The buffet of news served up on Wall Street this morning was none too savory, putting a damper on optimism about a possible interest-rate cut sometime this week. The major indices muscled into the green at the open, but were struggling to hang on to those gains.
Rumors that the
Fed might cut interest rates before its next official meeting on March 20 took hold late Friday, helping to break a four-day losing streak on the
Nasdaq. The tech-heavy index turned up in the last half-hour of trading, closing just in the green, but it remains near a two-year low. The
Dow also reversed gargantuan losses at the end of Friday's trading session, but was unable to break out of the red. After several weeks of ugly fourth-quarter earnings numbers and warnings about coming quarters, talk of an interest-rate cut is a boon to investors.
Still, many doubt the interest-rate cut theory, and there are plenty of bad-news bears out there this morning to spoil everything. Investors continued getting rid of their chip and PC- making stocks today; both of these sectors have fallen off sharply since Feb. 15, when Fed Chairman
Alan Greenspan spoke before the Senate. Financials got a brief reprieve early on today -- after putting in a miserable performance in the past two weeks -- but lately were headed back down south. The
American Stock Exchange Broker/Dealer Index
was down 0.2% and the
Philadelphia Stock Exchange/KBW Index
was off by 0.1%.
Chip stocks weren't getting any help from communications chipmaker
slashed its first-quarter revenue estimates -- again -- this morning.
Dan Niles also lowered his forecasts on chipmakers
, citing supply issues that he said likely won't bottom out until the third or fourth quarter. The
Philadelphia Stock Exchange Semiconductor Index
was down 3.8%. Texas Instruments was off 2.7%, Micron Technology was down 4.97% and Cypress Semiconductor was losing 0.6%.
But mobile-phone makers
were climbing, despite lowered earnings estimates from
this morning. Nokia and Ericsson have seen their share prices plummet in the past week on
rumors that they would warn about upcoming earnings. Nokia lately was up 4.5% and Ericsson was 1.1% higher.
The warning rumors surfaced amid a flurry of trouble in the telecom-equipment sector. So far this month, sector heavyweights
have all warned. Motorola
warned on Friday.
Merrill also downgraded telecoms
. Alcatel was lately down 1.2 %, while Marconi was up 2.6%.
was giving a boost to the retailers after it
raised its earnings for 2001. Lowe's was lately up 4.7% to $57.15. The company did say, however, that it sees first-quarter
same-store sales coming in flat to negative. The news was particularly heartening since Lowe's and its rival,
issued troublesome outlooks for coming quarters. Home Depot was up 5.2%, and was giving a 13.5 point lift to the Dow.
Procter & Gamble
was the biggest weight on the Dow, however, after the company cut its forecast for 2001 earnings. The stock was falling 5.6% to $70.80, and slashing 27.5 weighted points from the index.
While some on Wall Street are doubtful the Fed will cut interest rates before its March 20 meeting, economists say the monetary policy body may be forced to act if the stock market continues to erode and if consumer confidence readings for February continue to tumble. The intermeeting cut theory began to gain credence on Wall Street after Wayne Angell, ex-Fed governor, said he thinks there is a 60% chance the Fed will cut interest rates by a half-percentage point this week.
The naysayers are worried that the threat of inflation could hold the Fed back. Some economic data released in the past two weeks showed much stronger gains in wholesale and retail prices during January than were expected, mostly due to high energy prices. Economists and the Fed still are more worried about depressed consumer sentiment levels and a potential recession than they are about inflation. But if higher energy prices are lasting and prices continue to soar, the double-whammy could lead to stagflation, the thinking goes -- and
cripple the Fed's interest-rate cutting plans even as the economic slowdown continues to creep along.
The Fed cut rates twice in January, inspiring a heady rally in stocks that month. But those gains and more have since been erased as the outlook for corporate earnings in coming quarters has begun to look more and more dire.
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Biotech stocks were rallying for a third straight day today. The
Nasdaq Biotechnology Index
was rising 2.5%, with gains lead by
, up 11.7% to $34.13.
Human Genome Sciences
was 9.5% higher and
was 4.5% higher.
And investors continued to seek shelter in the ultimate defensive sector, gold. The
Philadelphia Stock Exchange Gold and Silver Index
was up 2.97%.
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Treasury prices had been slightly lower this morning after rallying boldly Friday on rumors of an imminent interest-rate cut, but lately were up as the stock market's early rally faded to red. The benchmark 10-year
Treasury note was up 3/32 to 99 8/32, yielding 5.097%.
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