Stocks Brace for Rough Morning

Nervousness over the July Purchasing Managers' Index is contributing significantly to the negative outlook.
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With bonds, European markets and index futures all under heavy selling pressure, stocks look like they're going to take some lumps this morning.

There is also a good deal of nervousness ahead of the July

Purchasing Managers' Index

, due out at 10 a.m. EDT. The consensus estimate in the

Reuters

poll calls for the PMI to come in at 55.7, down a bit from the previous month. But because the Chicago index came in so strong on Friday, traders worry that the national index will top forecasts. And even if it comes in relatively well, it would be hard to turn around the bearish mood in the bond market.

"The mood in the bond market is pretty bad," said Charles Farra, president of

Global Trading

. "The PMI would have to be a real shocker in terms of a weak number to make that turn around."

But Farra thinks that unless the bonds get hit real badly, the

S&P 500

futures should be able to weather the storm. "I don't know how bad the S&Ps are going to get hit because of the bonds. We're getting down to levels where more downside is going to be hard. You're probably going to have some early weakness, but I wouldn't be surprised if the market does rebound into the early afternoon."

At 9 a.m. EDT, the

S&P 500

futures were off 0.2, more than 3 below fair value and indicating a negative open. The 30-year Treasury was off 26/32 to 87 17/32, pushing the yield to 6.17%.

With traders worrying over the latest declines in New York and the continued weakness of the dollar, Tokyo stocks eased a bit. The

Nikkei

slipped 36.16 to 17,825.7.

Expectations (later fulfilled) of a strong profits report from index-heavyweight

HSBC

(HBC)

overcame Wall Street worries in Hong Kong. The

Hang Seng

added 248.57, or 1.9%, to 13,435.43.

HSBC reported first-half profits of $4.07 billion, more than $500 million better than the median estimate.

In Europe, stocks were having a tough time of it after purchasing managers' reports there came in stronger than expected. That renewed fears that interest rates in the eurozone and the U.K. will head higher next year and put pressure on bond markets.

Frankfurt shares were off, with

DaimlerChrysler

(DCX)

continuing to take heavy hits on its recent earnings disappointment and the growing perception that the company is more Chrysler than Daimler. The

Xetra Dax

was off 103.73, or 2%, to 4998.14.

In Paris, the

CAC

was off 81.9, or 1.9%, to 4300.16.

London's

FTSE

was down 44.3 to 6187.6.

Monday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Earnings/revenue reports and previews

(Earnings estimates are from

First Call

.)

AutoNation

(AN) - Get Report

posted earnings from continuing operations of 21 cents a share, which matched the four-analyst estimate of 27 cents with the inclusion of 6 cents of earnings from discontinued operations. The company earned 11 cents a year ago. The company's board also decided to separate AutoNation's automotive rental division from the company and "is exploring various strategic alternatives" on the form of a separation. AutoNation's automotive rental division includes

National Car Rental

,

Alamo Rent-A- Car

and

CarTemps USA

. The board also authorized the repurchase of an additional $500 million of stock. The company announced that Michael E. Maroone, formerly president of AutoNation's

Automotive Retail Group

, has been named president and chief operating officer of AutoNation, succeeding John H. Costello, who has resigned.

CBS

(CBS) - Get Report

posted second-quarter income from continuing operations of 11 cents a share, up from the year-ago earnings of a penny a share. The six-analyst estimate called for earnings of 11 cents.

Litton Industries

(LIT) - Get Report

said its fiscal 1999 results, slated to be released on Sept. 1, will be sliced by special fourth-quarter charges totaling $116.8 million pretax, or $77.4 million after tax. The company said it will depart the mainframe outsourcing and professional services businesses conducted at its

Litton Enterprise Solutions

subsidiary.

Sabratek

(SBTK)

warned it expects second-quarter earnings to be "significantly lower" than the current two-analyst estimate of 7 cents a share. The results will be released on or about Aug. 12, the company said.

Witco

(WIT) - Get Report

reported second-quarter earnings of 22 cents a share, in line with the 22-analyst estimate, but down from the year-ago 26 cents.

Mergers, acquisitions and joint ventures

Fidelity National Financial

(FNF) - Get Report

is buying

Chicago Title

(CTZ) - Get Report

for $1.2 billion, or $52 a share in cash and stock. The $52 price for each Chicago Title share represents a 42% premium to the closing price of Chicago Title's stock on Thursday, the day before the companies announced they were holding talks.

Analyst actions

Warburg Dillon Read

upgraded

AmeriSource Health

(AAS)

to strong buy from hold.

Credit Suisse First Boston

initiated coverage of

Baan

(BAANF)

with a hold rating.

Morgan Stanley Dean Witter

downgraded

GPU

(GPU)

to neutral from outperform.

Miscellany

King Pharmaceuticals

(KING)

has bought the rights to sell

Eli Lilly's

(LLY) - Get Report

Lorabid

antibiotic for $90.5 million plus sales performance milestones that, if achieved, would bring the total value of the deal to $158 million.

Pitney Bowes

(PBI) - Get Report

and the

U.S. Postal Service

said they reached an agreement to resolve a postage-metering lawsuit filed by Pitney Bowes, under which Pitney Bowes will receive $51.75 million from the postal service.

Sears

(S) - Get Report

said it will cut up to 1,400 jobs at its headquarters by Oct. 31, in a move to trim expenses. The cuts will not affect the retailer's hardware or department stores.

Sun Microsystems

(SUNW) - Get Report

today will disclose its plans for a microprocessor with a radical new architecture designed to handle complex graphics, voice and video, challenging

Intel

(INTC) - Get Report

and other chipmakers in the fast-growing market for communications and media-processing chips, according to an article in

The Wall Street Journal

.

As originally published, this story contained an error. Please see Corrections and Clarifications

.