Some renewed yen strength and the unlikely convergence of a couple of disasters (of both the natural and corporate variety) were keeping stocks deep in the hole at midday.
All the proxies were solidly lower. The
Dow Jones Industrial Average
was off 166, or 1.5%, to 10,658; the tech-embossed
Nasdaq Composite Index
was down 32, or 1.1%, to 2854; and the
was retreating 18, or 1.4%, to 1317.
TheStreet.com Internet Sector
index was sinking a more modest 2, or 0.4%, to 627, while the small-cap
was 5 lower to 428.
"The market hasn't been acting well for the past couple of weeks," said Charles Crane, chief market strategist at
Key Asset Management
. "Today we have a couple of lightning rods for investors to aim their anxieties."
Rod No. 1: The 7.6-magnitude quake that hit Taiwan yesterday, killing more than 1,500 people and injuring about 3,700 others, is raising concerns in the market about some short-term production problems for the island's semiconductor industry.
By itself, that probably wouldn't be enough to roil the U.S. technology market. But compounding that natural disaster this morning was the fallout from
profit warning. The company said last night that delivery problems with
G4 processors, which are used in Apple's
Power Mac G4
computers, would keep fourth-quarter earnings below the third-quarter results. Specifically, interim CEO
said that chip-shipping delays will leave Apple unable to fill all of the more than 150,000 orders for Power Mac G4s this quarter.
Semiconductor stocks were indeed feeling the pinch at midday. The
Philadelphia Stock Exchange Semiconductor Index
was off about 1.6%. Motorola was lately down 1.7%
Apple, itself down about 9.7%, was also dragging down computer manufacturers across the block. The
Philadelphia Stock Exchange Computer Box Maker Index
had fallen 3.6%.
"We're getting into the preannouncement period, and a lot of people taking things off table," said Tim Grazioso, manager of Nasdaq trading at
. "And it's much easier to take profits than to take losses."
There are certainly profits there for the taking. The Nasdaq opened the session just shy of its all-time high. To Grazioso, today's selling is partly payback for the marked narrowness of the market's recent rallies: "We've been talking about how most of the move in the Nasdaq and the Dow has been limited to a small basketful of stocks. When these things happen, people sell those stocks."
Accordingly, tech bellwethers were suffering of late.
was down 1.4%,
Without much positive news to focus on, things seem stretched in the short term. Earnings season doesn't fully kick off until mid-October. Until Oct. 5, when the
Federal Open Market Committee
next meets to decide the fate of short-term interest rates, investors will be forming their sentiment on earnings from preannouncements, which aren't inspiring anyone right now.
"I think it's sideways to down until you get some kind of positive news," Grazioso said. "Right now, sentiment's slightly negative for earnings. Looking at Apple, it's not a demand problem. Earnings should be up, and they're down."
That sentiment should change sooner or later. Analysts are gearing up for earnings to come in 20% ahead of last year, according to
First Call/Thomson Financial
. But Crane isn't expecting an upside breakout for the market until investors can get over their anxieties over such diversions as interest rates, Y2K concerns, high valuations and a possible slowdown in the U.S. economy (no problem, right?): "All these things are starting to chip away at the market's condition. Will it turn into an outright rout? I don't think so. Third-quarter profits are going to be quite good. There will still be investors' propensity to buy on dips. I'm just not sure when they'll come off the sidelines."
Of course, even without Apple, stocks would be swimming upstream against the tide of yen buying set off by the
Bank of Japan's
decision to keep its monetary policy unchanged. Egged on by reports by newswire services and in the Japanese press, market participants had been poised for the BOJ to ease policy by increasing the supply of yen through open market operations.
When it became clear that that wasn't going to happen, the dollar retraced all of the gains it had made against the yen since Friday, moving almost immediately through the 105 yen level.
The dollar also was coming under pressure this morning from the latest
report, which showed the U.S. trade deficit unexpectedly setting a new record in July, a massive $25.1 billion.
