With Brazil Behind It, Market Heads for Smoother Waters

Stocks look ready to open higher, fueled by yesterday's comeback and the absence of further Brazil-inspired crises overnight.
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With no news of any fires breaking out overnight and traders still impressed by how stocks bounced back yesterday despite Brazil's de facto devaluation of the real and the resignation of its central banker, U.S. stocks are cued to head higher this morning.

"It looks like we'll open on a firm note, though I suspect we'll have a hard time making an extraordinary amount of upside," said Bill Meehan, market analyst at

Cantor Fitzgerald

.

Naturally enough, much of the focus today will be on Internet stocks, which are dealing with their own Brazil. Last night,

Deutsche Morgan Grenfell

analyst Alan Braverman downgraded

Yahoo!

(YHOO)

,

Excite

(XCIT)

and

Lycos

(LCOS)

to accumulate from buy. The portal company downgrades came on the back of a report from

Morgan Stanley's

Mary Meeker urging investors in Yahoo! to "take some money off the table."

The suggestion that the Internet stocks may be topping worries Meehan because he fears that a selloff in the .coms could spill over into the broader market. He noted that when the

Nasdaq

came off its highs yesterday afternoon, it was Internet issues that moved first.

"You never know at what point a bubble pops or what will be the trigger," he said. "It's simply a confidence game, and once a little bit of doubt creeps in, it's gone and it's irretrievable."

But the suggestion that Internet stocks are overvalued is hardly new, and it's questionable whether analysts have much influence over where these stocks go.

At 9 a.m. EST, the

S&P 500

futures were up 6.5, about 2 above fair value, indicating a positive open.

Though investors preparing to deploy money in the stock market again weighed a bit on Treasuries early on, the dollar's continued rebound was helping counteract that. A slightly weaker-than-expected December

Consumer Price Index

was also adding support. The 30-year was up 3/32 to 101 25/32, dropping the yield to 5.13%. Dollar/yen was up 0.46 to 113.91.

The U.S. stock market's comeback yesterday was enough to assuage any jitters Japanese investors had over Brazil's devaluation, and the rebounding dollar gave them reason to buy. Currency traders continue to show no sign that they want to test the line that the

Bank of Japan

drew at 110 yen to the dollar, and this encouraged buyers to come back into global blue-chips. The

Nikkei

climbed 335.26, or 2.5%, to 13,738.86.

Hong Kong's stock market, which, with its close ties to China, approaches emerging-market status, bore a little damage from the news out of Brazil. The

Hang Seng

fell 90.64 to 10,183.13. And some other regional markets took Brazil's troubles even more to heart. South Korean stocks declined 4.5%, while stocks in the Philippines dropped 4.8%.

European markets were seeing a pretty strong bounce off of yesterday's declines. In Frankfurt, the

Dax

was up 72.79, or 1.5%, to 5004.59. In Paris, the

CAC

was up 58.13, or 1.5%, to 4016.85. In London, the

FTSE

was up 45.5 to 5895.6.

Thursday's Wake-Up Watchlist

By

Brian Louis
Staff Reporter

    Eastman Kodak

    (EK)

    reported fourth-quarter operating earnings of $1.05 a share, far short of the

    First Call

    11-analyst consensus estimate, but up from the year-ago 75 cents.

    Unisys

    (UIS) - Get Report

    reported fourth-quarter earnings of 42 cents a share, beating the First Call 11-analyst estimate of 40 cents and up from the year-ago 25 cents.

    (Earnings estimates are from First Call.)

    Adtran

    (ADTN) - Get Report

    reported fourth-quarter earnings of 23 cents a share, in line with the 12-analyst estimate, but down from the year-ago 32 cents.

    Advanced Micro Devices

    (AMD) - Get Report

    posted fourth-quarter earnings of 15 cents a share, falling 4 cents below the 23-analyst estimate, but reversing the year-ago loss of 9 cents.

    Apple

    (AAPL) - Get Report

    reported first-quarter earnings of 78 cents a share, 8 cents higher than the 18-analyst outlook and above the year-ago 33 cents.

    Salomon Smith Barney

    downgraded Apple to neutral from buy, while

    Donaldson Lufkin & Jenrette

    upgraded it to buy from market perform.

    Dayton Hudson

    (DH)

    set a $1 billion stock buyback program.

    Exel

    (XL)

    reported operating earnings of $1.15 a share, beating the 12-analyst outlook by 2 cents and up from the year-ago $1.09.

    First Union

    (FTU)

    reported fourth-quarter operating earnings of $1 a share, beating the 26-analyst consensus by a penny and up from the year-earlier 77 cents.

    Finova

    (FNV) - Get Report

    reported fourth-quarter earnings of 79 cents a share, beating the 16-analyst estimate by 2 cents and up from the year-ago 66 cents.

    Motorola

    (MOT)

    reported fourth-quarter earnings of 26 cents a share, topping the 28-analyst estimate by 3 cents, but falling behind the year-ago 65 cents.

    National City

    (NCC)

    reported fourth-quarter operating earnings of $1.06 a share, beating the 21-analyst estimate of $1.04 and up from the year-ago 93 cents.

    Wachovia

    (WB) - Get Report

    reported fourth-quarter operating earnings of $1.19 a share, in line with the 20-analyst estimate and up from the year-ago $1.02.

    Many investors could not dump stocks at favorable prices as online trading companies struggled yesterday under record-breaking volume, today's Heard on the Street column in

    The Wall Street Journal

    said. The

    Journal

    reported that Web message boards were full of complaints all day about Web service at major online brokers, including

    E*Trade

    (EGRP)

    ,

    Waterhouse Securities

    and

    Ameritrade

    (AMTD) - Get Report

    .