Core PPI Falls Short of Expectations, Lifting Stocks

A softer-than-expected core

Producer Price Index

has stocks poised to go higher this morning.

Increased energy prices helped drive the headline PPI up 0.5% in August, exceeding the 0.3% increase forecast by economists polled by

Reuters

. But the core rate, which excludes food and energy costs, unexpectedly declined by 0.1%. Economists had expected a 0.1% gain.

Stock futures and bonds were higher on the news. At 9:15 a.m., the

S&P 500

futures were up 14.7, about 10 points above fair value and indicating a big jump at the open. The 30-year Treasury was up 17/32 to 101, its yield falling to 6.052%.

The market needed this sort of reassurance from the core rate, despite the growing conventional wisdom that rates aren't going any higher this year. (Twenty-three of the 30 primary dealers of government debt polled by

Reuters

think the

Fed

won't move until 2000.) Since the Aug. 24 rate hike, weakness in Treasuries and financial stocks, along with the strength of energy stocks, suggests that investors are still very nervous about inflation.

"It looks great," said Paul Rich, a trader

BT Brokerage

. "We've been stuck in a trading range for so long. I don't necessarily think

the PPI will take us out of that trading range, but today it looks great."

Technology was already looking very strong in premarket trading. And the buzz over a possible earnings shortfall at

Chase

(CMB)

, notwithstanding, the financial sector should rebound nicely from its recent swoon, Rich said.

The banks can't but be helped by the developments overnight in Tokyo, where the

Bank of Japan

finally gave foreign-exchange markets what they'd been expecting for so long. Prompted by the upward pressure that yesterday's stronger-than-expected

gross domestic product

report had on the yen, the BOJ intervened, spending an estimated $2 billion to buy dollars and sell yen. Finance Minister

Kiichi Miyazawa

confirmed that Japanese authorities took action.

More a case of brake-tapping than of drastic currency manipulation, the intervention wasn't able to curb hot demand for yen. The BOJ brought the dollar up to 110 yen, but the greenback subsequently fell back below the 109 level, and was lately quoted at 109.25 yen.

The yen's late resurgence cut into an early surge in Tokyo stocks. The

Nikkei

finally closed up 33.46 to 17,711.02.

In Hong Kong, stocks were relatively flat -- not at all a bad thing to be after the

Hang Seng's

3.7% advance yesterday. The benchmark index held onto the previous session's gains nicely, inching forward 1.05 to 13,855.93 after running into resistance at the 14,000 level. Optimism over China's bid to enter the

World Trade Organization

may have helped ward off profit-taking;

President Clinton

will meet this weekend with Chinese President

Jiang Zemin

at the

Asia-Pacific Economic Cooperation

summit in New Zealand.

Indonesian stocks rebounded sharply despite massing hostility from the international community over its handling of the crisis in East Timor, including the U.S.' suspension of military ties with Indonesia and an Australian boycott of Indonesian wheat.

The

Jakarta Stock Exchange

composite index gained 17.36, or 3.2%, to 555.38. Sentiment may have been boosted by a growing sense that the violence in East Timor may be ready to subside, though reports of the militia's terrorization of East Timorese civilians continue to filter out.

European markets were surging toward midday in the wake of the PPI. The Paris

CAC

was up 47.29, or 1%, to 4764.71, while Frankfurt's

Xetra Dax

was up 74.15, or 1.4%, to 5511.01. In London, the

FTSE

was up 17.4 to 6278.0.

Friday's Wake-Up Watchlist

By

Tara Murphy

Staff Reporter

Mergers, Acquisitions and Joint Ventures

An investment group lead by

Broadcom

(BRCM)

President and CEO Henry T. Nicholas III are reportedly close to inking a letter of intent to acquire the

Anaheim Angels

and

Mighty Ducks

from

Disney

(DIS) - Get Report

for between $400 million to $500 million,

The New York Times

reported.

Illinois Tool Works

(ITW) - Get Report

hammered out an agreement to acquire

Premark International

(PMI)

in a $3.4 billion deal. Under the agreement, shareholders of Premark, a commercial food-equipment maker, will receive ITW stock with a market value of $55 for each Premark share. But the amount may vary, based on ITW's average share price in the 20 trading days before closing. Deerfield, Ill.-based Premark will become a wholly owned subsidiary of ITW.

Old Kent Financial

(OK)

announced its plans to buy

Grand Premier Financial

(GPFI)

in a deal valued at $394 million. Old Kent said it would assume a one-time charge of $30 million.

Merrill Lynch

(MER)

unveiled plans to take a 14.3% interest in the electronic trading system,

Archipelago Holdings

, which will start transacting orders in Big Board-listed stocks,

The Wall Street Journal

reported.

Earnings/Revenue Reports and Previews

GenCorp

(GY)

posted third-quarter earnings of 53 cents a share, beating both the five-analyst estimate of 52 cents and the year-ago 42 cents.

National Semiconductor

(NSM)

reported a first-quarter profit of $57 million, or 25 cents a share, including a gain. The profit for the quarter ended Aug. 29 put the Santa Clara, Calif., chip concern ahead of schedule in returning to the black and reversed the year-ago loss of 63 cents a share. The 19-analyst estimate called for a loss of 14 cents a share. National Semi didn't release per-share figures excluding the gain, but said pretax profit excluding the gain was $1.2 million.

Analyst Actions

Wachovia Securities

rolled out coverage of

eBay

(EBAY) - Get Report

with a long-term buy rating and a price target of 208.

ING Barings

cut its rating on

HealthSouth

(HRC) - Get Report

to a hold from a buy. Yesterday, the company said it decided not to spin off its inpatient operations to shareholders and would instead keep its divisions under one business. HealthSouth also announced plans to restructure management at its outpatient services, a move that will result in charges of between $250 million and $300 million by the end of the year.

J.P. Morgan

also sliced its rating on the shares to a long-term buy from a buy.

ABN Amro

raised its price target on Illinois Tool to 100 from 93 and maintained its buy rating on the stock.

Morgan Stanley Dean Witter

raised its rating on

MidAmerican Energy

(MEC) - Get Report

to outperform from neutral.

PaineWebber

upped its rating on

TC Pipeline

(TCLPZ)

to a buy from an attractive.

PaineWebber cut its rating on

Tosco

(TOS)

at attractive from a buy.

PaineWebber lowered its rating on

Ultramar Diamond

(UDS)

to a neutral from an attractive.

Donaldson Lufkin & Jenrette

upped its rating on

Union Pacific

(UNP) - Get Report

to a buy from an accumulate.

Warburg Dillon Read

upped its rating on

Veritas

(VTS)

to buy from hold and set a price target of 28. The stock closed Thursday at 21.

Offerings and Stock Actions

Children's Place

(PLCE) - Get Report

said it iced plans for a 3 million-share offering by selling stockholders, citing a drop in its share price.

Miscellany

Leasing Solutions

(LSN)

said it would be delisted from the

New York Stock Exchange

if it fails to meet the NYSE listing requirements.

Law enforcement officials said wire transfer company

Torfinex

, which is connected to the

Bank of New York

(BK) - Get Report

money-laundering investigation, seems to have operated illegally in the U.S., channeling millions of dollars out of Russia,

The Wall Street Journal

reported.

Hechinger

, a home-improvement retailer, said it plans to liquidate its business rather than reorganize,

The Wall Street Journal

reported.