CBS-premarket run-down LONDON (CBS.MW) - U.S. shares stepped up smartly in pre-open trading on Monday, held aloft on expectations fuelling markets around the globe that the economic growth is rebounding nicely in the U.S.
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The rosy GDP outlook kept a potentially damning profits warning from Oracle Corp. largely contained to the software sector as the Nasdaq 100 tracker (QQQ: news, chart, profile) anticipated a better start in the tech stocks, and rose 10 cents on the ECNs to $35.84, taking strength from gains in Cisco and Sun Micro. A Lehman Brothers estimate cut on Intel Corp. (INTC: news, chart, profile) took the stock down, and lowered gains for the QQQs however as the New York open neared.
Bullishness on the macro picture abounded. Normura economists in London told clients they see first quarter U.S. GDP growing over 3 percent p.a.
On the Oracle down trend: PeopleSoft (PSFT: news, chart, profile), BEA Systems (BEAS: news, chart, profile), rival Siebel Systems (SEBL: news, chart, profile) and Microsoft (MSFT: news, chart, profile) came under early pressure, but shares of close rival SAP (SAP: news, chart, profile), Europe's largest software maker, held on to gains, and was up 1.7 percent in afternoon trade in Frankfurt.
Traders in the speculative session were looking for any sign that the Oracle impact wouldn't remain sidelined by the powerful Nikkei rally overnight and the follow-through gains in Europe. Siebel served as a caution. The stock dropped below $30 on the Redibook ECN, down from $30.10 in London earlier, dealers at Madoff Securities said. Microsoft was $61 even, a 0.5 percent decline.
Oracle downgraded
Oracle (ORCL: news, chart, profile) was down over 12 percent in the speculative session to $14, sinking as volumes picked up. Instinet had been seeing a $14.67-14.78 bid-to-offer range in the stock just ahead of 6 a.m. Eastern.
Merrill Lynch downgraded its rating on Oracle overnight to an intermediate-term 'neutral' overnight from 'buy.'
"Oracle could gap down to the $10-12 range, given the magnitude of the shortfall," analyst Christopher Shilakes tells clients. "We believe that these results will pressure the software group, hindering recent attempts at recovery."
Citing a downturn in its Asia-region sales, Oracle said Friday it expects third-quarter earnings of 9 cents a share compared with 10 cents a share earned during the same quarter last year. Merrill now sees the company reporting an 11.5 percent decline in fiscal third quarter revenue of $2.37 billion.
"The miss surprised us because the bar was so low," UBS Warburg told clients overnight The broker lowered its fourth quarter and fiscal 2003 estimates.
"The company blamed softness in the AsiaPac region as the primary culprit. However, we believe Oracle continues to face two issues - lack of significant growth in its core business... and lack of traction in its application business," UBS' Ken Carey told clients.
Several brokers took pains to comment that Oracle's woes aren't necessarily reflecting conditions for its peers. With year-over-year licensing revenue seen down 27 percent at Oracle, it "likely signals a still challenging spending environment, but many software companies we checked with say business is on track for their March quarters, so some of this may be Oracle specific as well," Goldman Sachs' Rick Sherlund said.
Media stocks boosted
Gainers in euro trading included: AOL Time Warner (AOL: news, chart, profile), up 29 cents to $26.27. Shares of U.K. media company Pearson (PSO: news, chart, profile) were up close to 10 percent on its outlook for 2002. See full story in FT Investor (Pearson is a significant investor in the publisher of this CBS MarketWatch report).
Telecoms ahead
Shares of networking and telecoms-related stocks were higher. Cisco Systems (CSCO: news, chart, profile) was up 12 cents to $15.12; Lucent Technologies (LU: news, chart, profile) was 10 cents higher at $5.88; JDS Uniphase (JDSU: news, chart, profile) and Juniper Networks (JNPR: news, chart, profile) were a few ticks higher, according to data from Nasdaq-Live.
On the mobile side, shares of Sweden's Ericsson (ERICY: news, chart, profile) is up 4.6 percent. The company has scheduled a press conference Tuesday for its Sony-Ericsson joint venture. Analysts are expecting the launch of at least one new handset - a multimedia affair with a color screen.
U.S. mobile stocks may take direction from AT&T Wireless (AWE: news, chart, profile). The company Friday morning lowered projections for 2002 revenue and cash flow, citing stiff competition and the U.S. economic slump. See full story
Chips
Turning to the chip group. Germany's Infineon (IFX: news, chart, profile) was up 3 percent on continued reports of improving prices for the DRAM chips in Asia - U.S. rival Micron zoomed close to 13 percent on Friday.
Reuters is reporting that International Business Machines Corp. (IBM: news, chart, profile) and microchip maker Xilinx Inc. (XLNX: news, chart, profile) are announcing a $100 million, two-year pact for IBM to make programmable Virtex-II chips for Xilinx.
Intel on Monday is expected to launch its fastest ever chip for mobile computing, the U.K. Guardian reported. The chipmaker is bullish on laptop sales. Europe laptop sales rose 16 percent in the fourth quarter, the paper reported, citing a U.S. electronics group survey.
Intel was down 12 cents at $30.86 after 9 a.m. Eastern, trimming gains as Lehman Brothers lowered 2002, 2003 earnings estimates for the chipmaker. Bank of America Securities however the chipmaker's first quarter is 'tracking to plan.'
Analysts
Elsewhere from the brokers: Analyst John Corcoran at CIBC World Markets upgraded the shares of Yahoo (YHOO: news, chart, profile) to "buy" from "hold," and has set a 12-month price target of $21.
Shares rose 69 cents to $17.30 on the ECNs.
Analyst David Bradley at J.P. Morgan upgraded the shares of General Motors (GM: news, chart, profile) to "buy" from "market perform," citing the continued strength of the U.S. light vehicle market and the company's favorable market share trends.
Emily Church is London bureau chief of CBS.MarketWatch.com.
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