Traders Slow to Cast a Line for Bottom-Fishing

Volume will be thin and dangerous on this summer Friday, and dollar weakness is pressuring bonds.
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Maybe if it weren't a summer Friday -- a day when volume will be thin and, therefore, dangerous -- people would step in and buy stocks this morning. After seeing stocks fall 4% this week, it seems natural to tie a sinker on, stick a worm on the hook and bottom-fish.

But it is a summer Friday, and it looks like nobody's ready to cast a line. With August looming -- a dead month with a bad reputation -- it will be hard for the market to find fresh incentives to buy.

"We're passing earnings season, which was pretty darn good, and we're going into a period -- the month of August -- when there's nothing to look at but rates," says Todd Clark, head of listed trading at

Charles Schwab

. Clark thinks that there's a good chance that stocks could begin to rebuild a base at current levels, but he's worried about the bond market. With the yield on the long bond again at 6%, there's potential for more trouble.

Stocks are set up for a flattish open. At 9 a.m. EDT, the

S&P 500

futures were up 2.4, fractionally above fair value. Meanwhile, dollar weakness was pressuring the bonds. The 30-year Treasury was down 12/32 to 89 21/32, putting the yield at 6%.

Tokyo stocks dropped again, plagued by the incessant strength of the yen. The

Nikkei

lost 195.9, or 1.1%, to 17,534.44.

Traders may be feeling a little duped by the

Bank of Japan

. A week ago, the BOJ was believed to be targeting the 120-yen-to-the-dollar level, an area where the bank had intervened in the market several times. But this week, it let that level strengthen to around 118 before stepping (twice) into the market. Since then, it firmed to just above 116 -- and the BOJ is nowhere in sight. The sense some get is that authorities are working to slow the yen's climb, but not to hold it, as they thought, at a level. Because yen strength hurts Japanese exporters and fuels the forces of deflation at home, there's a fear it could snuff Japan's nascent recovery.

Still, these worries may be a little premature. Finance Minister

Kiichi Miyazawa

indicated today that policymakers remain concerned about the yen strengthening too quickly and will act to counteract that. Miyazawa also said that there were "technical" reasons for the government's recent inaction. Though he didn't specify what that meant, it is likely that authorities remember all too well the way interventions in early 1995 backlashed, fueling further gains in the yen.

Hong Kong stocks fell, knocked lower by

Greenspan's

comments yesterday. Because of the dollar peg, the

Federal Reserve

effectively sets monetary policy for Hong Kong's economy as well. The

Hang Seng

dropped 275.36, or 2.06%, to 13,093.70.

European bourses were mixed.

In Frankfurt, shares were supported by stronger-than-expected inflation figures in some German states. The

Xetra Dax

was up 16.94 to 5357.85.

Paris stocks were bearing some damage from the less-than-benign rate outlook in the U.S. The

CAC

was down 37.94 to 4451.63.

London stocks were also lower. The

FTSE

was off 37.4 to 6260.4.

Friday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

Merck

(MRK) - Get Report

posted second-quarter earnings of 61 cents a share, in line with the

First Call

24-analyst estimate and up from the year ago 54 cents.

Compaq

(CPQ)

named Michael Capellas its president and CEO, replacing at last the ousted Eckhard Pfeiffer, who was booted in April.

TheStreet.com

wrote about the move in a story

last night.

Morgan Stanley Dean Witter

upgraded Compaq to outperform from neutral.

Shares of

Ericsson

were up solidly in Europe as investors focused on the company's positive outlook, although it posted a big drop in pretax profits for the first six months of the year. Ericsson ADRs

(ERICY)

closed at 27 5/8 yesterday. Ericsson forecast a lower pretax profit for 1999 compared with 1998; however, as for 2000, the company anticipates "strong improvements" with pretax profits to be better than 1998. For the first six months of the year, pretax income came in 44% below the year-ago period. Net sales, meanwhile, in the first six months of 1999 increased by 12%.

Earnings/revenue reports and previews

(Earnings estimates are from First Call.)

Air Products

(APD) - Get Report

reported third-quarter operating earnings of 48 cents a share, in line with the nine-analyst estimate, but down from the year-ago operating earnings of 56 cents.

Allied Waste Industries

(AW)

posted earnings of 29 cents a share, beating the nine-analyst estimate by a penny and up from the year-ago 21 cents.

Gateway

(GTW)

after the close reported second-quarter earnings of 56 cents a share, a penny above the 23-analyst view and ahead of the year-ago 38 cents.

Donaldson Lufkin & Jenrette

upgraded Gateway to buy from market perform.

LTV

(LTV)

posted a net loss for the second quarter of 19 cents a share before special charges, missing the 12-analyst estimate of a loss of 17 cents.

Mobil

(MOB)

reported second-quarter operating earnings of 81 cents a share, ahead of the 21-analyst estimate of 73 cents and unchanged from the year-ago 81 cents.

St. Paul Bancorp

(SPBC)

reported second-quarter earnings of 39 cents a share, a penny ahead of the nine-analyst estimate and up from the year-ago 32 cents.

Sepracor

(SEPR)

posted a second-quarter loss of $1.11 a share, narrower than the eight-analyst estimate of a loss of $1.20.

Sun Microsystems

(SUNW) - Get Report

after the close posted fourth-quarter earnings of 48 cents a share, beating the 19-analyst estimate by 2 cents and up from the year-ago 35 cents.

U S West

(USW)

reported second-quarter earnings of 83 cents a share, beating the 19-analyst estimate of 81 cents and up from the year-ago 76 cents.

Offerings and stock actions

Goldman Sachs

priced

InsWeb's

(INSW:Nasdaq) 5 million-share IPO top-range at $17. The company provides customized insurance quotes over the Internet. Its price range was raised to $16 to $17 from $11 to $13.

Elsewhere,

U.S. Bancorp Piper Jaffray

priced

BioMarin Pharmaceutical's

(BMRN:Nasdaq) 4.5 million-share IPO top-range at $13. The company develops carbohydrate enzyme therapies for debilitating, life-threatening, chronic genetic disorders and other diseases.

Credit Suisse First Boston

priced

Tanning Technology's

(TANN:Nasdaq) 4 million-share IPO above-range at $15. The company is a technology services provider. Its expected price range was raised to $12 to $14 from $9 to $11.

Miscellany

The Inside Wall Street column in

BusinessWeek

, penned by Gene Marcial, includes some picks and a pan from Stuart Weisbrod of

Merlin BioMed Asset Management

, who likes

Aronex Pharmaceuticals

(ARNX)

and

BioCryst Pharmaceuticals

(BCRX) - Get Report

, while his top short is

EntreMed

(ENMD)

.

Elsewhere,

Andrew

(ANDW)

gets bullish mention in the column. Michael Jamison of

Brandywine Asset Management

figures Andrew is worth 39, and he expects the company to earn 75 cents a share in 1999, $1 in 2000, and $1.20 in 2001, the column reports. Andrew closed yesterday at 20 7/8.

The column says Ed Walczak, manager of the

Vontobel U.S. Value Fund

, likes

ESG Re

(ESREF)

. Walczak has been adding to Vontobel's stake in ESG Re and figures that ESG is worth north of 27 a share, the column says. ESG Re closed yesterday at 14 1/2.