Market Players Weigh How to React to Friday's Big News

A mixed, light-volume session is the prelude to the May jobs report, with Wall Streeters preparing strategies.
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Despite the healthy green glow on trading screens, there was not a heck of a lot of action on Wall Street at midday. Just as well -- it gave investors more time to chew their nails over tomorrow's May

jobs report

. Trying to figure out how the market might react is unnerving.

The general feeling on the Street is that the

Federal Open Market Committee

will raise rates at the conclusion of its June 29-30 meeting. The July fed funds futures contract has already priced in an 88% chance of a quarter-point tightening. Short-term Treasuries are pointing toward the Fed snugging rates as well.

Now a lot of portfolio managers are figuring that the best thing to do is to stick to the sidelines until after the meeting. Thinking that the

Fed

will only move once, or will at least hold off for a while before tightening again, they want to go into stocks on the downdraft. They would also like to have a bit more cash on hand to buy equities at what they think will be bargain-basement prices. They're planning to sell into any rallies.

This means there could be some strange reactions to the jobs report. If it comes in on the strong side, maybe all it will do is confirm the market's suspicion that the Fed is going to tighten -- and after some initial weakness you could see some buying of the fact. If it's on the weak side, it may still do little to deter the market's conviction that a hike is coming. The rally meets selling, selling wins, and people talk about how we're in a bear market because stocks go down on good news.

Confused? So's everybody else. Nobody knows what to do, so not much gets done.

"Investors are seeing both sides of the coin here," said Charles Crane, chief market strategist at

Key Asset Management

. "On the one hand, there's concern about the impact of a strong economy on inflation and interest rates. On the other, we have the positive influences of a strong economy -- mainly stronger earnings."

Tomorrow's jobs report, Crane thinks, will shift the balance toward one of those things or the other. If wages show little growth, investors may gather that the economy can continue to perk along at its current pace without raising the specter of inflation. If wage growth is strong, however, the market could see "a little bit of indigestion," said Crane.

With everybody focused on the report, trading today has been thin and basically range-bound. Much of the action has been driven by the

S&P 500

futures, which lately have bounced higher every time they touch their lows, only to stall out when they reach above 1300. "We take out some key levels, there's no follow-through, and we break back down again," said Kevin O'Brien, head index trader at

Prudential Futures

. "The market is marking time and trading sideways."

The

Dow Jones Industrial Average

lately was up 52 to 10,630. The

S&P 500

was up 3 to 1298. The

Nasdaq Composite Index

was off 13 to 2420.

TheStreet.com Internet Sector Index

was down 8 to 549 and the

Russell 2000

was down a fraction to 437.

Oil services were the standout in the market, after a number of firms came out with positive comments on them. The

Philadelphia Stock Exchange Oil Service Index

was up 3.9%.

The bellwether 30-year Treasury was down 7/32 to 90 11/32, its yield rising to 5.95%. (For more on the fixed-income market, see today's early

Bond Focus.)

Breadth was strong in the early going, but deteriorated a bit by midday. On the

New York Stock Exchange

, advancers were outpacing decliners 1,443 to 1,306 on 389 million shares. In

Nasdaq Stock Market

action, advancers were beating decliners 1,762 to 1,700 on 440 million shares. New 52-week highs were leading new lows 37 to 25 on the Big Board and 50 to 28 on the Nasdaq.

Thursday's Midday Movers

By Heather Moore
Staff Reporter

Oil service stocks continued this week's spurt higher with today's momentum coming from

Goldman Sachs

analyst Terry Darling, who started the sector as overweight. The analyst, citing improving commodity prices and lower operating costs, expects to see a 10% increase in upstream spending in 2000 for industry companies.

Schlumberger

(SLB) - Get Report

, up 1 to 61,

Halliburton

(HAL) - Get Report

, up 1 1/2 to 43, and

Hanover Compressor

(HC)

, up 1 7/16, or 5.4%, to 28 5/16, were added to the firm's recommended list.

