may yet come today, if not soon thereafter. But right now, stocks are sagging from early gains with tech stocks leading the retreat.
Dow Jones Industrial Average
rose as high as 9958.77 in its early attempt to summit 10,000, but quickly lost momentum and fell as low as 9864.98. Lately, the index was down 6 to 9892.
A profit warning from
was the biggest obstacle in the Dow's path this morning, while weakness in
also proved a hindrance.
IBM was falling in sympathy with
, lately down 20.9%. Oracle, whose database software runs on IBM mainframes,
last night reported disappointing revenue growth within its quarterly earnings announcement. The news rekindled lingering concerns about the profit outlook for technology's biggest names.
Nasdaq Composite Index
was down 38 to 2375, having enjoyed very little of an upswing at the opening.
Gary Kaltbaum, chief technical analyst at
J.W. Genesis Securities
in Boca Raton, Fla., called mid-morning to say: "I think the Nasdaq is about to take the big kazoo."
At the height of what would prove to be an ultimately disappointing rally in tech stocks
yesterday, Kaltbaum also expressed doubts about the group.
"I think a lot of things are looking ominous," the technician said this morning, espousing 2225 to 2250 as near-term support for the index. "I think this thing has got a chance to really get whacked. Too many stocks are looking in bad shape."
Specifically, Oracle has "broken down," as have
and "a lot of semiconductors," he said, noting additional weakness in
. "I don't think this whole sector can hold up with important stocks topping out."
Internet stalwarts were tumbling as well.
TheStreet.com Internet Sector
index lately was down 21 to 563, while
TheStreet.com E-Commerce Index
was off 3 to 105.
Weakness in big-cap technology stocks had the
backtracking from recent record highs. The index lately was down 5 to 1293 after rising as high as 1304.58 early on. The
was down 3 to 398.
The S&P's recent leadership group, energy, was able to pick up some of the slack left by the faltering tech names, and Kaltbaum said "the oil stocks look like they're for real." The
Philadelphia Stock Exchange Oil Service Index
was lately up 2.9%.
Strength in transportation stocks, particularly airlines such as
were also helping the S&P avoid a bigger downturn; the
American Stock Exchange Airline Index
was up 3.1%. Buoyed by the same, the
Dow Jones Transportation Average
was lately up 17 to 3275.
Financials, meanwhile, were mixed with a negative cast, although the bond market was steady in positive territory.
The price of the 30-year Treasury bond was up 12/32 to 95 25/32, its yield dipping to 5.54%, after the
reported its produce price index fell 0.4% in February, the largest decline since January 1998. Core PPI, which excludes food and energy, was flat. Economists had expected a 0.1% decline overall and a 0.1% rise in the core rate. (For more on the fixed-income market, see today's early
In NYSE trading, advancers were leading declining stocks 1,551 to 1,212 on 491 million shares. In
Nasdaq Stock Market
activity, losers were leading winners 2,157 to 1,410 on 565 million shares.
International Issues Lost in Dow 10,000 Shuffle
With much of the market (and certainly the media) focused on Dow 10,000, a meeting last night at the
Federal Reserve Bank of New York
got relatively little attention. The gathering featured Brazilian central bank president
International Monetary Fund
deputy chief Stanley Fischer and top executives from major financial institutions, including
The last time the New York Fed hosted a meeting with such luminaries (that we know of) was last September, when financial big shots gathered to rescue
Long Term Capital Management
(and their own backsides).
New York Fed officials declined to comment. People familiar with the meeting say the Fed merely provided a facility. That's pretty much the same thing folks said about the Long Term Capital meeting.
"The Fed only uses its facilities when it wants to be a leader as it did with Long Term Capital," said Tracy Herrick, market strategist at
in San Francisco and formerly of the
Federal Reserve Bank of Cleveland
. "Ordinarily, meetings are held off-premises. I know little more, but I think it's clear that something is very serious."
Herrick, like many on Wall Street, does not believe Brazil's situation is as urgent as was the infamous hedge fund's. Moreover, the main outcome of last night's meeting was the banks pledge to maintain Brazil's credit lines at Feb. 28 levels, which
The Wall Street Journal
portrayed as evidence the banks are "regaining confidence" in Brazil.
Fraga is touring financial centers in an effort to convince banks and investors that Brazil has a credible recovery strategy to problems created by the January devaluation of the real.
"It was a positive meeting," said David Roberts, international economist at
NationsBanc Montgomery Securities
, who attended a separate analysts' meeting in New York yesterday. "Fraga showed candor and dealt with many of our fears. He got a round of applause."
But European banks, which have the most loans outstanding to Brazil, will need more convincing than their U.S. counterparts to maintain exposure to the country, Roberts said. Fraga next meets with bankers in London and Paris.
