MARKET ACTIVITY/ WEEKEND EDITION OF TRADING NOTES JUNE 14, 1998 (2)
MARKET OVERVIEW,Con't
Active issues
General Motors Corp. (GM) was among the leading drags on the Dow through most of that as it was hit with its second United Auto Workers strike in a week Thursday, increasing the chance its entire North American operations could grind to a halt. GM shares fell 3/8 to 69 7/8.
Bottom-fishing in the beleaguered energy and energy-services sectors played a key role in the market turnaround. Oil companies and oil drillers were on the rise despite a drop in crude-oil prices. Among Dow components, Exxon (XON) rose 1 1/4 to 69 5/16, Texaco (TX) rose 7/8 to 57 7/16, Atlantic Richfield (ARC) rose 1 9/16 to 78 13/16 and Chevron (CHV) bounced back from this week's selloff with a robust gain, adding $3 7/16 to $81 3/8, finishing the session on its high. Mobil Corp. (MOB/NYSE) gained US$1 1/2 to US$76 9/16
The related oilfield services group got a lift as well, overcoming some discouraging comments from an analyst at Deutsche Bank Securities. Shares of Halliburton Co. (HAL/NYSE) moved up US$1 5/8 to US$43 3/4 and Schlumberger Ltd. (SLB/NYSE) gained US$11 5/16 to US$72 3/4.
On the flip side, transports gained heavily as their costs dropped along with oil prices. The Dow Transportation Index ($TRAN) jumped 21.16 to 3,378.94. Leading the gains were AMR Corp. (AMR), parent of AmericanAirlines, up 1 5/16 to 77 11/16, and US Airways Group 5/16 to 76 1/16.
Northwest Airlines (NWAC) dropped 1 3/16 to 38 3/4 on news that the Federal Aviation Administration is investigating allegations that Northwest improperly serviced its aging fleet of DC-9 aircraft, according to published reports. The FAA confirmed to The New York Times and The Wall Street Journal that it was conducting a "fact finding review" after three separate accusations -- one from an FAA employee, one from a former Northwest employee and one from a current Northwest employee.
Financial stocks pulled on the market, with Dow component American Express (AXP) down 1 5/16 to 102 3/4, one of the top losers in the average. J.P. Morgan (JPM) fell 3/4 to 121 5/8.
Biotech stocks also suffered. Advanced Tissue Sciences Inc. (ATIS) fell 3 1/8 to 3 15/16 after the U.S. Food and Drug Administration turn down approval of the biomedical company's Dermagraft artificial-skin product because of unsatisfactory data on how successfully the product worked.
Medical-device company Kensey Nash Corp. (KNSY) fell 6 to 10 3/16 after announcing Thursday that it expects revenues for the fourth quarter ending June 30 to fall significantly below analysts' estimates, on revenues of $3 million.
Rural/Metro Corp. (RURL) was down 5 to 12 3/8 after reporting Thursday that it expects to report weaker than-expected fourth-quarter results.
Ultralife Batteries Inc. (ULBI) was down 1 9/16 to 8 3/16 after reporting that its fiscal fourth-quarter earnings would not meet expectations because of higher production costs. First Call said analysts had expected a loss of 14 cents per share for the fourth quarter.
Brunswick Corp. (BC) dropped 3 5/8 to 25 3/16 after saying Thursday that it expects second-quarter earnings to be flat with the 83 cents a diluted share a year ago. The company. Analysts' consensus forecast is 93 cents a share, according to First Call. The company cited lower-than-expected sales of bowling equipment and outdoor recreation products.
FiberMark Inc. (FMK) fell 3 1/8 to 16 1/4 after the maker of paper products and specialty fibers said Thursday that it anticipates second-quarter earnings of 45 cents to 50 cents per share, falling short of analysts' expectations of 56 cents to 58 cents per share.
TST/Impreso Inc. (TSTI) was up 1/2 to 4 1/16, after the paper-products company said talks had ended with an Asian company that had planned to make an equity investment in TST. The negotiations ended because of the economic troubles in Indonesia, the Asian company said.
Rogers Corp. (ROG) was down 1 3/4 to 31 1/4 after the polymer-products maker said it expects second-quarter and third-quarter earnings to be well below analysts' expectations because of the Asian economic crisis.
Flowserve Corp. (FLS) dropped 1 to 25 15/16 as the maker of pumps and valves said it forecasts second-quarter earnings before special charges to be 15% to 20% below the 61 cents a share earned a year earlier.
