MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING TUESDAY JUNE 30, 1998 (2)
MARKET OVERVIEW, Con't
After The Bell
In the "nothing-like-waiting-until-the-last-minute" category, several firms posted profit warnings after the close of trading Tuesday.
Advanced Fibre Communications (AFCI) said its second quarter earnings would be asmuch as a dime lower than the 17 cents per share analyst were expecting from the telecommunications equipment maker. Additionally, the company said its CEO has resigned.
Atmel Corp. (ATML) said it expects to break even in the second stanza and plans to take a $70 million charge to restructure and eliminate 10% of its workforce over the next two quarters. The integrated circuits developer was expected to earn 21 cents per share in the period.
Elsewhere in the tech sector, profit warnings were also posted by Medirisk (MDMD), a provider of proprietary database products, decision-support software and analytical services; Natural Microsystems (NMSS), a manufacturer of integrated hardware and software products; and Ciprico Inc. (CPCI), a designer and manufacturer of RAID disk arrays and controllers.
Conversely, Microchip Technology (MCHP) said its fiscal first quarter results will be better than expectations of 27 cents per share.
Outside of tech, red flags were waved by farm equipment manufacturer Case Corp. (CSE) and security systems developer Checkpoint Systems (CKP).
In earnings news, Great Plains Software Inc. (GPSI) produced fiscal fourth quarter earnings of 20 cents per share, two cents higher than expectations.
Nike Inc. (NKE) beat the Street by a penny, reporting second-quarter earnings of 4 cents per share, excluding one-time items.
Herman Miller (MLHR) whipped estimates by six cents, producing fiscal fourth quarter earnings of 42 cents per share.
Juno Lighting Inc. (JUNO) also beat estimates by 6 cents, reporting second quarter results of 37 cents per share.
Iron Mountain (IMTN) set a 3-for-2 stock split while C&D Technologies Inc. (CHP) separately announced a 2-for-1 split
INTERNATIONAL
Mexico Stocks Leap on Month-End Portfolio Buying
The Mexican bourse rose sharply Tuesday as fund managers bought stocks to prepare portfolios for the end of the month and quarter, dealers said. The 35-share IPC share index closed up 98.06 points, or 2.32 percent, at 4,282.62. The IPC leaped as high as 4,382.97 points shortly before the closing bell rang, but dealers said this was due to a typing error by a data processor.
Alexander Anderson, research director at the Abaco brokerage, said brokers also bought on expectations the U.S. Federal Reserve would not raise interest rates when its meeting concludes on Wednesday.
''Firm crude prices and the Fed meeting today and tomorrow,'' drove buying he said.
Tuesday's rise trimmed the IPC's year-to-date loss to 26.7 percent in dollar terms.
Benchmark Brent crude rose 19 centavos a barrel to $13.37, thus defusing concerns Mexico would implement its third round of budget cuts this year. The Mexican government is likely to derive one-third of its revenues from oil sales this year.
Anderson said the Bolsa also caught a tailwind from diminished concerns over the Japanese yen, which was trading at 139 per dollar, compared to 142 on Monday.
Benchmark stock Telefonos de Mexico (Telmex) rose by 0.55 peso (6 cents) to 21.60 ($2.41). Mexico's biggest financial group Bancomer shrugged off a rise in interest rates due to portfolio buying, gaining 0.16 peso (2 cents) to 3.35 (37 cents).
Bancomer and Telmex together accounted for 36 percent of moderate volume of 74.2 million shares. Turnover was lacklustre at 1.25 billion pesos ($140 million). On the broad market, gainers trounced decliners by 59 to 17, out of 89 stocks that changed hands.
Europe Eases After Gains
Rate fears spook London while traders consolidate in Frankfurt and Paris
European stock markets closed mostly lower Tuesday, with a weak opening on Wall Street and news of a missile attack by a U.S. F-16 warplane on an Iraqi radar site contributing to general hesitancy.
In London, the blue-chip FTSE 100 index closed down 52.0 points, or 0.88 percent, at 5,832.5, following a flat performance Monday, when it refused to participate in the general global surge.
"There is still the issue of interest rates and a fear of what will happen to profit forecasts," said Richard Kersley, CSFB UK equity strategist.
Consolidation on the Continent
German shares slipped lower as dealers locked in gains from Monday's rally, putting selling pressure on the benchmark Frankfurt index.