Fraga made a convincing case that Brazil would be able to avoid a default on its domestic debt, Roberts said. Fraga said Brazil aims to reduce the overall public sector deficit from a massive 10.34% of GDP in 1999 to 2.65% in 2000. He also discussed plans to issue government bonds in offshore markets in the coming months.
However, such an offering can only be accomplished if interest costs -- which make up the bulk of the government's expenditure -- are reduced sharply. Nominal rates, currently 45%, can fall if inflation expectations are limited, but that requires a stable real. To help prevent the currency from slipping, Fraga must convince foreigners to start putting money back into Brazil.
If Brazil's real interest rates don't fall rapidly, Brazil's debt is not serviceable, said economists at London-based
, who placed a 50% chance that Brazil will default on its domestic debt this year.
The IMF's austerity program for Brazil is "too stringent" and "not working," Herrick agreed. "Ultimately, if Brazil follows the
present route there will be debt moratoriums and defaults."
Herrick surmised last night's meeting was held on Fed turf because "their might be a new solution where the U.S. is taking the leadership from the IMF."
Perhaps the idea of a currency board in Brazil, similar to the one in Argentina, is being revived, Herrick said, although many Brazil watchers say otherwise. "This would require cooperating of the U.S. Fed and the banks, not only as lenders but as providers of the assets which would be backed by the new currency."
Senior Writer Peter Eavis contributed to this story
Friday's Midday Movers
As noted above, Caterpillar was tumbling 5 1/2, or 10.7%, to 45 7/16 after warning its first-quarter earnings will fall 50% below estimates because of lower sales. Analysts called for 84 cents a share this quarter vs. the year-ago 83 cents. The heavy equipment maker blamed the lower sales volume on weak demand from agriculture, mining and oil and gas customers and on poor economic conditions in Latin America.
Microsoft was falling 2 9/16 to 158 7/8 after last night saying it was on track to meet analysts' third-quarter earnings estimates but that it's experiencing a sequential slowdown in revenue.
Credit Suisse First Boston
reiterated its strong buy rating on the company.
Fellow software company, Oracle, was dropping 7 11/16, or 20.9%, to 29 3/16 on worries about its licensed database revenue growth. The company posted third-quarter earnings in line with estimates last night. Today,
dropped Oracle to intermediate accumulate from buy, keeping the stock at a long-term buy. Both NationsBanc Montgomery Securities and
Warburg Dillon Read
downgraded the stock to hold from buy. In sympathy, IBM was down 4 1/8 to 178 3/4.
In other news:
was up 1 7/16 to 36 1/8 after
BT Alex. Brown
upgraded it to buy from market perform.
was up 10 5/8, or 10%, to 117 3/16 after last night announcing a 2-for-1 stock split.
was down 3 5/16, or 7.6%, to 40 1/4 after Merrill Lynch slashed it to accumulate from buy.
was up 2 1/16, or 8.2%, to 27 5/8 after
Inside Wall Street column quoted a
BancBoston Robertson Stephens
analyst as saying the Israeli software development firm was worth nearly double its current trading price. Elsewhere in the column,
, lately up 1 1/4, or 12.7%, to 11 1/16, was said to be a possible takeover target "in the rapidly consolidating defense industry."
was up 5 5/8, or 31.9%, to 23 5/8 after Credit Suisse First Boston initiated coverage with a buy.
was down 3 1/2, or 21.5%, to 12 13/16 after saying it won't complete a previously announced sale of
and that it plans to liquidate the value-added hardware reseller. As a result, the company sees a fourth-quarter loss of 5 cents a share, instead of the previously expected 3-cent loss.
was down 2 11/16, or 20.1%, to 10 11/16 after last night warning it expects a third-quarter loss of 35 cents to 40 cents a share, below estimates for a loss of 16 cents. The company, which earned 9 cents in the year-ago quarter, blamed the warning on a industry trend of retailers shifting the inventory burden to manufacturers.
was up 2 7/8, or 7.1%, to 43 9/16 after last night reporting a narrower fourth-quarter loss than in the year-ago period.
was collapsing 15 1/4, or 41.2%, to 21 3/4 after saying it sees fourth-quarter earnings coming in around 30 cents to 32 cents a share because of store opening and relocation costs. Analysts called for a profit of 52 cents vs. the year-ago 44 cents.
was dropping 5 3/4, or 37.6%, to 9 5/8 after last night warning its first-quarter and full-year 1999 earnings will fall below estimates due to high distributor inventories and a slower ramp of new orders. Today, BT Alex. Brown lowered the stock to market perform from buy, and Merrill Lynch lowered it to intermediate-term neutral from accumulate while maintaining its long-term buy.