More NN mentions, this time in WSJ Interactive, and Dow Jones:
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The Wall Street Journal Interactive Edition -- August 13, 1998
Stock Market Declines
Amid Global Worries
By ROBERT O'BRIEN
Dow Jones Newswires
NEW YORK -- Stocks fell sharply as economies around the globe inched closer to apparent collapse, and new worries sprung up domestically about the earnings outlook for the rest of the year. A surprising show of strength in the U.S. economy was overshadowed by the global fears.
<Picture: Industrials>
The Dow Jones Industrial Average declined 93.46 to close at 8459.50. The industrials rose 90.11 Wednesday, or 1.1%, its biggest one-day point gain since July 30. The gain helped trim the industrials loss since hitting a record of 9337.97 on July 17 to 8.4% -- below the 10% that the market considers a "correction."
The Standard & Poor's 500-stock index fell 9.31 to 1074.91, and the New York Stock Exchange Composite Index lost 4.40 to 541.06.
Losses by smaller stocks were a little more dramatic. The Russell 2000 Index fell 4.72, a decline of 1.2%, to close at 403.83. Nasdaq Composite Index declined 22.99, or 1.3%, to 1802.54.
Decliners outnumbered advancers, 1,897 to 1,122, with 517 unchanged, on the Big Board. Volume reached 656.7 million shares, down from Wednesday's total, when 707.7 million shares changed hands.
A robust retail sales report released early Thursday surprised economists, who had predicted that strikes at General Motors in July would have a much greater damping effect on the U.S. economy. July retail sales slipped 0.4%, compared with expectations of a 0.9% decline. But the unexpected rise in retail stocks couldn't stem investors' fear about shakiness in the global markets.
In Hong Kong, the bellwether Hang Seng Index declined 2.9% to a five-year low amid increasing worries that the weak yen will force China to devalue its currency. Many fear a devaluation of the yuan will leave Hong Kong with no choice but to abandon its currency's peg to the U.S. dollar.
That news added more gloom to an investment backdrop already unsettled by reports that Russia's financial troubles were worsening, and the indications from earlier in the week that other global economies, especially those in Asia, had not extricated themselves very much from their own financial quagmires.
"This is an extremely difficult market environment, and every morning, it seems, you come in and find more bad news," Scott Curtis, senior equity trader at Brown Brothers Harriman, said Thursday. "It's actually a little disappointing."
Banking stocks took the worst hit. Shares of Citicorp skidded 7 to 140, easily the lowest the stock has finished a session since its prospective linkup with Travelers Group was unveiled in early April.
Travelers also lost ground, falling 2 7/16 to 56 3/4, as investors sold banking and finance stocks indiscriminately; Fleet Financial shed 2 1/8 to 76 1/8; and J.P. Morgan sank 1 1/4 to 116 1/4.
Transports also weakened dramatically in the session. The Dow Jones Transportation Average hurtled 83.81 lower, a drop of 2.7%, to finish at 3004.72.
Several transportation stocks which had rallied Wednesday surrendered ground Thursday. Among rails, Burlington Northern was off 3 5/16 to 95 11/16, and CSX dropped 9/16 to 41 11/16. Among air carriers, Delta Air Lines sank 2 3/4 to 114 1/2; UAL dropped 3 7/8 to 65 5/8, a 52-week low; and US Airways Group slid 2 7/16 to 68 3/16.
But a handful of oil names perked up, offsetting some of the weakness. The softness in the banks also forced some investors into the pharmaceutical sector.
"We saw a big move toward 'defensive' stocks," Meredith Siegel, a proprietary trader at Cantor Fitzgerald, said Thursday. "That's investors looking for a 'safe haven' when they need to hold positions."
Shares of Merck advanced 1 1/2 to 126 3/4. Warner-Lambert gained 1 to 71 15/16, and Schering-Plough edged ahead 1 13/16 to 94 13/16.
