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Markets Still Shaking From Friday's Price Data

The prospect of inflation has unnerved investors everywhere.

A smattering of mergers this morning apparently won't be enough to ease Wall Street's nervousness over interest rates.

The market doesn't look very good this morning. With bonds not showing any bounce-back from Friday's selling, and tension gathering ahead of tomorrow's

Federal Open Market Committee

meeting, stocks are under heavy pressure.

By the market's lights, it is now a nearly forgone conclusion that the Fed will announce after the meeting that it has adopted a tightening bias.

"To me, it appears that it's at least a 50-50 proposition," said Bill Meehan, market analyst at

Cantor Fitzgerald

. "I think it would be greater, except the Fed does not want to raise rates if they can have the market do it for them." Given the poor interest-rate environment, Meehan suspects small-cap and value stocks will continue to outperform large-cap growth.

It could be a thin and choppy session. With the FOMC meeting looming, and the nice weather in New York, Meehan said a lot of people are hitting the links rather than going to the office to get depressed by the market.

At 9 a.m. EDT, the

S&P 500

futures were off 4.9, putting them about 8 below fair value and indicating a negative open. The 30-year Treasury was down 3/32 to 98 19/32, driving the yield up to 5.93%.

Though the lines of cause and effect between U.S. inflation and the Japanese economy are uncertain, Tokyo stocks sold off in reaction to Friday's strong

consumer price index

. The


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shed 389.37, or 2.3%, to 16,421.02.

Also weighing on stocks was frustration that Finance Minister

Kiichi Miyazawa

did not suggest that any fresh rounds of stimulus are in the offing when he met with the



Larry Summers

, at the

Asia Pacific Economic Cooperation

meeting in Malaysia this weekend.

In Hong Kong, the links with the U.S. economy are far clearer. Because of its peg to the dollar, for Hong Kong a raise in U.S. rates is a raise in rates. Adding to the pressure on stocks: rumors that

Morgan Stanley Dean Witter

would lower Hong Kong's weighting in its international indices today. The

Hang Seng

dropped 266.92, or 2.1%, to 12,588.60.

European stocks fell, hurt by Wall Street's poor performance Friday and expectations of further losses today. In Frankfurt, the


was off 73.93, or 1.4%, to 5099.32. In Paris, the


was down 65.96, or 1.5%, to 4257.87. In London, the


was down 113.3, or 1.8%, to 6187.1.

Monday's Wake-Up Watchlist

By David A. Gaffen
Staff Reporter

  • Global Crossing (GBLX) and U S West (USW) confirmed last week's reports that they would merge in a stock swap valued at $37 billion. Global Crossing, which in March said it would acquire Frontier (FRO) - Get Frontline Ltd. Report, will fold that acquisition into the merged entity.
  • Morgan Stanley Dean Witter cut its ratings on Ford (F) - Get Ford Motor Company Report and General Motors (GM) - Get General Motors Company Report to neutral from outperform this morning. It also began coverage of Wellpoint (WLP) and United Health (UNH) - Get UnitedHealth Group Incorporated (DE) Report with strong buy ratings, and started coverage of Trigon (TGH) - Get Textainer Group Holdings Limited Report, USWeb (USWB) and Foundation Health (FHS) with outperform ratings. Lastly, it upped Commerce Bancshares (CBSH) - Get Commerce Bancshares Inc. Report to outperform from neutral.
  • Xerox (XRX) - Get Xerox Holdings Corporation Report set a technology and product alliance with Microsoft (MSFT) - Get Microsoft Corporation Report, designed to make it easy to connect Xerox digital copiers to networks running Microsoft software, The Wall Street Journal reported this morning.
  • Citigroup (C) - Get Citigroup Inc. Report will apply for one of the six enhanced banking licenses for foreign banks created by the Monetary Authority of Singapore.
  • Dow Jones (DJ) and Reuters (RTRSY) are combining their interactive business services to create an Internet-based database product for corporate clients, the companies said this morning.
  • General Dynamics (GD) - Get General Dynamics Corporation Report said it would buy jet manufacturer Gulfstream Aerospaceundefined in a $5.3 billion stock swap.
  • Gerald Stevens (GIFT) said it filed for an offering of 5 million shares.
  • Niagara Mohawk (NMK) reported first-quarter earnings of 27 cents a diluted share, up from 8 cents a year ago.
  • TRW (TRW) , a defense contractor, said it would sell four noncore automotive operations for $1.2 billion to $1.5 billion to reduce debt.
  • Foamexundefined reported first-quarter earnings of 24 cents a diluted share, up from 12 cents a year ago.
  • Aztec Technology (AZTC) reported first-quarter earnings of 1 cent a share, up from break-even for the same period a year ago.
  • TicketMaster Online-Citysearch (TMCS) said it will acquire from Cendant (CD) - Get Chindata Group Holdings Limited Report.
  • Synetic (SNTC) and Medical Manager (MMGR) agreed to merge in a deal valued at about $1.4 billion.
  • EarthLink Network (ELNK) and Sprintundefined said they will offer co-branded high-speed Internet access using Sprint's DSL network.
  • Precision Castparts (PCP) agreed to buy Wyman-Gordon (WYG) for $20 per share, or $721 million, in cash. Wyman-Gordon closed Friday at 13 1/4.
  • Toys R Us (TOY) reported first-quarter earnings of 7 cents a share, just as it did at this time last year. The company is hoping for a boost in earnings this quarter with the sale of Star Wars: Episode I -- The Phantom Menace-related action figures and video games.