Additionally, Goldman began coverage of the following names with market outperformer ratings:

Baker Hughes

(BHI)

, which was up 3/4 to 32 11/16;

BJ Services

(BJS)

, up 7/8 to 29 1/2;

Cooper Cameron

(CAM)

, up 1 3/8 to 37 3/4;

Nabors Industries

(NBR) - Get Report

, up 1 7/16, or 6.8%, to 22 11/16;

National-Oilwell

(NOI)

, down 1/16 to 11 13/16; and

Veritas DGC

(VTS)

, up 1 1/2, or 8.7%, to 18 11/16. Finally,

Smith

(SII)

was up 2 1/16 to 44 1/2 after Goldman initiated coverage with a market performer and

Morgan Stanley Dean Witter

upgraded it to outperform from neutral.

Many retailers were gliding, with the

S&P Retail Index

rising 2.6%, following strong May same-store sales reports.

  • Ames Department Stores (AMES) was rising 1/8 to 42 5/8 on sales up 6.4%.
  • AnnTaylor Stores (ANN) was rising 1 1/8 to 43 3/8 on sales up 10.1%.
  • Dollar General (DG) - Get Report was rising 2 7/8, or 10.7%, to 29 13/16 on sales up 9.2%.
  • Kmart (KM) was falling 1/8 to 15 5/16 despite sales up 3.7%.
  • May Department Stores (MAY) was falling 1/16 to 42 5/16 despite sales up 2.9%.
  • Pier 1 Imports (PIR) - Get Report was falling 1/2 to 11 3/4 despite sales up 5.9%.
  • Sears (S) - Get Report was flat at 50 7/8 on sales up 1.9%.
  • ShopKo (SKO) was falling 1/16 to 35 despite sales up 9.4%.
  • Wal-Mart (WMT) - Get Report was rising 1 7/16 to 45 13/16 on sales up 7.7%.

In other news:

Cendant

(CD)

was up 1 3/16, or 6.6%, to 19 1/4 after

Salomon Smith Barney

started coverage of the stock with a buy and a price target of 30.

Genentech

(GNE) - Get Report

was tumbling 4 7/16, or 5.1%, to 82 1/16 after

Roche Holding

said it intends to exercise a call option to acquire all the shares of the company it doesn't already own for $4.2 billion. After redeeming the shares, Roche said it intends to sell up to 19% of Genentech to the public, maintaining the biotech's status as a publicly traded, independent legal entity.

Good Guys

(GGUY)

was up 1 9/32, or 33.6%, to 5 3/32 after saying its founder and former chairman and CEO, Ronald Unkefer, will rejoin the company July 1 as chairman and chief executive. He will replace Robert Gunst, who is resigning.

Nucor

(NUE) - Get Report

was down 4 1/4, or 8.3%, to 47 after saying John Correnti resigned as director, vice chairman, president and CEO. Chairman David Aycock will take over as president and chief executive.

Weatherford

(WFT) - Get Report

was up 1 15/16, or 5.6%, to 36 7/16 after Morgan Stanley Dean Witter lifted it to strong buy from neutral.

Earnings/revenue movers

Best Buy

(BBY) - Get Report

was up 4 3/4, or 9.9%, to 52 5/8 after saying it sees first-quarter earnings of 20 cents a share, above the current 18-analyst

First Call

estimate of 13 cents. The company, which made 8 cents in the year-ago period, is scheduled to release quarter earnings June 15.

U.S. Xpress Enterprises

(XPRSA)

was down 2 5/16, or 19.3%, to 9 3/4 after last night saying it will record a second-quarter charge of $1.3 million related to a settlement of a dispute with

Employee Solutions

(ESOL)

. Today,

BT Alex. Brown

cut the stock to market perform from strong buy.

Volt Information Sciences

(VOL)

was up 2, or 11.3%, to 19 11/16 after posting second-quarter earnings of 38 cents a share, a dime above the year-ago 28 cents. First Call didn't have an estimate for the company.