Stocks Look to Rebound From Thursday's Thumping

A summer Friday may provide a respite from the selling skein.
Author:
Publish date:

Stocks look like they're going to take back a little bit this morning.

Nobody's going to pull out the noisemakers for something like that, though. For stocks to come back after a selloff like yesterday's is a natural. And month-end buying typically boosts stocks a bit in any case.

Still, it will mean something if stocks can stay in the black today. It will give the market a bit of a psychological toehold, maybe tone down the talk of how this year is last year repeating itself. It will be good.

If it happens, that is. There are a couple of big hurdles stocks will have to get through to close the day out positive. At 10 a.m. EDT, the July

Chicago Purchasing Managers Index

gets released. Considered an early indictor on what next week's national index will look like, economists expect the Chicago to come in at 58.8, down from last month's 60.

Next, the market will have to combat the effects of any investors squaring positions ahead of next week's slew of economic reports. Because this is a summer Friday and volume will be thin, stock movements could be exaggerated.

At 9 a.m. EDT, the

S&P 500

futures were off 2.5, putting them more than 3 above fair value and indicating a positive open.

"Today, the futures are more up on an oversold bounce than anything," said Jim Volk, co-director of institutional trading at

D.A. Davidson

. "I think the market's are going to rally at the open and then tag off. There's enough concern about the level of interest rates and what the

Fed's

going to do that unfortunately people are now saying that they have to wait and see what the Fed does." If that's true, the market looks like it's in for a buyer's strike until the Aug. 24 Fed meeting, suggesting that the market will at best drift lower.

The 30-year Treasury was down 10/32 to 88 13/32, putting the yield at 6.11%.

Japanese stocks edged lower in cautious trading ahead of the weekend. The

Nikkei

slipped 8.06 to 17,861.86.

Japan's June unemployment rate climbed 0.3 percentage points to 4.9%. (If unemployment was tallied in Japan as it is in the U.S., that number would be much higher.) Although that was weaker than economists expected, it had little effect on the market, as it's almost a given in Tokyo that the unemployment rate will rise as companies restructure.

Hong Kong stocks sold off sharply in the morning, but made back their losses, and then some, on optimism over mainland-based

China Everbright Group

.

The company had been under pressure on reports that Chinese authorities were investigating its chairman, Zhu Xiaohua. Today, the company announced Zhu will be replaced by a

People's Bank of China

deputy governor, Liu Mingkang. China-related shares skyrocketed and blue-chips traipsed along after them. The

Hang Seng

added 69.02 to 13,186.86.

Stocks in Europe were bouncing back.

Frankfurt's

Xetra Dax

was up 13.97 to 5066.29 even as another 3.4% chunk was taken out of

DaimlerChrysler

(DCX)

.

In Paris, the

CAC

was up 50.16, or 1.2%, to 4356.56. Today's options expiration ("the French have to do everything a little bit different," groused one trader who works CAC options and futures a while back) could add a little volatility through the day.

London stocks were on the mend, helped by good first-half results from

Lloyds

. The

FTSE

was up 67.6, or 1.1%, to 6185.1.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Earnings/revenue reports and previews

(Earnings estimates are from

First Call

.)

Cardinal Health

(CAH) - Get Report

posted fourth-quarter operating earnings of 58 cents a share, a penny ahead of the 15-analyst estimate and up from the year-ago operating earnings of 46 cents.

Electronic Data Systems

(EDS)

reported second-quarter earnings of 44 cents a share, a penny better than the 19-analyst estimate and up from the year-ago 39 cents.

Footstar

(FTS) - Get Report

reported second-quarter earnings of 83 cents a share, beating the five-analyst estimate of 81 cents and up from the year-ago 69 cents.

Tommy Hilfiger

(TOM)

posted first-quarter earnings of 40 cents a share, ahead of the 15-analyst estimate of 37 cents.

Solutia

(SOI) - Get Report

reported second-quarter earnings of 61 cents a share, in line with the 10-analyst estimate and up from the year-ago 58 cents.

Mergers, acquisitions and joint ventures

Fidelity National Financial

(FNF) - Get Report

and rival

Chicago Title

(CTZ) - Get Report

are talking about getting together, the

Los Angeles Times

reported. The newspaper said it is expected that Fidelity National would buy Chicago Title, but both title insurers would retain their names and identities and analysts said the value of the deal could be as high as $1.4 billion.

KLM Royal Dutch Airlines

(KLM)

and

Alitalia

detailed their previously announced alliance, which will become effective Nov. 1. The

Financial Times

reported that Leo van Wijk, the Dutch carrier's president, said on Thursday that the two airlines were likely to merge within three years.

Analyst actions

Salomon Smith Barney

downgraded

Glaxo Wellcome

(GLX)

to neutral from outperform.

Lehman Brothers

had negative things to say about

DaimlerChrysler

(DCX)

,

CNBC

reported. Meanwhile,

Warburg Dillon Read

downgraded DaimlerChrysler to buy from strong buy, while

Goldman Sachs

cut earnings estimates on the company. DaimlerChrysler failed to match expectations in its profit report released yesterday.

Miscellany

First Union's

(FTU)

board named Ken Thompson its president to replace John Georgius, who will retire on Dec. 31.

With the number of diabetics predicted to soar to 220 million worldwide in the next decade, a host of firms are racing to develop new technologies that make managing the disease more comfortable and effective, the Heard on the Street column in

The Wall Street Journal

says today. Among the companies receiving positive mention in the column are

MiniMed

(MNMD)

,

SpectRx

(SPRX)

,

PolyMedica

(PLMD)

and

Inhale Therapeutic Systems

(INHL)

.

Gene Marcial's Inside Wall Street column in

Business Week

says some pros believe

Aspect Development

(ASDV)

is expected to announce a remake of itself into a Web-based operator.

In another item, Marcial quotes Jim Tilton, managing director at

Trust Co. of the West

, as saying he wouldn't be surprised if

Hewlett-Packard

(HWP)

ended up buying

Diametrics Medical

(DMED)

. Trust Co. owns some 5% of Diametrics, the column says. In June, H-P and Diametrics set a pact under which H-P would sell Diametrics' blood-testing systems worldwide, and on July 17 H-P acquired 5% of Diametrics, with an option to buy as much as 19.9%, the column says.

Elsewhere, Catherine Moore of

FAC/Equities

, a unit of

First Albany

(FACT)

, thinks

Project Software & Development

(PSDI)

will spin off to shareholders its

MRO.com

operations and she figures MRO.com, which she projects to post revenue of more than $6 million in fiscal 2000, is worth $500 million, or about 30 a share, the column says in another item.