The major indices were solidly in the green heading into the far turn, but the market picture is currently a bit unsettled. Already, investors are backing off in anticipation of
the Federal Reserve's meeting next week. The market's expecting a 50 basis-point rate cut, and playing that positive against an earnings season that hasn't been stellar.
After months of dire projections for fourth-quarter earnings, companies that beat expectations and raise forecasts for future quarters are like manna from heaven. And the market gods tossed plenty of manna to the hungry bulls last night and this morning:
all spit out satisfying numbers following yesterday's close.
Dow Jones Industrial Average was taking some heat from drug maker
, which met earnings estimates this morning. Merck was the biggest weight on the blue-chip Dow, slashing 16 points from the index. Another drug company and member of the Dow,
Johnson & Johnson
beat analyst expectations by a penny a share; still, it had recently turned down, losing 0.6% to $93.69.
Helping the Dow this morning were gains in the financial stocks,
Players expect a bit of listlessness in the days leading into the Fed meeting. Meanwhile, on Thursday, Fed Chairman Alan Greenspan is scheduled to speak before the
Senate Budget Committee
on fiscal challenges, but he is unlikely to show his hand just before the Fed meets next week. Comments from other Fed officials and recent economic data together have the market well convinced that a 50 basis-point cut is in the cards; currently the
fed funds futures traded on the
Chicago Board of Trade
are factoring in a 96% chance that this will happen.
Improved sentiment continues; winners were ahead of losers on both the
New York Stock Exchange and the
Nasdaq Stock Market, by counts of 16 to 10 and 18 to 16, respectively.
Tech bellwethers were mostly in the red, though, including software giant
, computer titan
and PC giant
Getting soundly trounced was
. The B2B company was losing 22.3% to $20.75, making it one of the Nasdaq's top losers, after the company reported earnings yesterday and was hit with a slew of analyst downgrades this morning.
was hogging the
Nasdaq spotlight and raking in the cash this morning. The communications software provider was the most actively traded stock on the Nasdaq and was soaring 14.9% to $61.25 after it posted a quarterly operating profit ahead of schedule and lifted its forecasts for this year's earnings. Openwave was formed through the merger of Phone.com and Software.com.
EMC was lately rising after losing a bit despite strong earnings. The storage software leader saw fourth-quarter earnings rise 49% to 25 cents per share, beating analyst estimates by 2 cents.
separate story about how well-positioned the company is going forward. EMC was lately up by 0.8% to $77.06; it's up nearly 40% for the month.
Other earnings winners were also rising. Communications equipment maker Tellabs, which met fourth-quarter consensus estimates with earnings of 56 cents per share, was rising 7.1% to $57.56. Merrill Lynch, which
beat fourth-quarter earnings estimates -- due to increased fees for advising companies on mergers -- was up 3.7% to $77.88, a new high for the brokerage. Software maker Computer Associates, which beat fiscal third-quarter earnings estimates and
raised its earnings outlook for the fiscal fourth quarter, was up 4.1% to $33.56.
The semiconductor sector was weak, though, after generating a few bumps along the earnings trail last night with an
earnings warning from
revenue miss from
Philadelphia Stock Exchange Semiconductor Index
was down 0.8%.
And the two California utilities nearing bankruptcy were also lower today, with
down 2.6%, and
down 4.1%. The two stocks bounced Monday amid news of a possible plan for resolution to the state's energy crisis. But today
The Wall Street Journal
reported that California faces new threats to its electric system, "as utilities are no longer able to ask that power be turned off at big users operating under so-called interruptible contracts."
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After being ignored while technology stocks were surging, cyclical names are moving higher in today's trading. The
Morgan Stanley Cyclical Index
was lately up 1.7%, helped along by gains in
, up 1.5%, and
Illinois Tool Works
, gaining 1.9%.
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Treasuries are trading higher as institutional investors await critical economic developments due later this week. The increase in note and bond prices this morning, which broke the down trend of the last two business days, is primarily due to adjustment of overbought positions and trading "within the range." The markets will have more to react to in a couple of days, when employment data and the latest comments by
Federal Reserve chairman
Alan Greenspan become public. Bond prices were also lifted a bit after the
Bank of Canada
lowered interest rates by 25 basis points. The yield curve remains steep, with the difference between yields on the 2-year note and the long bond about 0.8%.
The benchmark 10-year
Treasury note lately was up 9/32 to 104 5/32, lowering its yield to 5.192%.
In economic news, the
BTM-UBSW Weekly Chain Store Sales Index
chart ) fell 0.7% in the week ended Jan. 20, after a 0.3% drop in the prior period. The loss is attributed to adverse weather on Saturday, considered the week's strongest shopping day, as well as to people staying home to watch the presidential inauguration. The year-to-year sales average is healthier, showing 3.1% growth, though it is lower than the 4.9% recorded 12 months ago.
Redbook Retail Average
chart ) found January sales running 2.4% ahead of December, narrowly exceeding a target of 2.3%. They were also 3.4% ahead of the previous January. However, this is the month when stores clear inventories, so most of the current sales will probably result in low profit margins. A more-accurate reading of consumer spending can be made in the second quarter of this year, after the proposed tax cuts, interest-rate corrections and rounds of mortgage refinancing have been completed.
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