A remarkably bullish first-quarter
Employment Cost Index
report has changed the preopening tenor on Wall Street, boosting bonds, sending the
futures leaping and setting up a slight rise at the start of equity trading.
The ECI, a quarterly inflation measure closely watched by the
, rose 0.4% in the first quarter, well under the already modest consensus estimate of 0.8%. The report shows that U.S. inflation remains in abeyance, meaning an interest-rate hike is even less likely.
The report has turned things around this morning "big-time," said Todd Clark, head of listed trading at
in San Francisco. "Basically, the speculation is that's going to prevent the Fed from having to do anything probably into the summer, so you're getting a bid in the bond market."
Indeed, a thrilled bond market has soared on the news, with the benchmark 30-year Treasury up 31/32 to 96 3/32 and its yield easing to 5.52%. Stock-index futures traders are getting their swerve on as well, sending the S&P 500 futures up 3.50 as of 9:10 a.m. EDT -- they were down 6.20 just before the report -- to indicate a modest hop at the open.
But Clark isn't all grins about the day's outlook. "Unfortunately, I expect to see the group rotation that dominated the tape yesterday continue today," he said, looking for cyclicals and interest-rate-sensitive stocks to outperform while techs languish.
And it's certainly looking like an important session ahead for Internet stocks and the broader tech sector, as investors continue testing the (vast potential) growth vs. (somewhat dubious) value proposition in the volatile segment.
The first-quarter report late yesterday from
showed a better-than-expected loss and strong revenue, but as
reported last night, analysts are growing increasingly impatient with Amazon's plans to ramp up spending aggressively, deepen losses and push profitability further into the future.
That impatience is showing up in the e-commerce giant's stock, which sold off 6% yesterday ahead of the earnings release and has continued to fall in the thin but influential postclose and preopen market. After dipping to around 177 last night from its New York close of 193 1/2, Amazon reportedly was trading around 171 this morning.
Nor is Amazon alone in its retreat. The bluest of Internet chips,
, is weaker in preopen trading after
The Washington Post
reported that AOL may be joining
in its increasingly expensive bid to wrest
from the clutches of
The Net nervousness, coupled with the ongoing broadening of the market that Clark expects to roll on (and which
Abby Joseph Cohen
flagged in comments
yesterday), looks set to sap tech stocks of a little more strength today.
Overseas action has augured no better for the long side, with Europe's major indices all trading lower. The U.K.'s
was off 99.5, or 1.5%, to 6499.3; the German
was down 36.45 to 5316.27; and the French
was down 12.29 to 4362.41. In Asia, Hong Kong's
finished with a small rise of 46.31 to 13,179.70. The Tokyo stock market was closed for a holiday.
Here in the U.S., Wall Street's princely precincts will likely pay some attention to reports in the morning papers that federal regulators are planning closer scrutiny of the oft-fast-and-loose hedge-fund community. The
Securities and Exchange Commission
Commodity Futures Trading Commission
would gain expanded powers to monitor the lending habits of firms that lend to hedge funds, and the
administration will seek more hedge-fund disclosure of borrowing and trading practices.
Long Term Capital Management's
dark, cold shadow lingers on.
Thursday's Wake-Up Watchlist
- Amazon.com reported a first-quarter loss of 23 cents a share, 6 cents narrower than the 21-analyst
First Call view but deeper than the year-ago loss of 7 cents. Revenue soared to $294 million from $87 million a year earlier.
Credit Suisse First Boston reiterated its buy rating on Amazon.com.
United News & Media (UNEWY) is buying
CMP Media (CMPX) for $920 million in cash.
Covance (CVD) is buying
Parexel International (PRXL) in a stock deal valued at $800 million. The new company will be called
Covance Parexel. Under terms of the deal, Paraxel shareholders will receive 1.184 Covance shares for each Parexel share.
In other news (earnings estimates from First Call):
Ambac Financial (ABK) reported first-quarter operating earnings of $1.02 a share, beating the eight-analyst estimate of 99 cents and up from the year-ago 91 cents.
Apache (APA) - Get APA Corp. Report posted a first-quarter loss of 4 cents a share, narrower than the 20-analyst estimate for a loss of 7 cents, but reversing the year-ago earnings of 18 cents a share.
CBS (CBS) - Get CBS Corporation Class B Report posted first-quarter earnings from continuing operations of 4 cents a share, beating the six-analyst outlook of a loss of a penny and above the year-ago 3 cents.
PaineWebber downgraded a handful of oil companies. The firm downgraded
Conoco (COC) and
Texaco (TX) - Get Ternium SA Report to neutral from attractive, and downgraded
Unocal (UCL) to attractive from buy.
Some money managers and analysts think
Disney's (DIS) - Get Walt Disney Company Report string of poor quarterly earnings could drag on well into next year, the Heard on the Street column in
The Wall Street Journal reported.
TheStreet.com is taking a look at Disney in a series of stories that began
Kerr-McGee (KMG) posted first-quarter earnings from continuing operations of 9 cents a share, beating the 11-analyst estimate of a loss of 8 cents, but down from the year-ago 18 cents.
MCI WorldCom (WCOM) reported first-quarter earnings, excluding its acquisition of
Embratel and a gain, of 36 cents a share, beating the 26-analyst estimate of 34 cents.
Oxford Health (OXHP) posted a first-quarter operating loss of 6 cents a share.
Pharmacia & Upjohn (PNU) posted first-quarter earnings of 42 cents a share, in line with the 18-analyst estimate and up from the year-earlier 36 cents.
Reliant Energy (REI) - Get Ring Energy, Inc. Report posted first-quarter operating earnings of 34 cents a share, in line with the 10-analyst estimate and up from the year-ago 33 cents.
Service Corp. (SRV) - Get The Cushing MLP & Infrastructure Total Return Fund Report reported first-quarter operating earnings of 36 cents a share, beating the eight-analyst view of 34 cents, but down from the year-ago 42 cents.
Tenneco (TEN) - Get Tenneco Inc. Class A Report will spin off its specialty-packaging business to shareholders. The spinoff will split Tenneco into separate auto-parts and packaging companies. The company also reported first-quarter earnings from continuing operations of 27 cents a share, down from the year-ago 44 cents.
Unilever (UN) - Get Unilever NV Report said first-quarter pretax profit fell 4% to $1.1 billion from the year-ago $1.15 billion.