M A R K E T .. S N A P S H O T -- Stocks get no respect
Accounting issues stay in the spotlight
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 5:34 AM ET Feb 16, 2002
NEW YORK (CBS.MW) -- Stocks mounted an Olympian effort to battle back but lost their stamina by week's end.
"We're still churning and working off the overbought conditions [reached in] late December," said Scott Curtis, head of U.S. equity trading at Credit Lyonnais.
Investors have been quick to chastise companies' accounting tactics and even the slightest hint of irregularity has brought with it harsh punishment.
Analysts stress that raising questions about Corporate America's bookkeeping is just another way to wring out years of excesses and aggressive practices that were readily ignored during the go-go days of the late 1990s but are coming to the fore amid two years of tremendous losses in the stock market and a stagnating economy.
"There's just no traction in the stock market. In this post-Enron environment, people are coming to grips with headline risk. Nobody is willing to come off the sidelines. Skittish psychology takes time to heal," remarked Bryan Piskorowski, market commentator at Prudential.
The brief rallies mounted by the stock averages have been thus far characterized by shabby sponsorship.
Joe Liro, equity strategist at Stone & McCarthy Research Associates, noted that each and every market bounce this week has been accompanied by pathetic activity.
Analysts have repeatedly lamented the meek volume on advances this week, maintaining that it epitomized investors' current disinterest in equities.
Curtis wrote off the rally in the top averages earlier in the week as a mere bout of short covering.
The Dow industrials closed out the week up 1.6 percent, the Nasdaq off 0.7 percent and the Standard & Poor's 500 up 0.7 percent.
Liro said spreading accounting issues have done significant damage and produced an aversion to stocks among investors.
He said it was disappointing to see the market go south considering that the economic backdrop has improved steadily over the past six weeks.
"Eventually the good news will overwhelm [current worries] and rekindle interest," the analyst added.
For now, investors appear eager to retreat.
Stocks have been retrenching amid a steady diet of economic reports signaling that a second-half turnaround should indeed materialize.
This week, January retail sales excluding autos got their meatiest increase in almost two years and jobless sales continued to trek lower, pointing to a stabilizing labor market. But investors latched onto a decrease in a consumer sentiment index released by the University of Michigan, underscoring the market's marked sensitivity to even modestly negative news.
Earnings calendar
Next week's earnings calendar will be marked by releases from the retailers. Among those reporting their quarterly results: Wal-Mart, Abercrombie & Fitch, J.C. Penney, Nordstrom and Liz Claiborne.
Other releases dotting the calendar include: ADC Telecom, Agilent Technologies, Ciena, BEA Systems, Nextel Communications, Duane Reade, King Pharma, Aetna and DaimlerChrysler.
Thomson Financial/First Call said the pace of positive pre-announcements continues to improve.
The earnings tracker said there have been 469 pre-announcements for the first quarter so far, with 139 positive, 91 in line, and 239 negative.
In absolute numbers, negatives are running well behind each of the quarters of 2001, First Call said. And positive pre-announcements are outpacing those experienced during the first quarter of 2001 by 98 percent and are 36 percent above those posted in the second quarter and 46 percent above the third-quarter's pace.
Standout groups raising their outlooks include technology -- mainly the major players -- and a handful of retailers.
On the negative side, drug companies, industrial outfits and smaller technology firms -- mostly in the semi equipment and contract manufacturing segments -- are lowering their outlook.
First Call said the second quarter of 2002 will not only mark the upturn of the cycle, but will be better than had been anticipated at the start of the year.
"The question remaining is not when the recovery will come, but rather what the slope of the recovery will be in the second half of 2002," the earnings compiler concluded in its weekly research note.
Feather-light data week
The shortened week will offer data-hungry investors little to chew on. Among the reports on tap: January housing starts, the January consumer price index, January leading economic indicators and the December trade numbers. Check economic calendar and forecasts.
Friday's trading activity
Equities took a beating Friday as eroding consumer sentiment and more worries over corporate accounting incited a bear stampede on Wall Street, handing the top averages a close just above the day's nadir.
IBM and Nvidia Corp. were the latest companies to come under the market's accounting microscope.
IBM's woes caused the Dow industrials to repel the 10,000 level after closing above the mark on Thursday for the first time in five weeks. And the Nasdaq slid for a second session as financing worries continued to plague the telecom sector. Networking stocks were also big losers, extending their losing streak to four straight days.
The Dow Jones Industrial Average ($INDU) fell 98.95 points, or 1.0 percent, to 9,903.04. AT&T topped the list of decliners, followed by IBM, Citigroup, Intel, American Express and Hewlett-Packard. Among the index's gainers were DuPont, Eastman Kodak, Philip Morris and Procter & Gamble.
The Nasdaq Composite ($COMPQ) tumbled 38.17 points, or 2.1 percent, to 1,805.20 while the Nasdaq 100 Index ($NDX) forfeited a heady 38.01 points, or 2.6 percent, to 1,436.70.
Among the broad market's big decliners were brokerage, bank, biotech, utility and retail issues. The defensive drug and consumer sectors tallied gains while oil service issues enjoyed a Halliburton-induced ascent. Airline and defense issues also nudged higher. Check market stats and latest sector performance.
The Standard & Poor's 500 Index ($SPX) slipped 1.1 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks edged down 0.3 percent.
Volume totaled 1.35 billion on the NYSE and 1.62 billion on the Nasdaq. Market breadth was mixed, with winners outpacing losers by 16 to 15 on the NYSE and decliners outstripping advancers by 21 to 14 on the Nasdaq.
Long-dated government bonds generated substantial upside and the rest of the yield curve joined in the festivities as well.
The 10-year Treasury note was up 21/32 to yield ($TNX) 4.865 percent and the 30-year government bond put on 18/32 to yield ($TYX) 5.375 percent. .
In the currency sector, the dollar flexed his muscles against the major currencies. The greenback gained 0.3 percent to 132.54 yen while the euro slipped 0.1 percent to 87.28 cents.
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