Saf-T-Lok Inc. (LOCK) dropped 15/16 to 3 3/16 after the gun-lock maker said it had fired president and chief executive John Gardner. Chairman Franklin Brooks will fill in, pending the appointment of a new president, the company said. In a separate development, the company ended its agreement with Semiconductor Laser International Corp. (SLIC) to develop a laser-driven fingerprint gun-locking device. Semiconductor Laser was down 1/4 to 1 3/16.
Woodhead Industries Inc. (WDHD) dropped 1 1/2 to 14 13/16 after the maker of electrical devices to improve workplace safety reported that it expects fiscal third-quarter earnings of 24 cents to 26 cents a diluted share, less than the 29 cents a share a year ago.
Technology stocks
Semiconductor stocks continued to weigh heavily on leading tech issues, with the Philadelphia Semiconductor Index (SOX) off 2.57 to 235.62. The Morgan Stanley High Tech Index (MSH), however, deflected the chips' weakness, rising 1.13 to 541.10.
A pair of analysts' downgrades brought contrasting results for a couple of chip specialists: Applied Materials (AMAT) rose 7/16 to 28 11/16, while KLA-Tencor (KLAC) fell 2 3/16 to 24 15/16. Morgan Stanley analysts lowered their ratings on both stocks to "outperform" from "strong buy."
Another chip-equipment maker, ASM Lithography Holding NV (ASMLF), fell 5 3/16 to 29 1/8. The world's second-largest maker of semiconductor equipment said weak sales, especially to customers in Taiwan, and the cost of new products will mean lower profit this year than last year.
Chip maker California Micro Devices Corp. (CAMD) fell 3/16 to 4 3/16 as it announced that it expects sales for its fiscal first quarter to be unchanged or below the $8.75 million reported last quarter, because of "softness'' in the semiconductor industry.
The No. 1 chip maker, Intel (INTC), dropped 1/8 to 68 7/16, and was the most active issue on the market, while smaller competitors declined even more sharply. Novellus (NVLS) lost 1 3/16, or 5.5%, to 31 1/4, Micron Technology (MU) fell 1 1/2 to 21 1/16, Analog Devices (ADI) dropped 1 1/8 to 22 15/16, and Lam Research (LRCX) fell 1 1/16 to 20 9/16.
After spending most of the day in negative territory, PC makers wound up mostly positive, with Dow component International Business Machines Corp. (IBM) gaining 1/4 to 116 1/4. Dell Computer Corp. (DELL) rose 3/16 to 82 7/8 and Apple Computer Corp. (AAPL) was up 5/16 to 28 1/8.
Compaq Computer Corp. (CPQ) was unchanged at 28 1/16 a day after its earnings warning. During a conference call with analysts, the world's largest PC maker said it will post only break-even results in the second quarter, down from 33 cents a year ago. Analysts' estimates were only for earnings of a penny per share. Lehman Brothers analysts raised their rating on Compaq to "buy" from "outperform."
Compaq also said the third quarter will be a "transitional" quarter and that it will begin to see the benefits of its Digital Equipment (DEC) acquisition in the fourth quarter.
Inktomi Corp. (INKT) continued to rise by 3/8 to 40 1/8, as the maker of a popular Internet-search engine, which doubled in its first day of trading on Wednesday, continued to rise on investor enthusiasm for companies associated with the World Wide Web.
Internet-advertising specialist Netgravity (NETG) rose from its initial public offering price of 9 to 9 3/4 after its offering of 3 million shares opened this morning.
Other key Internet stocks were mixed, and the AMEX Internet Index (IIX) finished down 1.02 to 327.97. Yahoo! (YHOO) fell 1 7/16 to 113 3/16, Excite (XCIT) rose 1 1/16 to 65 3/8, America Online (AOL) was unchanged at 87, and Lycos dropped 1/4 to 52 5/8. K-tel International Inc. (KTEL) climbed 1 1/2, or 11%, to 15 1/4.
Memc Electronics Materials Inc. (WFR) fell 2 5/8 to 10 as it announced that it expects a second-quarter loss significantly wider than that in its first quarter. The maker of wafers for computer chips expects sales of $195 million to $200 million because of lower product volume and prices. The company lost 72 cents a share and had sales of $235.2 million in the first quarter.
After the bell
Lattice Semiconductor Corp. (LSCC) announced that it plans to buy back as many as 1.2 million shares of its common stock in the open market. The chip maker had about 23.5 million shares outstanding as of June 1.
Aluminum Co. of America (AA) and Alcan Aluminum Ltd. (AL), the largest and second-largest aluminum producers in the world respectively, announced that they won't make a joint bid for Venezuela's four state owned aluminum companies.
