Wake-Up Call: Stocks Set to Start the Week Lower

Following last week's strong performance, market indices may consolidate this morning. European markets have turned weaker along with U.S. stock futures.

Author:: Thomas Lepri
Publish date:: Oct 25, 1999 9:21 AM EDT

It looks as if the market is going to come under some selling pressure in the early going today.

Considering the recent performance of the market's major proxies, a little bit of consolidation wouldn't be an altogether unhealthy way to start the new week. Last week the

Nasdaq Composite Index

gained 4.7%, the

S&P 500

picked up 3.8% and the

Dow Jones Industrial Average

added 3.5%.

Whether stocks can resume that uptrend this week depends on a lot of things: bond yields topping out, earnings staying strong overall, inflation fears not worsening, and investors' Y2K-slowdown worries remaining in a state of relative sublimation -- a state that was seeming a little precarious toward the close of Friday's session, when

CNBC

reported that an unsubstantiated, rather scary rumor was circulating about

Cisco

(CSCO) - Get Report

possibly pulling another

IBM

(IBM) - Get Report

in its first-quarter

earnings report.

Right now, things are looking weak for the open. At 9:05 a.m. EDT, the S&P 500 futures were down 7.4, more than 9 points below fair value and indicating a very strong inclination toward the downside.

Not everyone in the market is convinced by last week's strength, which followed the Dow's largest ever one-week point loss. "I was amazed when I saw that, after the worst week ever in terms of points, the following week we get a bounce-back and with more 52-week lows than the previous week," said Bill Meehan, chief market analyst at

Cantor Fitzgerald

. "It's sick."

Stocks will likely find it tough to move higher as long as the bond market's weakness persists. The 30-year Treasury was lately down 21/32 to 96 12/32, putting its yield at a juicy 6.398%. The December futures contract was off 17/32 to 110 14/32. "We just made a new low on the December contract, and we're sitting on it," Meehan noted.

Dow components are painting a mixed picture of earnings today.

Union Carbide

(UK)

has posted a negative surprise for its third-quarter, while

(MMM) - Get Report

and

AT&T

(T) - Get Report

are both out on the upside.

There are no major economic data slated for today. On Thursday, the

Commerce Department

will release advance third-quarter gross domestic product figures, and the

Labor Department

will put out its third-quarter

Employment Cost Index

. Friday brings the

Chicago Purchasing Managers' Index

for October.

Friday's strength on Wall Street invigorated Asian markets overnight. In Tokyo, amid optimism over new demand expected from eight new investment trust funds scheduled to launch at the end of the month, the

Nikkei

gained 209.99, or 1.2%, to 17,648.79. The benchmark index had been up as much as 17,787.73, or 2%, late in the afternoon session.

The yen didn't make any drastic moves in Tokyo trading, not with the

Bank of Japan's

policy board scheduled to meet on Wednesday, when it may offer market participants some clarification of the slight shift in monetary policy it made two weeks ago by stepping up outright purchases of short-term government debt. The dollar ranged between the 106.2-yen and 105.5-yen level overnight, and was lately quoted at 105.48 yen.

Hong Kong stocks also managed to close solidly higher despite paring strength toward the close. The

Hang Seng

added 171.1, or 1.3%, to 13,034.18. It had been up more than 2% at midsession.

Moving against the general positive current in Asia was South Korea's

Seoul Composite

index, which fell 20.68, or 2.5%, to 798.84 amid fears that Thursday's meeting among the foreign creditors of

Daewoo

may go badly. Confidence in the

chaebol's

debt repayment proceedings, not strong to begin with, was shaken further last Friday when the vice chairman of

Citigroup

unit

Citibank

called on the South Korean government to provide a partial guarantee for Daewoo's foreign creditors.

The big European indices were falling along with the U.S. stock futures in early afternoon trading. London's

FTSE

was down 61.21, or 1%, to 5997.7, while the Paris

CAC

was 16.49 lower to 4661.31. Frankfurt's

Xetra Dax

was off 49.46, or 0.9%, to 5308.29.

The euro was lately quoted at $1.0685.

Monday's Wake-Up Watchlist

Brian Louis

and

Eileen Kinsella

Staff Reporters

Mergers, acquisitions and joint ventures

An investment group, including

Berkshire Hathaway

(BRK.A) - Get Report

, is buying

MidAmerican Energy Holdings

(MEC) - Get Report

for $35.05 a share in cash, a hefty premium over MidAmerican's closing price of 27 1/4 Friday.

Columbia Energy Group

(CG) - Get Report

said no to

NiSource's

(NI) - Get Report

sweetened $6.1 billion takeover bid. Columbia said the NiSource offer was financially inadequate. Columbia said its board authorized management to look into strategic alternatives, including a merger.

Excite@Home

(ATHM) - Get Report

is buying

Bluemountain.com

, for about $780 million in cash and stock.

Earnings/revenue reports and previews

(Earnings estimates are from

First Call/Thomson Financial

AT&T

(T) - Get Report

, a

Dow Jones Industrial Average

component, posted third-quarter operating earnings of 54 cents a share, a penny ahead of the 22-analyst estimate, but down from the year-ago 68 cents.

Columbia/HCA Healthcare

(COL)

reported third-quarter earnings from continuing operations of 27 cents a share, 2 cents ahead of the 21-analyst estimate and up from the year-ago 20 cents.

Exxon

(XON) - Get Report

, a Dow component, reported third-quarter earnings of 61 cents a share, ahead of the 21-analyst estimate of 59 cents and up from the year-ago 58 cents.

(MMM) - Get Report

, a Dow component, posted third-quarter operating earnings of $1.14 a share, ahead of the nine-analyst estimate of $1.06 and up from the year-ago operating earnings of 97 cents.

Union Carbide

(UK)

, also a Dow component, posted third-quarter operating earnings of 36 cents a share, a penny shy of the 10-analyst estimate.