The greenback was lately quoted at 104.8 yen.
The bond market sold off early in response to the BOJ news, setting the stage for a downside session for equities. The 30-year Treasury had lately stabilized a bit, down 11/32 to 100 10/32, its yield rising to 6.10%. (For more on the fixed-income market, see today's early
Volume was moderate and breadth was nothing to write home about.
New York Stock Exchange
decliners were squashing advancers 2,141 to 691 on 425 million shares, with 32 new 52-week highs against a massive 205 new lows. In
Nasdaq Stock Market
action, decliners were beating advancers 2,339 to 1,220 on 588 million shares, with 57 new highs and 76 new lows.
The Score Soon: Trading 22, Sleep 2
Just can't get enough of that after-hours, before-hours, whatever-hours trading?
online brokerage are betting on it big-time. They plan to offer trading 22 hours a day and on weekends by next year, an official of their parent company said today.
The first step would be an extension of the current 8 a.m.-to-8 p.m. EDT Island session to midnight-8 p.m., probably within three months, said Edward Nicoll, president and COO of
Datek Online Holdings
. He was speaking at a
online trading conference in New York.
Sometime later, probably next year, Island's session would swell to midnight-10 p.m., Nicoll said. Finally, trading would be extended into the weekend. Nicoll offered no details on the hours of the weekend session.
Datek and Island have no plans to extend the trading day past 10 p.m., as a two-hour break is needed for trade clearing and system maintenance, Nicoll said. The expanded hours are meant to appeal to investors in Asian and European countries, he said.
Tuesday's Midday Watchlist
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified
Mergers, acquisitions and joint ventures
moved up 5/8 to 64 1/4 and
rose 4 1/4 to 216 1/4 after the companies said they have forged a new nationwide U.S. wireless telephone pact. According to the deal's terms, Bell will hold a 55% stake in the venture, carrying a value of more than $70 billion.
lost 1 1/8 to 50 3/8 after saying it will buy
for an undisclosed amount.
Dutch supermarket company
fell 3/16 to 33 1/4 after it said it made a deal with Britain's
Hilton Food Group
to sell the main meat processing division of
, the company's flagship supermarket chain.
rose 3/16 to 32 1/8 after it inked a $330 million mobile infrastructure pact with
. The deal calls for Ericsson to provide Cricket with digital mobile systems that supply voice and data services. Leap jumped 6, or 34.3%, to 23 1/2
lost 1/4 to 29 15/16 and
U S West
was unchanged at 56, after the companies said that federal and state applications for their $35 billion agreement will be finished by tomorrow. In a joint statement, the companies said roughly 500,000 Qwest shareholders and a million U S West owners would receive a copy of their final joint merger proxy for their stockholder meetings on Nov. 2.
lost 5/8 to 32 5/8 after it announced plans to buy
Southern Foods Group
in a deal valued at $6 billion. According to the terms of the transaction, Suiza would hold a 66.2% stake in the merger, with the remaining interest held by
Dairy Farmers of America
, which owns half of Southern Foods. The joint business, which will be known as
Suiza Fluid Dairy Group
, will receive raw milk from Dairy Farmers. Suiza said that Southern President and CEO Pete Schenkel would replace Suiza President and CEO G. Irwin Gordon, who has decided to leave the company, upon the deal's completion.
Earnings/revenue reports and previews
Apple shares fell 7 11/16, or 9.7%, to 71 3/8 after the company warned investors that it would post fourth-quarter earnings well below the previous quarter's results of 69 cents a share, missing the 19-analyst estimate of 76 cents,
reported. Apple blamed the disappointing earnings on delivery problems with Motorola's G4 processor chips, which are used in Apple's
Power Mac G4
computers. Shares of Motorola slipped 1 9/16 to 89 1/8.
lost 23/32 to 15 3/16 despite the fact the posted second-quarter earnings of 55 cents a share, in line with the seven-analyst estimate of 55 cents and beating the year-ago 45 cents a share.
fell 1 to 30 after warning investors that it would report disappointing fiscal 1999 results from $3.20 to $3.30 a share.
rose 1 5/16 to 31 7/16 after it posted second-quarter earnings of 91 cents a share, in line with the 15-analyst estimate of 91 cents and beating the year-ago 81 cents.
