Market Update: Dow Follows Nasdaq Modestly Lower at Midday
Some hangover from yesterday's Fed-motivated pullback and continuing confusion over the presidential election was keeping a lid on the market this morning. The blue-chip
Dow Jones Industrial Average was faltering below the flatline in thin volume, with decliners narrowly beating advancers.
Yesterday, the
Federal Open Market Committee left interest rates alone. But in a statement accompanying that decision, the policy-making body said the risk of excessive inflation remains stronger than the risk of recession.
The market had hoped to hear that those risks were balanced. Disappointment at not hearing this immediately flattened an earlier rally, leaving the major indices gasping near unchanged by the close. That disappointment lingered today.
And with the U.S. presidency still stuck in the courts, it's unclear when this country will have a winner for the White House.
Old-style industrials were weighing most heavily on the Dow, with chemicals giant
DuPont
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and forestry firm
International Paper
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putting the most pressure on the index, together shaving 22 points.
The
Nasdaq Composite Index got an extra dose of negativity from
Merrill Lynch
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, which managed to spoil the semiconductors' four-day winning streak. But after dipping at the open, the tech-heavy Nasdaq didn't advance any further into the red. It was lately only moderately lower.
Citing inventory concerns, Merrill lowered its ratings on a slew of communications-chip makers to near-term accumulate from buy. That list included
Broadcom
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,
Conexant
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,
Exar
(EXAR)
,
PMC-Sierra
(PMCS)
,
Transwitch
(TXCC)
and
Vitesse
(VTSS)
.
A negative conference call last night from semiconductor
Micron Technology
(MU) - Get Micron Technology Inc. Report
and some bearish analyst calls on the stock this morning also helped slam the sector.
Prudential Securities
lowered its earnings-per-share view on Micron to $2.30 from $2.60 for year 2001 and to $4.60 from $5.30 for the year 2002.
Lehman Brothers
also lowered its 2001 earnings view to $2.50 from $3.50.
The communications chip-makers were all lower, led by Broadcom, PMC-Sierra and Transwitch, which were falling 7%, 9% and 7.3%, in that order. Micron was down about 2.9%. These losers were painting the
Philadelphia Stock Exchange Semiconductor Index
crimson, and the measure was lately down 2.6%.
At least one semiconductor-maker was getting a lift, however. It seems investors decided they were pleased with last night's report from
Applied Materials
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. While the company reported earnings above official analyst estimates by a penny, it also issued a foggy earnings outlook and didn't say much about the so-called inventory buildup.
Lehman Brothers
said in its report this morning that the shares offer "exceptional value." Lehman hasn't done any recent underwriting for this company. Merrill just couldn't smile on a semiconductor this morning, however, and cut its 12-month price target and earnings-per-share view on the company this morning. Merrill's moves notwithstanding, Applied Materials was rising slightly, by 0.7%.
The semiconductor sector as a whole, including Applied Materials, has taken a beating in the past few months, though it had risen ahead of AMAT's much-anticipated earnings report.
What Next?
One observer, whose sentiments are probably shared by many on Wall Street, said the market probably won't get anywhere until there is some resolution on the elections.
"If we can get this thing resolved, we can move along. If this ends up in the courts for the next few weeks, it's going to be kind of tough. I'm having nightmares -- it's wearing a lot of portfolio managers thin," Ruffat said.
"For the most part, we'll probably tread water a little bit today," he said.
This morning, the market got another sign of economic slowdown in the October
Consumer Price Index, which came in at 8:30 a.m. The key inflation indicator came in right in line with expectations, and both the headline and core number -- minus food and energy -- hit 0.2% rises.
In September, the headline CPI jumped 0.5% and the core CPI rose 0.3%.
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Sector Watch
Financials were showing modest strength, led by gains in Citigroup
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and FleetBoston Financial
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, up 1.5% and 0.7%. Regional banks National City
(NCC)
, based in Cleveland, and State Street
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, based in Boston, were also firmly higher.
Brokerages were also higher, with the American Stock Exchange Broker/Dealer Index up 0.6%.
Banks and brokerages have been plagued by concerns over bad loans in recent weeks and were the subject of a
swift selloff yesterday.
Other pockets of strength could be found in the tobacco, utility, natural gas and retail stocks.
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Bonds/Economy
Bond prices were edging higher this morning after data was released showing the CPI rose 0.2% in October. The benchmark 10-year
Treasury note was up 4/32 to 100 13/32, yielding 5.694%.
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