NAPM Looms as Stock Traders Celebrate

The Fed's moved away from a tightening bias, but a big report is due at 10.
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Stocks look like they'll open a little weak this morning -- not a surprise, really, considering yesterday's move -- but the real action won't start until a half-hour after the opening bell.

The

National Association of Purchasing Managers

index comes out at 10 a.m. EDT, the first major report in the two cycles of economic data to come between now and the next

Federal Open Market Committee

meeting. "After the

Fed

statement yesterday, a lot more attention is going to be paid to the economic data," said Mike Cloherty, senior market economist at

Credit Suisse First Boston

. "Basically, they told us that the next move will be determined by it."

The consensus forecast is for the NAPM to come in at 54.4, but it's likely that the number will come in a little stronger than that. Yesterday, the

Chicago Purchasing Managers Index

came in at 60. Tony Crescenzi, bond market strategist at

Miller Tabak Hirsch

, has pointed out that, on average, the Chicago comes in about 3.6 above the NAPM, so it wouldn't be a surprise if the NAPM came in around 2 points strong.

"The expectation has been shifted up a little bit after the Chicago," said Cloherty. That makes it a little hard to gauge what the reaction to the report should be. A slightly stronger report really shouldn't hurt the market, but that's assuming that everybody knows what's going on. That's usually a stupid assumption.

In any case, after three big days, it looks like stocks are due for a pause. As strong NAPM might serve as an excuse to book profits. "I don't think there's any rush here to buy stocks," said Bill Allyn, head of block trading at

Jefferies

. "If anything, they're overextended, and a good selling day would be very much in order."

Allyn also thinks some stocks may be in for a pullback after yesterday's late-day shenanigans. A number of issues showed huge gaps up at the close as less-than-honest fund managers tried to make their quarters look better.

At 9 a.m. EDT, the

S&P 500

futures were off 0.7, about 3 below fair value. The 30-year Treasury was down 20/32 to 89 12/32, lifting the yield to 6.02%.

Cheered by the rally in the U.S. and the notion that the

Fed

isn't about to launch a series of rate hikes, Tokyo stocks hopped higher. The

Nikkei

added 331.01, or 1.9%, to 17,860.75.

Hong Kong markets were closed in celebration of the island's return to China, but other Asian bourses gave some keys to what tomorrow's action will be like there. In Korea, the

Kospi

added 4.2%. Singapore's

Straits Times

tacked on 2.2%.

European stocks are partying around the punchbowl in celebration of the Fed's decision to go back to a neutral bias. In Frankfurt, the

Xetra Dax

was up 91.52, or 1.7%, to 5470.04. In Paris, the

CAC

was up 72.72, or 1.6%, to 4609.37. In London, the

FTSE

was up 131.2, or 2.1%, to 6449.7.

Thursday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • Microsoft (MSFT) - Get Report CFO Greg Maffei told analysts and reporters on a conference call Wednesday that the Securities and Exchange Commission is probing the software titan's accounting policy for setting aside cash reserves. The company said it's confident the investigation, which was prompted by a Wall Street Journal article quoting a former Microsoft internal auditor, won't hurt earnings.
  • DuPont (DD) - Get Report set an undisclosed third-quarter charge to restructure its $2 billion crop protection business, cutting about 800 jobs. DuPont expects to save about $200 million a year before taxes, beginning in the fourth quarter. DuPont Crop Protection, which sells herbicides, fungicides and insecticides to the corn-and-soybean, cereals and specialties markets, employs 5,500 people in 40 countries.
  • Lehman Brothers' (LEH) "10 Uncommon Values" in stocks, CNBC reported, are: America Online (AOL) , AT&T (T) - Get Report, Ford (F) - Get Report, Intel (INTC) - Get Report, General Instrument (GIC) , KLA-Tencor (KLAC) - Get Report, Eli Lilly (LLY) - Get Report, Microsoft, Tyco International (TYC) and Firstar (FSR) . In other news (earnings estimates are from First Call):
  • AOL and eMachines, a low-priced PC manufacturer, set a pact under which AOL and CompuServe 2000 software will be integrated into all eMachines PCs, and will be accessible through icons prominently featured on the eMachines desktop. Under the pact, AOL will also make a minority investment in eMachines. In addition, eMachines and AOL's CompuServe will offer a special limited-time retail promotion beginning early this summer. Under the promotion, consumers signing up for three-year memberships to the CompuServe 2000 interactive service will get $400 rebates on three eMachines computers, including eMachine's $399 eTower.
  • Best Buy (BBY) - Get Report and Prodigy Communications (PRGY) , an Internet service provider, are rolling out a nationwide discounted PC program with the purchase of a Prodigy Internet service at Best Buy stores.
  • Paul Allen's Charter Communications, the fourth-largest U.S. cable operator, agreed to buy Bresnan Communications for $2.1 billion in cash and stock.
  • Morgan Stanley Dean Witter downgraded Disney (DIS) - Get Report to neutral from strong buy.
  • Duane Reade (DRD) - Get Report named CFO William Tennant senior vice president of planning and logistics. The drug-store chain named John K. Henry CFO. The appointments will be effective Aug. 1.
  • Lucent (LU) acquired Ccom Information Systems, a privately held developer of directory solutions and computer telephony integration software. Terms weren't disclosed.
  • MCI WorldCom (WCOM) announced the creation of Global Solutions, a new unit to manage its $1 billion business providing integrated network design, construction and maintenance to the world's largest corporations.
  • Nike (NKE) - Get Report posted fourth-quarter earnings of 38 cents a share, a penny higher than the 16-analyst outlook and above the year-ago 4 cents. The retailer said it sees 2000 percentage revenue growth in the mid-single digits.
  • S3 (SIII) expects to beat analysts' expectations for the second quarter by about 15 cents to 20 cents a share. The three-analyst estimate currently calls for the company to lose 20 cents a share.
  • Starbucks (SBUX) - Get Report forecast 1999 earnings of 54 cents a share, below the 20-analyst forecast of 60 cents but above the year-ago 44 cents. The company said it expects the 6-cent shortfall to be evenly split between the last two quarters of the fiscal year.
  • Wal-Mart (WMT) - Get Report set a strategic alliance with Books-A-Million (BAMM) under which Books-A-Million will be the exclusive provider of books and related products to Wal-Mart's online customers.
  • The Federal Communications Commission is preparing to open its own inquiry into the undersea-cable business, which already is under antitrust scrutiny by the Justice Department, the Journal reported. The Journal reported that while Justice's probe focuses on a single trans-Pacific cable operated by a consortium of telecommunications companies, the FCC inquiry would look more broadly at how various consortia build and operate underwater cables. The newspaper said the FCC still plans to grant a license to a consortium of more than 30 companies building an undersea cable between the U.S. and Japan, including AT&T, MCI WorldCom, Sprint (FON) and three large Japanese phone companies.
  • As part of a deal with the staff of the Federal Communications Commission to recommend approval of SBC Communications' (SBC) nearly $80 billion acquisition of Ameritech (AIT) - Get Report, SBC has agreed to offer competitive local telephone services in 30 markets outside its home territory and to do that SBC will likely have to partner with -- or acquire -- companies that already offer competitive local services in key cities, the Heard on the Street column in the Journal reported. Among potential partners for SBC mentioned in the article: Intermedia Communications (ICIX) and Nextlink Communications (NXLK) .