Investors Question Staying Power of Tuesday's Turnaround

Some are concerned that Monday's trouble may return.
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Monday, the rotation gets violent, sending money storming out of tech, drug and Internet issues and into stocks -- most notably the cyclicals -- that have languished. Tuesday, that move reverses a bit, and techs rebound while the cyclicals sell off. And today?

Today it looks like things will get started on a quieter note, as investors try to get a feel for whether the apparent shift in market has legs.

"I think we're going to continue to see some weakness for a while here in the tech stocks and the Internet stocks and the growth stocks," said Bill Allyn, head of block trading at

Jefferies

. "This rotation has more to go before it runs its course. I don't think we're going to see the violence that occurred earlier in the week, but there has to be some return to sensibility vis-a-vis valuations."

At 9 a.m. EDT, the

S&P 500

futures were off 2.6, nearly 2 below fair value and indicating weakness at the open. The 30-year Treasury bond was up 12/32 to 96 16/32, dropping the yield to 5.49%.

Heavy selling in Japanese blue-chips took the

Nikkei

down 202.09, or 1.2%, to 16,495.02. Financial issues were hurt the worst, while tech names, hurt badly yesterday, didn't have as far to fall.

A flood of overseas cash into Hong Kong was enough to displace concerns that a number of companies, taking advantage of stocks' recent rise, will make secondary offerings. A shipping company,

Cosco

, said today that it would do exactly that, sparking fears that there's more to come. That could ultimately slow the momentum that's come into the Hong Kong market. The

Hang Seng

added 133.98, or 1.1%, to 12,543.76.

Europe's major markets were trading higher, helped along by the recovery in tech in New York yesterday. In Frankfurt, the

Dax

was up 58.91 to 5146.20. In Paris, the

CAC

was up 18.16 to 4271.43.

Stocks in London were getting tugged in two directions by competing news on the economic front. On the one hand, they were helped by the release of the minutes from the

Bank of England's

policy meeting showing that the monetary policy committee was unanimous in its decision to cut rates earlier this month and suggesting that further cuts were in the offing. On the other, a pickup in wages raised concerns that cuts are not in the offing. The

FTSE

was up 7.9 to 6311.9.

Wednesday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • Microsoft reported third-quarter earnings of 35 cents a share, beating the 22-analyst First Call estimate of 32 cents and moving up from 25 cents a year ago. Prudential Securities downgraded Microsoft to hold from accumulate. For more on Microsoft and other postclose news, please see yesterday's Evening Update.
  • Exxon (XON) - Get Report reported first-quarter earnings of 47 cents a share, excluding a charge, beating the First Call 20-analyst estimate by a penny.
  • Coca-Cola (KO) - Get Report reported first-quarter earnings of 30 cents a share, a penny ahead of the First Call 15-analyst estimate, but down from the year-ago 34 cents.
  • Telecom Italia (TI) agreed in principle to merge with Deutsche Telekom (DT) - Get Report. In other news (earnings estimates from First Call):
  • Allstate (ALL) - Get Report posted first-quarter operating earnings of 81 cents a share, beating the 17-analyst estimate of 80 cents, compared with the year-ago 81 cents.
  • Alltel (AT) - Get Report reported first-quarter earnings of 59 cents a share, ahead of the nine-analyst estimate by a penny and up from the year-earlier 46 cents.
  • Morgan Stanley Dean Witter downgraded Amgen (AMGN) - Get Report to neutral from outperform.
  • Bristol-Myers Squibb (BMY) - Get Report reported first-quarter earnings of 53 cents a share, beating the 24-analyst estimate by a penny and up from the year-ago 46 cents.
  • Colgate-Palmolive (CL) - Get Report reported first-quarter earnings of 65 cents a share, ahead of the 15-analyst projection by a penny and up from the year-ago 60 cents.
  • Compaq (CPQ) posted first-quarter earnings of 16 cents a share, ahead of the recently lowered expectations of Wall Street. The 29-analyst consensus outlook called for earnings of 15 cents. In the year-ago period, Compaq posted earnings of a penny.
  • General Dynamics (GD) - Get Report reported first-quarter operating earnings of 78 cents a share, beating the nine-analyst estimate of 72 cents and up from the year-ago 65 cents.
  • Ingersoll-Rand (IR) - Get Report posted first-quarter earnings of 73 cents a share, beating the 17-analyst estimate and up from the year-ago 60 cents.
  • ITT Industries (IIN) - Get Report reported first-quarter earnings from continuing operations of 45 cents a share, ahead of the six-analyst estimate by a penny.
  • Knight/Trimark Group (NITE) posted first-quarter earnings of 67 cents a share up sharply from the year-ago 20 cents. The company also set a 2-for-1 stock split.
  • Mead (MEA) posted first-quarter earnings of 22 cents a share, ahead of the 13-analyst estimate of 15 cents.
  • New Air, a start-up airline that plans to provide low-fare service from New York's Kennedy International Airport early next year, has decided to buy narrow-body jets made by Airbus, a blow to Boeing's (BA) - Get Report competing 737 jet, The New York Times reported. New Air is expected to sign a deal with Airbus as early as today, the Times reported.
  • US Airways (U) - Get Report reported first-quarter earnings of 49 cents a share, excluding a gain, beating the 10-analyst estimate of 45 cents.