Focus Shifts to AT&T From IBM, and Open Looks Weak as a Result

The hostile $62 billion bid for MediaOne raises some concerns among traders.
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Stocks look like they'll give back a little of yesterday's

IBM

(IBM) - Get Report

-inspired rally, with investors booking some gains going into the weekend.

Attention will center on

AT&T's

(T) - Get Report

unsolicited

$62 billion bid for

MediaOne

(UMG)

. The prospect of a dogfight with

Comcast

(CMCSA) - Get Report

, which has made a friendly $54 billion offer for MediaOne, along with concerns that AT&T has barely begun to digest

TCI

, will likely hurt AT&T's shares today.

With the broader market looking to catch its breath, the news from letter T provides a good excuse for a pullback at the bell.

"It looks like we're going to open down a little bit," said Bill Meehan, market analyst at

Cantor Fitzgerald

. "But I expect that we'll see continued equity fund inflows, and with so much excitement over earnings, the market still looks higher short term. There's a lot of momentum here."

At 9 a.m. EDT, the

S&P 500

futures were off 4.4, about 2 below fair value and indicating weakness at the open. The 30-year Treasury was up 6/32 to 95 5/32, dropping the yield to 5.59%.

Japanese stocks gained ground in a broad-based rally that took the

Nikkei

257.37, or 1.5%, higher to 16,923.25. There's been increasing speculation in the market that the government will announce further stimulus plans when Prime Minister

Keizo Obuchi

meets with President

Clinton

May 3.

After trading higher through much of the day, Hong Kong stocks sold off on late-session rumors that several China-based companies listed on the exchange would be making secondary offerings. The

Hang Seng

finished the day down 28.24 to 12,905.3.

After the close, the

Hong Kong Association of Banks

left interbank rates pat, but indicated that, given the spreads between Hong Kong and the U.S., another cut could come soon.

European stocks were seeing a bit of pressure. In Frankfurt, the

Dax

was off 17.52 to 5201.30. In Paris, the

CAC

was down 17.7 to 4274.15.

London stocks were seeing a bit of a bid, with telecom shares moving higher on the back of AT&T's bid for MediaOne.

Cable & Wireless

(CWZ)

, which with MediaOne jointly owns cellular provider

One2One

, was up 24.5 pence to 839.5, while

Telewest Communications

(TWSTY)

, in which MediaOne has a large stake, was up 19 to 281.

London's

FTSE

was up 11.5 to 6425.1.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • AT&T has made an unsolicited bid valued at more than $62 billion for MediaOne, topping Comcast's friendly $54 billion offer, made last month. TheStreet.com wrote about the situation in a story this morning.
  • Cox Communications (COX) yesterday said it is buying Media General's cable systems serving approximately 260,000 customers in Fairfax County and Fredricksburg, Va., in a deal valued at $1.4 billion.
  • Merck (MRK) - Get Report posted first-quarter earnings of 54 cents a share, in line with the First Call 30-analyst estimate and up from the year-ago 47 cents. In other news (earnings estimates from First Call):
  • Eastman Chemical (EMN) - Get Report posted first-quarter operating earnings, excluding items, of 44 cents a share, beating the nine-analyst estimate of 28 cents, but down sharply from the year-ago 94 cents. Including items, net income was 31 cents a share.
  • E*Trade (EGRP) set a 2-for-1 stock split.
  • Merrill Lynch upgraded Exxon (XON) - Get Report to long-term accumulate from long-term neutral.
  • Gateway (GTW) reported first-quarter earnings of 62 cents a share, 2 cents higher than the 23-analyst view and ahead of the year-ago 48 cents.
  • Kellogg (K) - Get Report reported first-quarter operating earnings, excluding items, of 36 cents a share, a penny better than the 17-analyst view, but down from the year-ago 42 cents.
  • Mobil (MOB) reported first-quarter operating earnings, excluding items, of 59 cents a share, beating the 22-analyst estimate of 54 cents, but down from the year-ago operating earnings, excluding items, of 88 cents.
  • Donaldson Lufkin & Jenrette downgraded PepsiCo (PEP) - Get Report to market perform from top pick.
  • Morgan Stanley Dean Witter raised its rating on Philips Electronics (PHG) - Get Report to outperform from neutral.
  • Merrill upgraded Quorum Health (QHGI) to near-term accumulate from near-term neutral.
  • The Heard on the Street column in The Wall Street Journal says the "smart" money on Wall Street and elsewhere is betting Olivetti has a shot to succeed in its hostile takeover bid for Telecom Italia (TI) . Deutsche Telekom (DT) - Get Report and Telecom Italia yesterday officially announced a merger agreement. While some analysts expected regulators and politicians to be the obvious obstacle to the merger, the toughest constituency to convince could be investors, the Journal reported.
  • This week's Inside Wall Street column in BusinessWeek reports that investor Mario Gabelli thinks Telephone & Data Systems (TDS) - Get Report is undervalued and puts the private market value of its assets at $102 a share. Gabelli figures TDS will attract a acquirer, either for some of its assets or for the whole company. Even without a deal, Gabelli, who has a 12.6% stake in the company, says TDS stock could double in a year. Elsewhere, Doris Kelly-Watkins, a money manager at Evergreen Asset Management, a unit of First Union (FTU) , says TNP Enterprises (TNP) - Get Report, parent of Texas-New Mexico Power, is an attractive takeover candidate. The column reports Evergreen owns nearly 5% of the stock. The column reports one industry pro says TNP is in talks with suitors and he expects a deal shortly, but TNP Chairman and CEO Kevern Joyce wouldn't comment on speculation about buyout talks. Worries that Ardent Software's (ARDT) takeover of Prism Solutions (PRZM) -- which has battered Ardent's stock price -- might be in trouble are unjustified, some money pros say, the column says.