The Xetra DAX closed down 91.90, or 1.55 percent, at 5,841.83. The floor DAX fell 17.69, 0.30 percent to 5,897.44.
"Some shares were sold excessively yesterday and as a result led to profit taking today. It has taken the market down a bit," one trader said.
Commerzbank AG shares fell 1.35 marks to 67.92 ($37.48) amid rumors it was poised to acquire a 10 percent stake in Barclays Bank PLC.
However, a spokeswoman for Commerzbank denied the rumor, saying that the story "can't be serious."
A day of routine portfolio consolidation took French stocks to close near their session lows despite a brief flurry of activity following news of the U.S. missile attack on Iraq.
The blue-chip CAC-40 index closed down -44.79, 1.05 percent, at 4,203.45, rallying slightly from an earlier low of 4,202.86.
Total volume increased to 17.6 billion francs from yesterday's 11.407 billion francs as index derivatives expired. It was boosted further as institutional investors dressed up their end of quarter portfolios, one analyst said.
"People are lacking ideas," she said. "There is not much company news, but people can't afford not to be in the market because it is so expensive. They are buying without conviction."
The Milan bourse ended down in scant trade on Tuesday as Wall Street headed lower, but Italian stocks managed to scramble off session lows by the close.
The introduction of a new capital gains tax on Wednesday and a U.S. warplane attack on an Iraqi missile site combined to weigh on the bourse. But the U.S. attack also lifted crude oil prices giving ENI a boost in late trade.
The Mibtel all-share index closed 0.58 percent down at 22,827 after touching an earlier low of 22,618 while the Mib30 blue chip index ended 0.71 percent lower at 33,790. ENI shares ended 0.06 percent up at 11,580 lire. Banca di Roma saw heavy buying in late trade to end 3.16 percent up at 3,593 lire.
Pacific Rim Takes Off
Tokyo soars on news of 'bridge bank'; News Corp. bumps Sydney higher
Major Pacific Rim markets, with the exception of Singapore, enjoyed a day of soaring investor confidence based in large part on a firmer yen and further developments in Japan's "bridge bank" plan.
Australia enjoyed a boost thanks in great measure to a jump in Rupert Murdoch's News Corp. shares. Hong Kong stocks moved up on the strength of Tokyo and a recovering yen.
In Tokyo, stocks soared more than 3 percent news that Prime Minister Ryutaro Hashimoto had ordered the government and his party to consider a U.S.-style "bridge bank" to clean up Japan's bad-loan mess inspired investor confidence, brokers said.
As a result, the key 225 Nikkei average surged 464.54 points, or 3.02 percent, to close at 15,830.27. Nikkei September futures ended 260 points higher at 15,650.
Hopes that the Japanese government will finally try to solve its own problems, particularly its estimated 77 trillion yen in bad loans, were also boosted by speculation that a permanent income tax cut may be in the offing, they said.
"Stocks have been sold recently due to the slowness of Japan's policy making, but people on the sell side are starting to hold back," said Masaaki Higashida, deputy general manager at Nomura Securities Co. Ltd.
Gains were led by bank shares and the Nikkei futures.
"Japan is now addressing the biggest single impediment to economic recovery -- the bad debts," said Coen Kluyver, manager of foreign institutional sales at ING Baring Securities.
Hashimoto's LDP will produce a draft bridge bank plan on Thursday.
Shares in many banks gained amid hopes for a healthier financial system. But Long-Term Credit Bank of Japan slipped 16 yen to 81. Traders said this was because the future of the bank, which is in merger talks with Sumitomo Trust & Banking, remained unclear. Sumitomo Trust was up 10 at 620.
Hang Seng moves up, but closes off highs
Hong Kong stocks, boosted by the strength of Tokyo shares and a recovery of the yen, closed higher on Tuesday, but gains were pared as traders locked in profits ahead of a public holiday Wednesday, brokers said.
The Hang Seng Index ended up 82.39 points, or 0.97 percent, at 8,543.10 after retreating from a day high of 8,660.13.
The steadier yen triggered light window- dressing by institutional investors ahead of the half year end, said Sunny Chan, senior research manager at Seapower Securities.
"Buying continued in the afternoon to support stock prices, creating a better market atmosphere to welcome political leaders who visit Hong Kong," he said.
Sentiment improved on anticipation that Japan was pushing ahead with plans to clear out bad loans in its financial system, but investors were sidelined for further announcements expected from Japan next week, brokers said.
The yen was quoted at 139.83 to the U.S. dollar in late afternoon after recovering from below 142 in early trade.
