Stocks Rally After CPI Comes Out in Line With Expectations

Investors are breathing easier this morning after the Consumer Price Index came out in line with expectations.

The headline CPI gained 0.4% overall, matching the consensus estimate in the Reuters poll. The core rate, which excludes food and soaring energy prices, gained 0.3%, also in line with expectations.

Stock futures and bonds moved higher on the news. At 8:31 a.m. EDT, the S&P 500 futures were up 7.3, about 9 points above fair value and indicating a positive open. The 30-year Treasury was up 6/32 to 97 18/32, putting the yield at 6.307%.

With the market as volatile as it's been, and with technicals looking as bad as they do, it's tough to say how far an opening rally will be able to extend itself. But if stocks are indeed not overvalued, as many still claim they aren't -- well, the market's recent declines have left a lot of room on the upside.

Traders will have to stay on guard for a few more hours, though. Fed boss Alan Greenspan is scheduled to speak at an Atlanta Fed conference on financial risk at 1 p.m. After the trouble the G-Man loosed on stocks in his Thursday night speech , investors might want to think twice before taking their midday siestas.

Meanwhile, earnings season continues to roll on. Microsoft (MSFT Quote), the Nasdaq's most prominent member, is scheduled to report after the close today. It's difficult to overstate the importance of that report, especially after Dell's (DELL Quote) profit warning last night, which may put broad pressure on the boxmakers today.

TheStreet.com wrote about the industry implications of Dell's chip-pricing problems in a story last night, and first predicted in an Oct. 6 story that a Taiwan supply crunch might hurt Dell's results.

By the way, today marks the 12th anniversary of the infamous Black Monday market crash.

In Tokyo, investors nudged stocks lower in light volume ahead of today's CPI report, the Nikkei falling 21.16 to 17,254.17. The dollar churned in a range between the 105.6-yen and 105.2-yen levels, and was lately quoted at 105.74 yen.

Back from a public holiday, Hong Kong stocks got their chance to react to Friday's selloff on Wall Street. And they did so in the customary fashion: falling. The benchmark Hang Seng sank 164.95, or 1.3%, to 12,134.13.

The CPI was letting the big European indices extend their morning rebound at around midsession. London's FTSE was up 63.3, or 1.1%, to 5932.5, while the Paris CAC was up 67.66, or 1.5%, to 4562.96. Frankfurt's Xetra Dax was 67.20 higher, or 1.3%, to 5223.48.

Tuesday's Wake-Up Watchlist

By Tara Murphy
Staff Reporter

Mergers, acquisitions and joint ventures

Nortel Networks (NT Quote) announced after Monday's close that it plans to buy Clarify (CLFY Quote) in a stock transaction valued at $2.1 billion.

Earnings/revenue reports and previews

Dell (DELL Quote) cautioned Monday that a 25% increase in computer memory-chip component prices used in its PCs would probably dent its third-quarter profit margins. CFO Thomas Meredith said that although he sees the price hike as a short-term problem, the company's third-quarter operating margins would be affected. Dell refused to say if stress on profit margins would trigger lower earnings per share. In premarket trading, Dell shares were down to 37 1/2 from Monday's closing price of 41 5/16.

Bristol-Myers Squibb (BMY Quote) reported third-quarter earnings of 54 cents a share, in line with the 24-analyst estimate and up from the year-ago 47 cents.

Coca-Cola Enterprises (CCE Quote) posted third-quarter earnings of 24 cents a share, beating the 17-analyst estimate of 21 cents but down from the year-ago 28 cents.

ITT Industries (IIN Quote) posted third-quarter earnings of 60 cents a share, beating the eight-analyst estimate of 58 cents and the year-ago 23 cents.

Invacare (IVC Quote) posted third-quarter earnings of 46 cents a share, in line with the five-analyst estimate and up from the year-ago 43 cents.

Johns Manville (JM Quote) reported third-quarter earnings of 49 cents a share, missing the three-analyst estimate of 50 cents but up from the year-ago 31 cents a share.

Northwest Airlines (NWAC Quote) posted third-quarter earnings of $1.96 a share, missing the 12-analyst estimate of $1.98 but up from the year-ago loss of $2.91.

Parametric (PMTC Quote) reported pro forma fourth-quarter earnings of 18 cents a share, beating the 11-analyst estimate of 16 cents and the year-ago 17 cents.

Summit Bancorp (SUB Quote) posted third-quarter earnings of 53 cents a share, falling below the 18-analyst estimate of 70 cents and the year-ago 67 cents.

Texas Instruments (TXN Quote) posted third-quarter earnings of 51 cents a share, handily beating the 25-analyst estimate of 43 cents and the year-ago 19 cents, which included a pretax charge of $14 million for depression of fixed assets.

Wells Fargo (WFC Quote) posted third-quarter earnings of 57 cents a share, in line with the 27-analyst estimate and up from the year-ago 45 cents.

Offerings and stock action

Morgan Stanley Dean Witter priced a 7.2 million-share IPO of Martha Stewart Living Omnimedia (MSO Quote) top-range at $18 a share.

Mueller Industries (MLI Quote) said it set a stock buyback for up to 4 million common shares.

Analyst actions

Warburg Dillon Read upped its rating of Lucent (LU Quote) to strong buy from buy.

Warburg Dillon Read rolled out coverage of Rayonier (RYN Quote) with a strong buy rating and a price target of 55.

Miscellany

General Electric (GE Quote) Appliances said it was recalling roughly 3.1 million GE and Hotpoint brand dishwashers that could be possible fire hazards. GE, along with the U.S. Consumer Product Safety Commission, said that models made between April 1983 and January 1989 contain a slide switch that can melt and ignite over time.

MyPoints.com (MYPT Quote) said it plans to hike Web-based advertising and email marketing rates.