Another defensive play popular Thursday cited by Ms. Siegel was movement toward the Baby Bells: BellSouth gained 1 11/16 to 67 3/4, Bell Atlantic added 1 7/16 to 42 15/16, and U S West advanced 1 1/16 to 51 13/16.
Energy stocks also rallied. Mobil gained 2 1/4 to 69. Phillips Petroleum climbed 2 1/2 to 46 1/8. Amoco, which announced plans earlier this week to merge with British Petroleum, advanced 13/16 to 49. British Petroleum added 7/8 to 79 1/4.
The merger talk contributed to the optimistic backdrop in the energy sector, but the group also moved on rising prices for energy products, which marked progress after Saudi Arabia pledged to cut exports by a more significant measure than some experts were anticipating.
"So the commodity moved [Thursday], as well as the stocks," said Eugene Nowak, an energy analyst at ABN Amro.
The pessimism evident in Thursday's session was such that it blunted encouraging comments from Abby Joseph Cohen. "Stocks are now undervalued based on our expectations for U.S. profits, cash flow and inflation over the next year," the Goldman Sachs investment strategist told the firm's clients in a conference call Thursday.
Big losses, though, persisted. Investors were sensitive to earnings news, and even strong earnings reports couldn't win over investors, in some instances.
Shares of DuPont tumbled 5 1/2 to 55 after it lowered expectations for the third quarter, cautioning that weak oil prices and depressed sales of agricultural products would put earnings at the low end of analysts' estimates. DuPont's third-quarter results would reflect lower oil prices at its Conoco unit, which it is in the process of selling off, and a $100 million reduction in agricultural revenue. The continuing economic crisis in Asia also will weigh on earnings, DuPont said, particularly in the polyester business.
Kmart lost 7/8 to 17 13/16, despite topping analysts' estimates for second-quarter earnings. The Troy, Mich., retailer posted net income of 16 cents a diluted share, compared with year-ago earnings of six cents a share. Excluding charges in the latest quarter related to a voluntary early-retirement program, the company earned 19 cents a share, two cents a share higher than analysts expected.
Gap fell 3 1/16 to 63 1/2, despite reporting better-than-expected second-quarter earnings. The San Francisco clothing retailer said net income jumped to 34 cents a diluted share from 17 cents a diluted share in the year-earlier period. The results came in three cents higher than analysts' surveyed by First Call expected.
Still, some retailers did make some progress. Nordstrom, the Seattle department-store operator, rose 2 29/32 to 35 3/32 on Nasdaq, after its second-quarter numbers, issued late Wednesday, beat analysts' forecasts.
Flowers Industries advanced 11/16 to 20 1/8. An analyst at Goldman Sachs raised the firm's rating on the stock of the Thomasville, Ga., food products maker, and raised the firm's estimate of the company's 1998 earnings by 2 cents a share.
Kohl's advanced 4 5/8 to 57 1/8 after Standard & Poor's Financial Information Services said it will add the Menomonee Falls, Wis., retailer to the S&P 500 Index Thursday, replacing Mercantile Stores, which is being acquired by Dillard's, an S&P 500 component. Standard & Poor's said Kohl's will be added to the S&P 500 retail (department stores) industry group. Dillard's shares rose 11/16 to 35 1/2.
Cendant gained 3/8 to 16 1/2. The marketing and franchising company said Thursday that a four-month investigation of its books "uncovered much greater and more systematic fraud" than the company had thought existed. As expected, Cendant will restate and reduce its results for 1995, 1996 and 1997. The marketing and franchising company also reported results for the second quarter of 1998 that edged expectations by a penny a share. Those results have already been adjusted to reflect accounting reforms and won't be restated. Cendant, formed by last December's $14 billion merger of CUC International and HFS, lowered 1997 results by 28 cents a share, lowered 1996 results by 18 cents a share and reduced 1995 results by 14 cents a share.
Westpoint Stevens advanced 1 5/8 to 35 1/4 on Nasdaq. The West Point, Ga., maker of linens and home accessories replaced Kohl's in the S&P MidCap 400 Index.