Gencor Industries Inc. (GX) said it filed a registration statement with the Securities and Exchange Commission to offer 3.6 million shares of common stock. The engineering and construction company will offer 3 million shares, while 600,000 shares are being offered by selling stockholders and the company has granted the underwriters a 30-day over-allotment option to purchase as many as an additional 540,000 shares.
Broadcom Corp. (BRCM) officials told the Bloomberg Forum that they don't expect the company to maintain its recent torrid revenue growth, although they still see new orders coming for the second half.
Broderbund Software Inc. (BROD) shares may continue to rise on speculation that the entertainment and education software maker will be acquired after the company canceled an appearance at an investment conference.
Cable & Wireless Plc. (CWP) lost a federal court bid to bar MCI Communications Corp. (MCIC) from selling its Internet assets to another buyer without first negotiating with the U.K. company. Cable & Wireless agreed to purchase MCI's Internet business last month for $625 million. MCI agreed to that sale in an unsuccessful attempt to win regulatory approval of its $40 billion acquisition by WorldCom Inc. (WCOM).
Shares of Emco Ltd. (EMLTF) were halted from trading shortly after the bell. The Canadian building-products company later said it expects second-quarter earnings to fall short of the 39-cents-per-share earnings it reported for its 1997 second quarter.
Will the market's bulls follow Jordan's lead?
NEW YORK -- Maybe Michael Jordan can gain some inspiration from the stock market -- and for that matter, maybe the markets can be inspired by Jordan.
On Friday, after all, the market was down by 128 points, but rebounded and scored with a 23-point gain -- numbers the NBA's biggest star would like on any night. Particularly when he's on the verge of locking up yet another NBA title -- and then, according to the rumors, retiring from basketball.
If that happens, then there's at least an outside shot that Jordan and his Bulls -- who hope to wrap things up Friday against the Utah Jazz -- might create a ripple effect on Wall Street's own team of bulls.
Jordan's rise over the past 14 years from collegiate All-American to NBA All-Star and MVP, then beyond to legendary status as the greatest hoopster ever and one of the most recognized personalities anywhere, has roughly tracked the path of the Dow Jones Industrial Average. It's probably a coincidence, but some (market) players are fretting about what Jordan's retirement or a Jazz victory in the Finals would mean for the stock market.
A recent Fortune Magazine article calculated that Jordan has contributed some $10 billion to the economy through his impact on NBA attendance and TV revenues, plus his myriad endorsements. But what of the other "Jordan Effect" -- the one that says the stock market is akin to his Airness, who still has spectacular skills but not quite the same lift as he once did?
Before you dismiss this concept, think about this: The stocks of companies endorsed by Michael Jordan have moved roughly in tandem with his exploits. Ned Davis, president of Ned Davis Research, noted that shares of the companies whose products Jordan endorses "all got killed" when Jordan "retired" from basketball at the end of the 1993 season to pursue a career in baseball.
When he retires for good, M.J.'s exodus probably won't hold much sway over the Dow. But shareholders in Nike (NKE), Quaker Oats (OAT), General Mills (GIS), Sara Lee (SLE), McDonald's (MCD), Time Warner (TWX), WorldCom (WCOM) and Oakley (OO) should pay heed. No doubt the executives of those firms are watching the NBA Finals with the intensity of the most die-hard hoop fan.
"People like winners," Davis said. "He's still going to be doing ads for a quite a few years."
Another note for you tarot-card readers: 1994 was the only year since he was drafted in 1984 that Michael did not play any professional basketball (he was busy garnering a mediocre batting average for the Chicago White Sox' AAA affiliate). Recall, then, that 1994 was the market's worst year since 1990 as the Dow rose a modest 2%, while the S&P 500 slid 2% and the Nasdaq Composite fell 3%.
Clearly, most of Wall Street doesn't take this stuff too seriously. But as the bull market shows signs of faltering after its historic run, traders and pundits are wary of any signals the end is near. To date, the stock market has overcome the so-called Super Bowl jinx, which says it's bad news for the stock market if a team from the original American Football League wins the NFL Championship. This year, you'll recall, Denver won the big game, snapping a 16-season winning streak for the NFC.
In his annual "The Stock Trader's Almanac," Yale Hirsch noted that the Super Bowl predictor has been accurate for all but three of the first 31 years the game has been played, excluding 1998. But when asked about the "Jordan Effect," Hirsch blanched, saying he was not aware of any sports figure in history having a measurable impact on the stock market.
Still, the veteran market watcher said some investors adhere to such trivialities as the Super Bowl jinx or the "hemline indicator," which says the market follows the direction of women's skirts, so why not a Michael Jordan basketball indicator?
