Market Update: Dow, Nasdaq Plow Into Green, Driven by Fed Hopes
The
Dow Jones Industrial Average was reclaiming much of the 240 points it lost in Friday's session. The
Nasdaq Composite Index was also on the rebound, but being a bit volatile this morning.
The
S&P 500 was making its way back from hitting its year closing low Friday.
The market was buoyed by a story in
The Wall Street Journal
, which said the
Federal Reserve might get really aggressive and announce a interest rate cut tomorrow instead of waiting until January. The market, however, is pricing in only 46% odds of a rate cut tomorrow, up from 41% Friday. Word is information in the article was put out before the open in an effort to soften the blow of whatever announcement comes out of the
Federal Open Market Committee meeting tomorrow.
Ever since
Big Al gave a
speech to the
America's Community Bankers Conference
on Dec. 5 -- in which he acknowledged that the past six interest rate hikes had worked and resulted in a visibly slowing economy -- the belief has been widespread that the Fed would say the risk of inflation doesn't exceed that of recession.
If Greenspan and his wild and crazy crew decide to adopt an easing stance, it would most likely lead to an interest rate cut next month.
TheStreet Recommends
The Dow was being pushed up by financials (read: interest-rate sensitive stocks)
J.P. Morgan
(JPM) - Get JPMorgan Chase & Co. Report
and
Citigroup
(C) - Get Citigroup Inc. Report
.
Boeing
(BA) - Get Boeing Company Report
was a big blue-chip contributor after it announced a $365 million deal with Chile's leading airline
LanChile
(LFL)
. Lately, the Dow had only four detractors.
Elsewhere on the
Big Board,
Aetna
(AET)
, the large health insurer that has been going through a series of changes since it bought
U.S. Healthcare
several years ago, this morning announced moves to get its house in order. Lately, the stock was up $5.75 to 38.75.
Aetna said it would cut 5,000 jobs and take after-tax charges of about $100 million in the fourth quarter to pay for the restructuring. The Hartford, Conn.-based insurer also said it would take an after-tax charge of $235 million in the fourth quarter related to good will in connection with Medicare markets. Other after-tax charges for the fourth quarter include $35 million for the recent spinoff of its Aetna healthcare unit and $195 million for the sale of Aetna Financial Services and Aetna International. The sale of those two units was completed last week.
Also in healthcare,
Tenet
(THC) - Get Tenet Healthcare Corporation Report
was upgraded to strong buy from buy at
Credit Suisse First Boston
on signs of a strong quarter. The firm also raised
Lincare Holdings'
(LNCR)
2001 EPS to $2.67 a share from $2.57 and its 12-month price target to $70 from $47 after Congress approved legislation restoring $35 billion in Medicare and Medicaid funding over five years to the healthcare industry. Both stocks were higher in recent trading.
After the closing bell Friday,
Boston Scientific
(BSX) - Get Boston Scientific Corporation Report
was ordered to pay $324 million to blue-chip drug company
Johnson & Johnson
(JNJ) - Get Johnson & Johnson Report
in a patent infringement case concerning a stent, which is a tube used to keep open weakened heart arteries. J&J on Friday also announced that it expects its full-year earnings to meet estimates. Strangely, Boston Scientific was up a bit, while J&J was sliding.
Media meets market research in a newly announced $2.3 billion merger between Dutch media publisher
VNU
and market research firm
ACNielsen
(ART)
. VNU, which publishes
Billboard
magazine and the
Hollywood Reporter
, will pay $36.75 per Nielsen share. The deal is expected to close in the first quarter of 2001. If the deal goes through, ACNielsen will be reunited with
Nielsen Media Research
, which does the television ratings and was bought by VNU last year for $2.5 billion. ACNielsen was bouncing $11.25 to $35.88.
In breaking merger news, luxury goods company
LVMH Moet Hennessy
(LVMHY)
submitted a bid for high-end clothing maker
Donna Karan
(DK) - Get Delek US Holdings Inc Report
. Donna Karan shot up 73%, or $3.56, to $8.44, while LVMH was 31 cents higher to $13.25.
There were more earnings warnings attracting attention today -- big surprise.
Online toy retailer
eToys
(ETYS)
was the latest Internet company to warn that it's having problems. It was plummeting 75 cents to 31 cents. The company said third-quarter earnings would fall well short of expectations and that it was looking into a merger, asset sale or other type of restructuring in an effort to stay afloat. And as if eToys needed any more pain, its rating and loss estimates were placed on review at
Robertson Stephens
.
Nasdaq components were getting whacked by
Goldman Sachs
, which cut a slew of Internet companies, including eToys and online ad company
DoubleClick
(DCLK)
. The firm removed e-business softwaremakers
BroadVision
(BVSN) - Get BroadVision Inc. Report
and
Blue Martini
(BLUE) - Get bluebird bio, Inc. Report
from its recommended list because of concerns about potential 2001 budget cuts. DoubleClick still got a rally on, but BroadVision and Blue Martini were falling.
Automaker
DaimlerChrysler
(DCX)
was down on fears of a profit warning from its ever-troubled Chrysler unit, which on Friday announced temporary plant shutdowns. The company has recently announced a management shake-up that is part of efforts to give the company's earnings traction.
Cognex
(CGNX) - Get Cognex Corporation Report
, which makes machine vision technology, said it's expecting first-quarter earnings to miss estimates, citing decreased bookings from customers in the semiconductor and electronics industries. It was off 56 cents to $18.56.
And
Time Warner
(TWX)
this morning said it is reducing its growth expectations for earnings before interest, taxes and amortization to 11% for full-year 2000, from an earlier projection of 12% to 13%. The media giant in part blamed weakness in advertising on its cable network and weaker than anticipated music sales. Time Warner's merger with
America Online
(AOL)
got a boost last week when the
Federal Trade Commission
gave its approval to the deal. Time Warner was down $4.42 to $68.30 and AOL was sliding $3.45 to $45.62.
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Sector Watch
Rising natural gas prices were boosting related sectors. The
American Stock Exchange Natural Gas Index
was up 3%, while the
Philadelphia Stock Exchange Oil Service Index
was rising 7%.
The
Philadelphia Stock Exchange Semiconductor Index
was 4% higher.
Xilinx
(XLNX) - Get Xilinx, Inc. Report
was the sector's biggest help, up $5 to $45.56. This morning, the
International Trade Commission
announced that it would investigate claims that
Altera
(ALTR) - Get Altair Engineering Inc. Class A Report
is importing products that infringe upon three patents of Xilinx. Altera was up 4%.
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Bonds/Economy
All quiet here ahead of the FOMC meeting tomorrow.
The benchmark 10-year
Treasury note lately was 8/32 higher to 104 17/32, yielding 5.148%.
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