DJ MARKET TALK: Tech Still Not Place To Be, Yardeni Says
03 Sep 14:07
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201-938-5299; email: tom.granahan@dowjones.com)
MARKET TALK can be found using N/DJMT
2:07 (Dow Jones) To play technology and productivity, buy consumer stocks,
says Pru's Ed Yardeni. He says widespread competition is one of the main forces
that is both driving technological innovation and passing most of the resulting
benefits to consumers, rather than to businesses. He also notes that tech's
forward P/E went from 13.9 in 1995 to a record high of 48.3 during March 2000,
and is now at 25.4, still well above the market's P/E. Further, tech industry
analysts may be too optimistic about short-term outlook for earnings - while
they estimate a drop of 11.1% this year, they predict a gain of 50.1% next
year. (TG)
1:55 (Dow Jones) U.S. brokerage stocks got off to a rough start on the first
trading day in September, which could be a hint of things to come. Weak
earnings announcements, probable ratings downgrades by Standard & Poor's and
the investigation into equity research by state and federal regulators are
likely to result in a continuing series of bad news for the industry this
month, said Brad Hintz, an analyst with Sanford C. Bernstein & Co. But don't
fret too much. It's going to be rocky month, but "fundamentally this is a
cyclical business that is at or near the nadir of its earnings cycle," he says.
(CWM)
1:33 (Dow Jones) An abundance of caution seems to be what's steering stocks
Tuesday. A softish ISM number is looked at in its worst light, fears about Iraq
seem to be growing, and yet more discouraging talk from brokers about their own
peers all combine to drive stocks lower. No Dow components are higher, and
techs and financials are in rough shape. Meanwhile, 10-year yield of 3.98%
can't even draw investors into stocks. DJIA off 270 to 8393, Nasdaq Comp falls
42 to 1272, and S&P 500 down 29 to 886.(TG)
1:15 (Dow Jones) The T-bill auction came in much stronger than expected. The
new 3-month bills were sold at a yield of 1.61% vs. 1.65% prior to the auction
and the new 6-month bills were sold at a yield of 1.58% vs. 1.63% prior to
auction. Bid to cover ratio was 2.58 for 3-months and 2.35 for 6-months. (JSX)
1:00 (Dow Jones) U.S. Bancorp Piper Jaffray analyst Anthony Gikas initiated
coverage of Leapfrog Enterprises (LF) with an outperform rating and 12-month
price target of $23. He estimates that earnings for the maker of educational
toys and content should rise to 51 cents a share in 2002 from the 18 cents of
2001, and reach 71 cents in 2003. The company is well-positioned to grab market
share at retail, extend its brands into new product categories, increase its
international presence and capitalize on operating efficiencies in 2003 and
2003, the analyst says. LF off 3.9% at $18.09. (DDO)
12:41 (Dow Jones) Banc of America met with PepsiCo (PEP) management last
week, and left with the impression that the company continues to believe in the
long-term strength of its core franchise and is aware of the macro challenges.
Firm doesn't see much risk to its EPS view of $1.95 this year and $2.18 next,
as synergies/cost savings provide support. Banc of America sees 5-10% upside
based on valuation, and price target is $42. PEP off 1.2% at $39.06. (TG)
12:16 (Dow Jones) Morgan Stanley lowers its EPS estimates for Goldman Sachs
(GS), citing lower revenue for its M&A, equity trading and asset management, as
well as a forecasted loss from the principal investment portfolio. The firm's
new EPS views are below consensus numbers. Morgan, though, keeps its
equal-weight rating, calling the company "compelling" and "a fine firm." "We
still would like to see more cost-cutting at Goldman and the industry,
increased demand for capital by corporate clients...and a recoupling of the
capital markets and the economy." (GS)
12:02 (Dow Jones) Lower South American sales andincreased interest expense
will hurt Monsanto (MON) in the second half of the year, Merrill Lynch's Donald
Carson says. Carson lowered his earnings estimate for this year by 20 cents a
share to $1.20. He also lowered his outlook for next year by 10 cents a share
to $1.70, "based on expectations for a slower-than-expected recovery" in the
company's South American business. Carson notes that Monsanto's stock has
increased 16% since Pharmacia (PHA) spun off its 84% stake in the company Aug.