Of course, far more likely to disturb the markets is the spate of bad news from Asia. On Friday, the Japanese government reported that the nation's economy fell into recession for the first time in six years during the January-March period, and shows few signs of rebounding as capital spending and exports deteriorate.
In spite of that and continuing downgrades in semiconductor stocks, the market rebounded sharply in the last hour of trading Friday to finish some 23 points higher. The turnaround was fueled by computer driven buy programs and traders trying to square their books ahead of the weekend.
Investors looked past Asia and reckoned that some stocks have begun to look more attractive, analysts said. "There is enough positive news out there with interest rates headed lower. What this means is that next week we are going higher," said Robert Dickey, an analyst at Dain Rauscher. "If you enjoy roller coasters, you are going to enjoy the market for the next few weeks."
While traders were encouraged by the rebound, they stopped short of predicting an end to the recent market turbulence.
"We're still wringing out excesses in some areas of the market and information technology -- particularly the chip and storage sectors -- is one of those areas," said Dick Stein, a vice president at Noble International Investments.
For the week, the Dow lost 2.2%, while the S&P 500 slid 1.4% and the Nasdaq dropped 2.1%.
Economic data with the potential to move markets in the coming week will include Tuesday's consumer price index release as well as housing-starts data, as well as Thursday's trade-balance figures.
International Stocks
Bears find companions on European landscape
LONDON -- European bears chose to book profits on Friday instead of bargain hunting. Successive drops in New York have investors in Europe worried about a lasting correction, and traders noted that fears about the weakening yen and a possible Chinese correction have not eased.
London: Britain's FT-SE 100 index dropped to its lowest close in six weeks, down 82.7 points, or 1.4%, to 5769.8. The index was down 177.5 points, or 3%, from last week. The export-driven engineering sector was beaten back on concerns about exposure to Asia and the strength of the pound. British Aerospace fell 21p to 489p and British Steel lost 5.5p to 134.5p.
Frankfurt: German shares fell more than 3% in late trading and closed at their lowest level in the past week. The Dax index closed at 5670.83, down 83.63 points, or 1.5%. In later screen-based trade the Xetra Dax ended at 5631.34, down 167.88 points, or 2.9%, a fall of 93.41 points, or 1.6%, on the week. Volkswagen failed to hold on to its gains in floor trading, despite news that its Audi unit had signed a letter of intent to acquire Italian sportscar maker Lamborghini. The shares shed DM38, or 2.3%, in electronic trading to settle at DM1,595.
Paris: Oils were the main drag on the CAC-40 index as Brent prices stayed weak. Elf Aquitaine fell 4.47 percent while Total was down 4.01 percent. The CAC-40 Index closed down 2.19 to 4050.76.
Most Asian Markets Down
In Seoul, the key Korea Composite Stock Price Index slumped 26.61 points to 302.09, its lowest close since Jan. 28, 1987 when it stood at 301.56.
Thai shares prices fell for a sixth consecutive day, as the Stock Exchange ofThailand index fell 4.55 points to 279.37 points, its lowest point since Dec. 16, 1987.
In Malaysia, the main Composite Index on the exchange in Kuala Lumpur fell 10.63 points to 472.37.
Taiwan shares closed at a 7«-month low as the Weighted Price Index fell 93.63 points to 7,117.11.
Shares in New Zealand fell for the 12th consecutive session, dropping 11.5 points to 1,997.63. Indonesian share prices closed mixed as the Jakarta Stock Exchange's Index lost 3.172 points, or 0.7 percent, to 408.372.
But prices edged up in Japan, Asia's troubled economic powerhouse, despite the government's report of an unexpectedly large contraction in the economy in the last quarter of its fiscal year ended in March. The report confirmed that the Japanese economy was in a recession. On the Tokyo Stock Exchange, the 225-issue Nikkei Stock Average gained 8.29 points, or 0.06 percent, to close at 15,022.33, but down 301.1 points, or 2%, since last Friday. The barometer had fallen below the key 15,000 line for the first time in five months.
The big banks again rode to the rescue of the Australian share market, lifting it to a firmer finish. Australian share prices closed higher after the benchmark index rose than 30 points in the last 2« hours of trading, ending an eight-session losing streak. The Sydney's All Ordinaries Index rose 13.00 points, or 0.5 percent, to 2,571.7 , or 0.5%, but down 71.1 points, or 2.7% on the week
Hong Kong shares closed higher after three straight sessions of sharp losess. The Hang Seng Index rose 29.37 points, or 0.37 percent, to 7,915.44, but down 654.03 points, or 7.6%, from last Friday.
Singapore shares closed higher, with the Straits Times Industrial Index rising 4.66 points, or 0.4 percent, to 1,091.49.
|
