Core CPI Cools, Lifting Stocks and Bonds
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
TheStreet Recommends
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 Qualcomm Inc Report
was lately up another 3.4% in premarket trading, and
Microsoft's
(MSFT) - Get Microsoft Corporation 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 BlackRock Florida Municipal 2020 Term Trust 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
By
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
undefined
and
Halter Marine
(HLX) - Get Helix Energy Solutions Group, Inc. 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
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 Oracle Corporation 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 Progress Software Corporation 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
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.
Analyst Actions
PaineWebber
cut
Boston Scientific
(BSX) - Get Boston Scientific Corporation Report
to attractive from buy.