AtHome climbed 1 5/8 to 47 3/4 on Nasdaq. The Redwood City, Calif., provider of Internet services late Wednesday issued 2.5 million common shares of its stock at a price of $46.125 a share. Merrill Lynch underwrote the offering.
Newbridge Networks rose 2 1/8 to 22 7/8. The Canadian network-products developer on more speculation the company will be bought out. The company continued to deny the rumors.
Shares of 3Com gave up 1 1/4 to 28 3/4 on Nasdaq, giving up part of Wednesday's 10% advance, when the stock of the Santa Clara, Calif., networking-products concern rallied on rumors that Intel was interested in acquiring the company. Intel shares edged down 3/8 to 85 1/4 on Nasdaq.
Platinum Technology tumbled 3 1/2 to 27 3/8. The Oakbrook Terrace, Ill., computer-software concern said it signed a definitive pact to buy Memco Software in a stock swap valued at $500 million.
Equant, which went public last month, jumped 1 15/16 to 47 3/4, building on its gains of 6% Wednesday after the company announced plans to offer phone calls over its global data network using equipment from Cisco Systems. Equant, based in Atlanta and Amsterdam, said it will begin offering voice service over its frame relay network in the next two months. It currently is testing the service in 16 cities.
United HealthCare continued its downward price spiral, losing 2 13/16 to 32 1/16. Late Wednesday, officials of the Minneapolis managed-care concern told analysts that its medical costs may increase at a faster rate in 1999 than in 1998.
MSC Industrial Direct advanced 1 3/4 to 28 13/16. Prudential Securities raised its rating on the stock of the industrial products marketing concern.
MGI Properties surged 2 3/4 to 27 11/16 after the Boston real-estate investment trust said its trustees approved a plan to liquidate the company. MGI said it will submit the plan to shareholders for approval in October. The company estimates that sales of its assets will yield net cash distributions of between $30 and $33 a share.
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Dow Jones Newswires -- August 13, 1998
Newbridge Up On Continued Takeover Rumors;Co. Denies Rumors
By SCOTT ADAMS
Dow Jones Newswires
TORONTO -- Newbridge Networks Corp. (NN) shares are up 2.75 at 34.00 in Toronto Thursday on continued takeover speculation.
But Newbridge spokesman Paul Goyette said the company's position on the matter hasn't changed and that it's denying the rumors.
As reported, analysts told Dow Jones in late July that the company's stock was up on takeover rumors. At the time, Newbridge said the rumors were "completely false."
The stock may also just be rebounding Thursday after having declined in recent days, in the midst of an overall market drop. BancAmerica Robertson Stephens analyst Paul Silverstein said he verbally reiterated his "buy" recommendation to clients earlier Thursday, expressing confidence in Newbridge's reorganization efforts and its ability to meet earnings expectations.
Wheat First Butcher Singer analyst Patrick Houghton also said he has been telling clients the stock is a "buy." And HSBC Securities analyst Gurinder Parhar said he has a price target on the stock of C$49.
Observers continue to put forth various theories about whether or not Newbridge founder Terry Matthews - who owns about 21% of the company's stock - is interested in selling.
Some say he may be forced to if the company's alliance with Siemens AG (G.SIE) falls apart or if Siemens buys a competitor such as Ascend Communications Inc. (ASND).
Kearns Capital Corp. analyst Rob MacLellan, for one, is bearish on Newbridge and rates the chances of a takeover at "virtually nil." He believes Newbridge management wouldn't be interested in a takeover offer of anything less that C$75 a share, more than double the level the stock is currently trading at.
If investors are buying the stock solely because Newbridge might be a takeover target, he places the odds of an investor making any money at "one in 100."
Silverstein said he doesn't believe Newbridge is a takeover target at the stock's current price, although he said the company might be one at some point down the road.
-By Scott Adams; 416-943-7800
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