Market Update: Indices Trade Places Around the Flatline
(Updated from 11:06 a.m. EDT)
Stocks were making little headway approaching midday following a selloff on Friday. The major indices have been trading places around the flatline all day.
The
Nasdaq was rising 9.47 points, or 0.47%, to 2044.31, while the blue-chip
Dow was near unchanged -- down 15.7 points, of 0.15%, to 10,588.89. The broader market
S&P 500 was losing 1.98 points, or 0.16%, to 1223.37.
Stocks may trade tentatively ahead of the
Federal Reserve's interest-rate decision due Wednesday afternoon. The market is now evenly mixed in its expectations about how much the Fed will opt to cut interest rates when it meets tomorrow and Wednesday. The
fed funds futures market -- a good proxy of what the bond market expects from the Fed -- is pricing in 100% odds of a quarter-point cut and just under 50% odds of a half-point cut.
Alan Greenspan & friends have already dropped short-term rates by 2.5 percentage points since the beginning of this year, to 4% -- one of the Fed's most aggressive rate-cutting schedules in recent history.
"I think it's the Fed
that's lifting stocks this morning, and part of it is that nothing happened over the weekend in the Middle East," said Ray Hawkins, vice president of block trading at
J.P. Morgan
. "We also just have a bit of a relief rally here after Friday's selling, and there's a fear of being short." The Dow lost 111 points Friday to 10,605 and the Nasdaq fell 24 to 2035.
Among high-tech stocks moving to the upside this morning were networker
Cisco
(CSCO) - Get Report
, up 4.3% to $18.27, servermaker
Sun Microsystems
(SUNW) - Get Report
, rising 4% to $15.06,
JDS Uniphase
(JDSU)
, up 2.5% to $12.03, and data storage outfit
EMC
(EMC)
, up 7.2% to $28.30.
The biggest drugstore chain in the U.S.,
Walgreen's
(WAG)
was losing ground, however, after it reported fiscal third-quarter earnings of 21 cents per share, a penny shy of analyst estimates collected by
Thomson Financial/First Call
. The drug retailer saw profits rise 10.2% from the year-ago period, but performance was weaker than expected due to heavy store expansion and soft sales. It was dropping 9.9% to $37.
Reflecting hard times in the PC and computer hardware business,
Compaq Computer
(CPQ)
plans a major restructuring under which it will shift its emphasis to software and services from computer hardware,
The Wall Street Journal
reported today. The article cited a memo sent to employees by Compaq chief executive Michael Capellas. PC sales have been dwindling since last year and industry leaders have been aggressively cutting prices to grab market share. Compaq was ticking higher, up 1.9% to $13.76.
In other major company news, the country's biggest savings and loan,
Washington Mutual
(WM) - Get Report
, said it agreed to buy
Dime Bancorp
(DME)
for about $5.2 billion in stock and cash. Dime was rising 3.3% to $38.09, while Washington Mutual was off 3.9% to $37.40. Dime is now within whisper distance of its 52-week high of $39.
Natural gas stocks, biotechnology stocks and retail stocks were some of the weakest sectors today. The
American Stock Exchange Natural Gas Index
was falling 1%; the
Nasdaq Biotechnology Index
was losing 2.7% and the
S&P Retail Index
was down 2.3%.
'Fess Up
Second-quarter earnings confession season -- when companies let investors know if they expect to fall short of previously set performance targets -- is in its fourth week. The past three weeks have seen a flurry of confessions from many heavy-hitters and smaller fry, particularly in the tech sector.
Stocks traded sideways last week despite another spate of earnings warnings, and some pros say investors have become immune to the bad news. Wall Street seems to have given up on a third-quarter acceleration in earnings, and hopes for the fourth quarter
are dimming.
Some traders expect the major indices to remain range-bound this week, no matter what happens with earnings announcements or the Fed meeting. Investors say they want clarity about an economic recovery during the third quarter and an earnings rebound early next year -- and signs of that likely won't come for at least another month or two. Even so, any big disappointments from the Fed or earnings warnings this week could certainly slam stocks.
Existing home sales rose in May instead of falling, as economists had predicted. Some 5.37 million new units were sold on an annual basis through May, compared to the 5.12 million forecast for the month and the 5.2 million sold on an annual basis through April.
Housing starts, or privately owned housing units on which construction has been started or building authorized, began to decline in May, marking the first sign of easing in what has been one of few strong areas in the slowing U.S. economy.
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