13. He thinks BASF could emerge as a potential bidder for Monsanto, and that
its takeout price could be more than $40 a share. Carson has a buy rating on
the stock. MON off 3% at $17.79. (DJH)
11:45 (Dow Jones) Arnhold technician John Roque wondering if AMEX Biotech
index is good proxy for market - the BTK made low prior to the market (the
market followed), it bounced prior to market (the market followed), and it
failed just when it started to look like it had one more leg higher in it. He
looks for complete retest for BTK of lows in the 275 area, and says investors
should be aware that there is a "very good chance the index works to the 200
area." BTK off 4.5% at 331. (TG)
11:36 (Dow Jones) Nextel (NXTL) bonds are off a couple points, with the stock
down 9% at $6.94, after a WSJ story on wireless entrepreneur Craig McCaw
hedging more than half of his shares in the company. However, Merrill analyst
Matt Crakes views McCaw's forward sale agreements as a way to limit downside
vulnerability, not as a negative vote on the company. Crakes says Nextel is "on
track to post a very solid" 3Q, and the bonds remain a top pick. The 9 3/8%
notes of '09 are quoted at 75 bid, 76 offered. (RTB)
11:22 (Dow Jones) Since the beginning of the quarter, Thomson First Call
reports, expected 3Q02 earnings growth has fallen to 11.2% from 16.6%. First
Call expects the downward revision rate to pick up speed during preannouncement
season, after slowing down the final two weeks of August. The earnings tracker
sees the analysts' earnings growth estimate down to about 6% by the start of
3Q02 reporting season. The would imply earnings growth of about 8% for 3Q02,
assuming actual results beat the final estimate by somewhere between the 1.3%
in 2Q02 and the 2.8% average. (GS)
11:09 (Dow Jones) UK Prime Minister Blair believes dealing with the problem
of international terrorism will also help global economy. Tells press
conference he's not sure how much of current financial-market worries are due
to international instability, but adds: "If we allow a serious problem (like
international terrorism) to develop unchecked, that will have a negative
impact" on the economy. (ML)
10:57 (Dow Jones) The pricing environment for beer remains solid, with little
promotional activity in the light beer segment over the Labor Day weekend,
Morgan Stanley's Bill Pecoriello said. Pecoriello conducted a survey of 120
retailers in 40 cities, sampling price points for 12-, 18- and 30-pack cans of
Miller Lite, Bud Light and Coors Light. Pecoriello estimates that prices for
Miller Lite and Bud Light 12-packs were about 4% to 5% above last year, and
that a Coors Light 12-pack price was about 1% to 2% higher. The greatest
discount reductions were in value, or 30, packs. (DJH)
10:46 (Dow Jones) With 99% of the S&P 500 having reported 2Q02 earnings,
Thomson First Call says, it appears that the final earnings growth for the
quarter will be about 1.4%, "relatively close to the 1.6% expected at the
beginning of the quarter." (GS)
10:35 (Dow Jones) While the headline number of the August ISM report is still
above 50, which indicates expansion, the latest data suggest "very slow
manufacturing recovery" and somewhat higher chance of a rate cut at the Sept.
24 FOMC meeting, U.S. Bancorp Piper Jaffray's strategist Redfield says. Fed
funds futures now showing 38% chance of Sept. 24 ease. (JXS/CMN)
10:29 (Dow Jones) Ten-year note approaches 4.0% yield, level not seen since
Aug. 14 when anintraday low of 3.96% was reached. The two-year note yield also
dips to 2.00%. (JSX)
10:26 (Dow Jones) You know fall is in the air when Manhattanites drag out
their black-and-gray wardrobe and volatility in the options market climbs. In
this first session after Labor Day, the CBOE market volatility index, or VIX,
spiked 5.78 to 41.58 not long after the opening. Although volatility in the
market has been high in recent weeks (compared to prior summers), this fear
gauge nonetheless has not closed above 40 since Aug. 12, when the recent wave
of cautious relief first started to take hold. With pre-announcement season
looming, it may be time to fasten the seat belts? (KT)
10:15 (Dow Jones) ISM's manufacturing survey shows that growth for the sector
remained at a snail's pace, in line with July's sharp drop. The overall August
index was at 50.5 versus 50.5 in July. New orders fell into the contraction
zone at 49.7 from 50.4. Production was steady at 55.6 from 55.7 in July, and
employment remained weak at 45.8 versus 45.0. (SV)
10:09 (Dow Jones) Stocks react weakly to ISM report, though headline number
was better than official estimates. Given Tuesday's tone, it was going to take
a bigger number than this to turn things around immediately, though the current
selloff is one built on fragile legs, its says here. Major averages can turn
this around before the day is out. DJIA off 220 to 8443, Nasdaq Comp sheds 35
to 1280, and S&P 500 drops 25 to 890. (TG)
9:58 (Dow Jones) Call it a temporary de-facto ease. The Fed added a
gargantuan $11 billion overnight RP, trying to ease up a funds rate that is
genuinely tight at around 1 7/8%. Typically, month-end pressure lets up
considerably on the first trading day of the month, but not this time. (SV)
(END) DOW JONES NEWS 09-03-02
02:07 PM |
