Stocks Await Cue From Tomorrow's CPI

With the PPI gone and the CPI looming, stocks don't know which way to head. The S&P 500 futures lately were indicating a flattish open.

Author:: Thomas Lepri
Publish date:: Aug 16, 1999 9:21 AM EDT

Stocks are open to suggestions this morning.

Gone is the updraft stocks got Friday from a weaker-than-expected

Producer Price Index

. Tomorrow brings the

Consumer Price Index

, to which investors will look for a confirmation of the low-inflation reading in the PPI -- and the suggestion that the

Fed's

expected quarter-point hike Aug. 24 will be its last.

In the meantime, don't be surprised to see a bit of consolidation ahead of that key number, especially after Friday's gains.

The market often follows the

S&P 500

futures on low-volume, news-starved days like today. But Charles Farra, president of

Global Trading

in Chicago, isn't expecting the futures to make any drastic moves.

"Today's going to be a range day. My gut feeling's that we'll see both sides of Friday's close." The September S&P 500 futures contract finished at 1332.90 on Friday -- Farra said he sees it moving between 8 to 10 points lower or higher through the session, settling near unchanged.

"The wild stuff is tomorrow," he continued, remembering how "people got killed in May" by trading ahead of the hotter-than-expected April CPI.

At 9:05 EDT, the S&P 500 futures were up 0.7, near fair value and indicating a somewhat flat open.

The 30 year Treasury was off 5/32 to 100 6/32, its yield rising to 6.111%.

Wall Street's PPI-inspired surge on Friday took the big Asian markets along for the ride overnight. Tokyo's

Nikkei

climbed 390.86, or 2.2%, to 17,826.03 as Japan said its June industrial output rose 3.2% in June, 0.2 percentage points higher than initially reported. Trading was once again light amid the continuing summer obon holidays.

The revised production report, along with the selling of dollars for yen by exporters seeking to book profits for their half-year book-closing in October, helped take the yen higher against the greenback. The dollar lately was off 1 yen to 114.70.

In Hong Kong, the

Hang Seng

advanced 286, or 2.3%, to 12,894.78, bouncing back from Friday's decline on the news that

Morgan Stanley Capital International

will put Malaysia back into its benchmark indices -- a move that will reduce Hong Kong's index weighting to about 26% from the present 33%.

Having already spent their big post-PPI rally on Friday afternoon, European bourses were mixed to higher this morning. The London

FTSE

was down 4.1 to 6241.0. Nearly 15 negative points were coming from 11 stocks -- including

Barclays

(BCS) - Get Report

BP Amoco

(BPA)

British Telecom

(BTY)

and

HSBC Holdings

(HSBHY)

-- that went ex-dividend today.

In Paris, the

CAC

was up 12.40 to 4446.68, and Frankfurt's

Xetra Dax

was up 23.67 to 5243.10.

Monday's Wake-Up Watchlist

Brian Louis

Staff Reporter

Alcoa

(AA) - Get Report

said it is going to launch a cash tender offer this week for

Reynolds Metals

(RLM) - Get Report

at a price of $65 a share. Reynolds Metals' board unanimously decided in a special meeting yesterday that Alcoa's more than $4 billion offer to buy Reynolds was "inadequate for our shareholders." The board also said -- with the assistance of its financial adviser

Merrill Lynch

-- that the company "should explore all alternatives to maximize shareholder value," including selling the company.

Rodney Proto, COO and president of

Waste Management

(WMI)

, has stepped aside, and John Drury, chairman and CEO, who is undergoing medical treatment, is also being replaced. Drury will remain on the board. Waste Management's board elected Ralph V. Whitworth chairman and Robert S. Miller president and CEO. The company also announced a new strategic plan, which includes disposing of "nonstrategic and underperforming assets." Also, Waste Management anticipates earnings per share, as adjusted, to be in the range of 90 cents to $1.00 a share for the six-month period ending Dec. 31, 1999.

Mergers, acquisitions and joint ventures

Cisco

(CSCO) - Get Report

is buying

Calista

, a privately held U.K.-based Internet technology group for $55 million in stock.

Harrah's Entertainment

(HET)

has made an offer to acquire

Players International

(PLAY) - Get Report

for $8.50 a share in cash. Players closed Friday at 6 9/16. The deal has been approved by Players' board, and Players has given notice to terminate its existing merger agreement with

Jackpot Enterprises

(J)

VNU

, a Dutch publisher, is buying

Nielsen Media Research

(NMR) - Get Report

for $37.75 a share in cash. Nielsen closed Friday at 32 13/16.

Miscellany

UnionBanCal

(UB)

set a streamlining plan and will take a one-time pretax restructuring charge of $85 million, or 33 cents a share after tax, in the third quarter. The company plans to cut 1,400 jobs, about 15% of the bank's work force, over the next 18 months.

Venator Group's

(Z) - Get Report

board has elected Dale W. Hilpert president and CEO, effective today. Hilpert was Venator's president and COO, a post the company said it has no present plans to fill. Venator also said it is getting out of eight noncore specialty businesses that operate, in the aggregate, nearly 500 stores.

The premium paid in mergers and acquisitions, which is frequently cited as a barometer of the fate of a transaction, does not have a correlation to subsequent shareholder value, according to a study by

Booz Allen & Hamilton

, a Washington consulting firm, the Heard on the Street column in

The Wall Street Journal

said.