Chinese President Jiang Zemin arrived in Hong Kong on Tuesday to attend celebrations to mark the first anniversary of this territory's return to China after more than 150 years of British rule. U.S. President Bill Clinton will arrive in Hong Kong for the last stop of his nine-day China visit on Thursday.
News Corp. gains boost Australia
The Australian share market ended 1.8 percent higher on Tuesday, the end of the financial year, boosted by rallies in blue chips News Corp. and BHP. Gains in Tokyo and Wall Street also helped.
"People are getting some negative arbitrage off their books for June 30, and there's some selling of smaller companies exiting the All Ordinaries index," one broker said, adding that media group News Corp.'s jump accounted for much of the overall market's gains.
The All Ordinaries index closed up 47.3 points up to 2,668.4 on turnover of A$1.15 billion (US$702 million).
The market has fallen 2.1 percent over the turbulent 1997/98 financial year, but many equity strategists expect the All Ordinaries index to have beaten its April record of 2,893.7 by the end of 1998.
A firmer Japanese yen and a smaller-than-expected trade deficit of A$536 million in May pushed the local dollar well above US$0.61 on Tuesday and gave the stock market extra fuel.
The focus of the day, however, was Rupert Murdoch's News Corp. after news of a U.S. asset restructure. The stock soared to a record A$13.65 before closing up A$1.08 to A$13.18 after the U.S. ADRs jumped 12 percent overnight.
Rival media stock Publishing and Broadcasting climbed 15 cents to A$6.95.
Mining stocks were mainly lower on the back of weaker commodities, but BHP took back most of Monday's result-related losses by rising 46 cents to A$13.65.
Singapore market unimpressed
Singapore markets were unimpressed by the government's S$2 billion economic stimulus package announced Monday.
The 30-share Straits Times Industrials index shed 18.49, or 1.40 percent, to close at 1066.66.
The package, aimed at combating an expected drastic slowdown in growth this year, includes S$670 million on infrastructure projects and an additional tax rebate of 40 percent on commercial land.
Traders reported disappointment that a hoped-for easing in contribution requirements to the massive central provident fund was not announced.
Elsewhere:
Taipei: Share prices closed higher on bargain-hunting. The market's key Weighted Stock Price Index rose 13.08 points, or 0.1 percent, to 7,548.81.
Wellington: New Zealand share prices closed higher, boosted by gains in the afternoon session on the back of a fall in short-term interest rates. The NZSE-40 Capital Index rose 7.75 points, or 0.3 percent, to 1,964.59.
Seoul: Share prices closed slightly lower on worries over the effects of Monday's closure of five financially weak banks. The Korea Composite Stock Price Index slipped 0.72 point to 297.88.
Kuala Lumpur: Malaysian share prices closed mixed. The benchmark Composite Index rose 4.87 points, or 1.0 percent, to 455.64.
Bangkok: Thai share prices closed lower in thin trading. The Stock Exchange of Thailand index fell 3.87 points, or 1.4 percent, to 267.33.
WEDNESDAY MORNING MARKET MOOD
Wall St. May Strive To Rise
Upturn possible as Japan shows signs of putting financial house in order
July 1, 1998: 8:49 a.m. ET
What may be among early signs Japan has weathered its economic storm brightened up Asia's dour markets Wednesday and could cause Wall Street to beam with delight as well.
Stocks seemed ready to resume their rise after the Dow Jones industrial average ended its five-day streak of gains Tuesday, drifting 45.34 points to 8952.02.
Asian markets may be partly behind the expected gain, after Japan's government progressed toward creation of a "bridge bank" that could reinforce the country's ailing financial system.
Shares in Tokyo surged nearly 3.4 percent and other Asian markets crested alongside.
The Japanese yen also began to revive, after recently dipping below 140 to the dollar, and was up 0.51 at 138.32.
The U.S. bond market, which had risen lately amid the anti-inflationary dip in the yen, was off slightly early Wednesday. The 30-year Treasury issue is now off 1/32 in price for a yield of 5.62 percent.
European markets rode the tide from Asia and reports that continental carmakers Volvo and Volkswagen may be on the road to a merger, sending their shares higher in European trading.
Based on S&P Futures trading on the Globex system Wednesday, the Dow appeared set to return to its upward tack by about 50 points at the opening bell.
The report of a possible Volvo-Volkswagen deal could spill over to shares on Wall Street as well.
