Core CPI Cools, Lifting Stocks and Bonds

Plus, Motorola confirms it'll buy General Instrument.

Author:: Thomas Lepri
Publish date:: Sep 15, 1999 9:28 AM EDT

Stocks are ready to rally on a weaker-than-expected core

Consumer Price Index

The headline CPI gained 0.3% overall, matching the consensus estimate in the

Reuters

poll. The core rate, which excludes food and soaring energy prices, gained 0.1%, a tenth of a point shy of the expected 0.2% increase.

Focusing on the cool core, stock futures and bonds were trending higher. At 8:31 a.m. EDT, the

S&P 500

futures were up 12, about 12 points above fair value and indicating a strong open. The 30-year Treasury was up 18/32 to 100 20/32, dropping the yield to 6.027%.

Todd Clark, head of listed trading at

Volpe Brown & Whelan

, was keeping his head. "To the extent that the CPI wasn't a negative surprise, what we've seen

in the futures and bonds is a little bit of relief," he said. "But I'm paying attention to the dollar."

The greenback continued its slide against the yen overnight. It was lately sitting at 104.24 yen, having fallen to as low as 103.4 yen early this morning.

"As long as that trend's in force, it's hard to see bonds getting too excited to the upside."

In the short-term, Clark noted that stocks weren't as bad yesterday as the

120-point loss in the

Dow Jones Industrial Average

would suggest, except in the financial sector. While "financials have to stabilize or at least circle the wagons" for the market's overall tone to improve, "the technology side continues to function."

Tech looks strong again this morning.

Qualcomm

(QCOM) - Get Report

was lately up another 3.4% in premarket trading, and

Microsoft's

(MSFT) - Get Report

$1.3 billion stock purchase of drawing and diagramming software maker

Visio

(VSIO)

may shake things up a bit.

Elsewhere in M&A news, there's

Motorola's

(MOT)

confirmation of its plans to buy

General Instrument

(GIC)

and

Bestfoods'

(BFO) - Get Report

denial of a report in

The Wall Street Journal

that it's in talks to combine with

Heinz

(HNZ)

in what would be the largest food deal ever.

Markets in Tokyo were closed in honor of Keirou-no-hi, or Respect for the Aged Day. But that didn't stop the dollar from plunging through the 104-yen level, prompting questions of when, with what force and with whose cooperation the

Bank of Japan

might next intervene. On the last count, the

Kyodo News

reported today that Japanese officials will ask the G7 to call for a weaker yen. A senior official in the Ministry of Finance's international bureau told the paper: "The present focus is a G7 meeting in late September. We want member countries to agree to issue a message calling for the correction of the yen's rise."

In Hong Kong, stocks re-enacted yesterday's selling on Wall Street, and then some. Spooked by the stronger-than-expected U.S. retail sales report, investors unloaded long positions ahead of today's CPI report, and the

Hang Seng

shed 373.43, or 2.7%, to close at 13,430.60. Hong Kong interest rates effectively track those in the U.S.

European markets were rebounding on the heels of today's key inflation report. After being down as much as 44 points, London's

FTSE

was lately off 8.8 to 6107.2. The Paris

CAC

was up 22.88 to 4720.27, and Frankfurt's

Xetra Dax

was up 22.14 to 5423.61.

Wednesday's Wake-Up Watchlist

Eileen Kinsella

and

Brian Louis

Staff Reporters

Mergers, Acquisitions and Joint Ventures

Bestfoods, in the wake of a report in the

Journal

, issued a statement saying "that no significant acquisition or combination discussions are in progress." The

Journal

reported today that Heinz was in merger talks with Bestfoods.

Dime Bancorp

(DME)

is merging with

Hudson United Bancorp

(HU)

Microsoft is buying Visio.

Motorola confirmed it will acquire General Instrument for about $11 billion in stock. The transaction will be accounted for as a pooling of interests, and Motorola expects the acquisition to "modestly dilute earnings" through 2000 but to strengthen earnings thereafter.

Friede Goldman

and

Halter Marine

(HLX) - Get Report

disclosed late Tuesday they have amended the terms of their pending merger. Under the new terms, each Halter share will be converted to 0.57 of a share of Friede. The original terms of the merger, announced in June, called for each Halter share to be exchanged for 0.4614 of a share of Friede.

Earnings/Revenue Reports and Previews

(Earnings estimates are from

First Call/Thomson Financial

AAR

(AIR) - Get Report

reported first-quarter earnings of 39 cents, in line with the eight-analyst estimate and up from 34 cents a year ago.

Oracle

(ORCL) - Get Report

posted first-quarter earnings of 16 cents a share, in line with the 30-analyst expectation and up from 13 cents a year ago. Despite meeting expectations, the stock tumbled to 39 from its closing price of 45 7/16 in postmarket trading on

Island ECN

, suggesting that investors hoped for stronger profits.

TheStreet.com

examined Oracle's earnings last night.

Progress Software

(PRGS) - Get Report

reported third-quarter earnings of 43 cents a share, above the three-analyst estimate of 39 cents, and up from 31 cents a year ago.

Miscellany

AT&T

(T) - Get Report

announced plans to extend broadband services to businesses.

DaimlerChrysler

(DCX)

is hopeful it can reach a deal on a new employment pact with the

United Auto Workers

without further work stoppages in the wake of unauthorized strikes at key plants yesterday, according to a

Reuters

report.

Maytag

(MYG)

said it will realign its business into four operating groups, including home appliances, commercial appliances, worldwide and emerging business. The company said the move will allow it to streamline decisionmaking and brand focus.

Offerings and Stock Actions

Staples

(SPLS)

says it will plan a tracking stock for its e-commerce unit. The company also said it increased a share-repurchase plan to $300 million from $200 million.