is expected to focus on possible
accounting fraud. Enron shares, trading below $1, sank 13%.
Dow Chemical settled a lawsuit that had raised questions about the company's
vulnerability to investor anxiety over rising asbestos-related litigation. The
chemical company inherited the suit as a result of its acquisition of Union
Carbide. Its shares declined 8.2%.
Weakness in several key international markets may also have scared off
buyers. In intraday trading, Frankfurt's Xetra DAX was down 1.8%, while
London's Financial Times Stock Exchange 100-share index was 0.7% lower. Tokyo's
Nikkei 225 Stock Average closed with a loss of 1.2%, and Hong Kong's Hang Seng
Index fell 1.6%.
Despite the selling Thursday, analysts didn't seem to think selling in the
U.S. was the start of a big bleed.
"The market is going to be supported," Wachtel said. "People have been
salivating for a chance to buy on dips."
In major U.S. market action: Stocks moved down. On the Big Board, where 738.3
million shares traded, 1,624 stocks fell and 1,361 rose. On the Nasdaq, 998.1
million shares changed hands.
Bonds rose. The 10-year Treasury note rose nearly 1/2, or $5.00 for each
$1,000 invested. The yield, which moves inversely to price, fell to 4.99%. The
30-year bond was up more than 5/8 point to yield 5.45%.
The dollar was weaker. It traded at 132.81 yen, down from 132.89 late
Wednesday, while the euro rose against the dollar to 89.20 cents from 89.14.
For continuously updated news from The Wall Street Journal, see WSJ.com at
wsj.com.
(END) DOW JONES NEWS 01-10-02
01:46 PM |
