Market Awaits Fallout From July Jobs Strength
Yesterday's hope that stocks had found their bottom may have just got washed away by a July
employment report
that came in much stronger than expected.
The nation added 310,000 nonfarm jobs last month -- well ahead of the 199,400 consensus estimate in the
Reuters
poll. Average hourly earnings added 0.5% -- well ahead of the 0.3% economists expected. The unemployment rate stayed at 4.3%, as expected.
Yet the effect of the report has been somewhat muted by continued rumors in the bond market that a trading desk, or desks, has gotten on the wrong side of widening spreads. This would put the credit market at risk, and has prompted a flight-to-quality bid in the Treasury market. Yesterday it helped the bonds rally despite bad economic reports, and today it may be damping the blow from the jobs report.
Not that that means stocks aren't going down.
"It was a surprise -- I think the market is going to discount a hike," said Jim Herrick, managing director of trading at
Robert W. Baird
. "You have this combined with
last week's
Employment Cost Index
, and it's almost a given that you're going to see some type of hike."
There is even some talk -- likely put out by shorts -- of the
Fed
stepping in today.
At 9 a.m. EDT, the
futures were off 9.2, nearly 8 below fair value and indicating a negative open. The 30-year Treasury was down a full point to 88 5/32, lifting the yield to 6.12%.
Tokyo stocks fell for a third day. Again, traders were laying the losses on the yen's strength -- although that seems a little like an excuse for a normal consolidation move. The
Nikkei
shed 273.95, or 1.6%, 17,084.24.
Yesterday's action in New York failed to cheer Hong Kong investors. The
Hang Seng
lost 87.28 to 13,167.06.
Europe came off a bit after the jobs report, but was still faring well.
The
Frankfurt
market was cheered by news that
Deutsche Telekom
(DT) - Get Free Report
agreed to buy U.K. cell-phone company
One2One
. The
Xetra Dax
was up 8.21 to 4986.66.
In Paris, the
CAC
was down 18.79 to 4221.91. Beyond the news from the U.S., the focus was on banks: Today shareholders must decide if they support
Banque Nationale de Paris'
hostile bid for
Paribas
and
Societe Generale
.
London's
FTSE
was up 8.5 to 6110.1.
Friday's Wake-Up Watchlist
By
Brian Louis
Staff Reporter
Earnings/revenue reports and previews
Unilever
(UN) - Get Free Report
posted an 8% increase in second-quarter profits.
Analyst actions
Goldman Sachs
upgraded
Yahoo!
(YHOO)
to its recommended list,
CNBC
said.
Mergers, acquisitions and joint ventures
Canada's
Le Groupe Forex
said it received a new takeover offer from
Boise Cascade
(BCC) - Get Free Report
, providing for three options to shareholders: $21.32 (C$32) cash to be paid by the retraction of a new class of Forex shares to be created; $21.32 (C$32) in installment notes payable over five years with interest; or $21.99 (C$33) payable by the issuance of a new class of Forex shares to be created, which will be exchangeable into Boise Cascade stock. Yesterday, Forex's board met to consider the Boise Cascade offer, and Forex's board determined that the Boise Cascade offer is superior to the $20.66 (C$31) offer made by
Louisiana-Pacific
(LPX) - Get Free Report
on Monday.
MediaOne Group
undefined
and
Cable & Wireless
(CWP)
said they've agreed to sell One2One, the U.K. mobile telecommunications operator, their 50/50 joint venture, to Deutsche Telekom for $13.6, billion, including debt.
Nokia
(NOK) - Get Free Report
said it was in discussions to sell its
Salcomp
unit, which in 1998 had net sales of $151 million.
Sweden's
Volvo
(VOLVY)
has acquired a majority stake in rival truck and bus maker
Scandia
and was offering to buy the rest of the company for $7.4 billion.
Miscellany
Boston Scientific
(BSX) - Get Free Report
said it is voluntarily recalling from commercial distribution and use its
Rotablator RotaLink Advancer
and
RotaLink Plus
rotational atherectomy systems.
Britain's tax authority is seeking to determine whether
IBM
(IBM) - Get Free Report
improperly avoided taxes in that country by having its British unit pay artificially high royalties to the parent company,
The Wall Street Journal
reported, citing people familiar with the matter.
Inland Revenue
, the U.K.'s version of the
Internal Revenue Service
, has been examining IBM's books for about two years, the
Journal
reported.
The Inside Wall Street column in
Business Week
, penned by Gene Marcial, quotes Dave Talbot, managing partner at
Health/Vest Advisors
, as saying, "We wouldn't be surprised to see
NeoPharm
(NEO) - Get Free Report
acquired for a minimum of 50 a share." Talbot says the most likely acquirers are
Bristol-Myers Squibb
(BMY) - Get Free Report
and
Pharmacia & Upjohn
(PNU)
. NeoPharm closed yesterday at 14 3/4.
The column also has a positive item on
Cornerstone Internet Solutions
undefined
, a stock that has a fan in Barry Rubenstein, managing partner at
Wheatley Partners
.
Elsewhere,
BioTime
(BTIM)
is a stock that has drawn the affection of Al Kingsley, head of money-management firm
Greenway Partners
-- who has acquired a 7% stake in BioTime -- but it's also a stock that is a current favorite of shorts, too, the column says.