American depositary receipts of Volvo (VOLVY) were up nearly 2 points in pre-market trading after losing 3/16 to 29-9/16 Tuesday.
U.S. investors may be keeping an eye on the swoosh Wednesday after sport shoe maker Nike reported a fourth-quarter loss after the bell Tuesday.
Shares of Nike (NKE) slumped 9/16 to 48-11/16 Tuesday but traded higher in pre-market trading.
More consolidation in financial services: Star Banc and Firstar said Wednesday they have agreed to a merger valued at $7.2 billion, creating the nation's 21st-largest bank holding company with sites mainly in the Midwest.
Shares of Star Banc (STB) closed Tuesday down 1/2 at 63-7/8 while First Star (FSR) stock surged 4-1/2 to 38-3/16.
In a move called for by long-distance giants, U.S. regulators have told Midwest regional phone company Ameritech to suspend marketing long-distance services of Qwest Communications while officials look into the legality of the deal.
Shares of Ameritech (AIT) were unchanged at 44-7/8 on the New York Stock Exchange Tuesday while shares of Qwest (QWST) were up 1-1/4 at 34-7/8 in Nasdaq trading.
NYMEX Oil Futures are likely to move lower following American Petroleum Institute inventory data showing crude inventories rose last week. The market could be supported by more favorable gasoline numbers.
The Sun Rises On Wall St. - Stocks Surge On Optimism Japan May Pull Its Economy Out Of The Storm
July 1, 1998: 10:09 a.m. ET
Wall Street started with a bang Wednesday, with stocks shooting up right after the opening bell as eager investors rushed into the market amid signs that Japan may take long awaited measures to fix its economy.
A report in a widely circulated Japanese newspaper overnight that Tokyo is considering introducing permanent tax cuts even before a July 12 election sent Southeast Asian stock markets soaring and boosted the value of the yen. Gains in the region were also supported by the expected announcement Thursday of a "bridge bank" -- a U.S. style institution that would help failing Japanese banks deal with their bad loans.
Wall Street's gains were also underpinned by expectations that the Federal Reserve will leave interest rates unchanged when it concludes its two-day policy meeting, the results of which are expected to be announced around 2 p.m. Hopes that the reading of the National Association of Purchasing Management's June index, due out at 10 a.m., will show strength but no overheating in manufacturing activity, also added to the bullish mood.
Shortly before 10 a.m. the Dow Jones industrial average rallied 45.83 points to 8,997.85. Gainers trounced declines 1,674 to 722 on trading volume of 84 million shares on the New York Stock Exchange.
The Nasdaq Composite rose 9.17 to 1,903.91 and the broad S&P 500 index gained 6.35 to 1,140.19.
Bonds traded lower, hurt by the dollar's declines against the yen. The yield on the benchmark 30-year Treasury bond rose to 5.63 percent as its price fell 5/32 of a point.
The dollar slipped against the yen as optimism swept Asian markets. But the greenback advanced against the German mark as Russian financial markets remained a mess and put a pressure on the German currency.
The bulls are back
In stocks, a feeling that the best of all worlds is back again -- with strong, non-inflationary U.S. growth, stable interest rates at home and a bit of light at the end of the Asian economic tunnel -- gave buyers an early jump start.
Technology issues once again were among the market leaders, as Dell (DELL) jumped 11/16 to 93-1/2, Intel (INTC) rose 15/16 to 75-1/16, and Microsoft (MSFT) gained 1/2 to 108-7/8, despite a delay in a major upgrade of its Windows NT operating system.
Dow member IBM (IBM) rose 13/16 to 115-5/8. Another Dow component, Disney (DIS), which was largely responsible for the blue chip index's losses Tuesday, bounced back 1-9/16 to 106-5/8.
In the day's deals, shares of Firstar Corp. (FSR) soared 4-13/16, or 12.6 percent, to 43 after the company sealed an expected merger deal with rival Star Banc Corp. (STB).
The number of the day's losers was small, but their losses were enormous. Leading the pack, shares of Advanced Fibers (AFCI) plummeted 23-3/16, or almost 58 percent, to 16-7/8 after the maker of telecommunications systems said second quarter earnings will fall sharply below expectations and the firm's chief executive quit.
Finally, shares of semiconductor maker Atmel (ATML) fell 1-1/16 to 12-9/16 after the company said it would cut about 10 percent of its workforce in a restructuring effort aimed to counter a slump in the semiconductor sector.
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