Discount Auto Parts
slipped 3/4 to 17 after posting first-quarter earnings of 44 cents a share, missing the five-analyst estimate of 45 cents and the year-ago 42 cents.
dropped 1 3/8 to 59 3/8 despite posting third-quarter earnings of $1.32 per share, easily beating the 11-analyst estimate of $1.09 cents.
fell 5/16 to 22 9/16 after it reported second-quarter earnings of 27 cents a share, in line with the six-analyst estimate of 27 cents a share and beating the year-ago 24 cents.
edged down 1/16 to 6 15/16 after posting fourth-quarter earnings of 2 cents a share, missing the three-analyst estimate of 4 cents a share but up from the year-ago 72-cent loss.
Pepsi Bottling Group
gained 1 3/16, or 7.2%, to 17 11/16 after reporting third-quarter earnings of 59 cents a share, beating the three-analyst estimate of 55 cents but down from the year-ago 81 cents a share.
lost 5/16 or 6.8%, to 4 5/16 after it preannounced a first-quarter loss of $1.20 to $1.30 a share, well below the 11-analyst estimate of a $1.06 loss.
Offerings and stock actions
raised the size of its planned IPO to four million shares from three and raised the expected share offering range to $17 to $19 a share from $14 to $16.
is serving as the deal's lead underwriter.
Bed, Bath & Beyond
added 1 1/4 to 30 1/8, after
raised its rating to a strong buy from a buy. Bed Bath & Beyond will become part of the S&P 500 at the close of trading today.
rose 1/8 to 9 3/4 after
started coverage with near-term and long-term accumulate ratings.
fell 3/8 to 6 1/4 after
rolled out coverage with a neutral rating.
rose 3/8 to 62 1/16 after
Morgan Stanley Dean Witter
reinstated coverage with a strong buy rating.
fell 5/8 to 22 13/16 after
Donaldson Lufkin & Jenrette
initiated coverage with a buy rating.
fell 4 9/16, or 8.8%, 47 3/8 after
sliced its rating to a market perform from a long-term buy.
slipped 2 5/16, or 21.1%, to 8 5/8 after Morgan Stanley hammered down its price target on to 15 from 18.
Banc of America Securities
cut its fiscal 1999 earnings estimates to $5.04 a share from $5.33.
lost 5/8 to 40 after J.P. Morgan started coverage with a market perform and set a price target of 45.
gained 1 9/16 to 44 15/16 after Lehman Brothers upped its fiscal 1999 and 2000 earnings per share estimates to $4.03 from $4.00 and to $4.65 from $4.60 respectively.
Park Place Entertainment
climbed 9/16 to 11 1/8 after J.P. Morgan rolled out coverage with a buy rating and a price target of 14.
was off 1 7/16, or 7.9%, to 16 11/16 after Morgan Stanley sliced its rating to neutral from outperform.
added 9/16 to 46 1/8 after Morgan Stanley reinitiated coverage with a strong buy rating.
climbed 7/16 to 11 1/4 after
initiated coverage with intermediate market-perform and long-term outperform ratings.
lost 3/16 to 103 after
Deutsche Banc Alex. Brown
began coverage with a strong buy rating
lost 1/8 to 14 3/8 after saying it chose Executive Vice President Robert Blair to become its president and CEO. Blair is replacing Fred Chan, who will continue to serve as the company's chairman.
added 3/8 to 17 3/4 after saying it tapped President and COO Craig Conway to serve as the company's CEO.
lost 5/32 to 6 13/16 after saying it tapped George Platt to become its new president and CEO. Platt will replace William Jobe, who stepped down in July.
As originally published this story contained an error. Please see
Corrections and Clarifications.