Market Update: Stocks' Misery Carries Through to the Close; Dow, Nasdaq Both End in Red
With Al Gore's concession speech in the books and George W. Bush's rumpled, what-me-worry demeanor Oval Office-bound, the stock market took a stumble as both technology and non-technology stocks sold off.
The
Dow Jones Industrial Average took a big fall, dropping more than 100 points on bad news from the financials.
J.P. Morgan
(JPM) - Get JPMorgan Chase & Co. Report
and
Chase Manhattan
(CMB)
have been merged at the hip ever since agreeing to combine into one company back in September. And today, both companies sank banker and broker stocks after the pair announced that fourth-quarter earnings will come in way below expectations. Total revenue will be lower than the year-ago fourth quarter and the previous quarter this year, due to a challenging market, including low volume on currency markets.
Five thousand employees will be jettisoned to help cut duplication related to the merger, which leaves a particularly bad taste in mouths just as bonuses are set to be doled out. Since many brokers don't really make much in the way of salary, bonuses are a way to assess one's worth. And now many will simply be lucky to have a job in the new J.P. Morgan.
But perhaps most disturbing was the bottom line at
Chase Capital Partners
. (Which has a stake in
TheStreet.com
.) The venture capital unit of Chase Manhattan has losses of $300 million on its books, which means that its investments in both the stock market and in bringing companies public were far lower than many anticipated.
This news, coupled with the news of the earnings miss, has hurt both the banking and brokerage houses. The
TheStreet Recommends
American Stock Exchange Broker/Dealer Index
slid 4.7%, giving back a lot of the gains that it had made in the beginning of December. This is the third-straight day of losses for the brokers. The
Philadelphia Stock Exchange/KBW Bank Index
slid 2.2% after trading relatively flat over the past two sessions.
As should be expected, both J.P. Morgan and Chase were reeling from the news. After tacking on 22% in December gains as of yesterday's close, Morgan was beaten down 3.8% to $157.94. Chase fell 3.7% to $42.88.
It was nearly impossible to escape the ghost of economic future. Appliance makers dropped following yesterday's earnings warning by
Whirlpool
(WHR) - Get Whirlpool Corporation Report
and today's warning from rival
Maytag
(MYG)
.
General Electric
(GE) - Get General Electric Company Report
is one such appliance maker, with its Hotpoint line. It was another drag on the Dow, falling 3% to $51.44.
The
Nasdaq Composite Index was in the red, too, as those darned technology stocks took a nosedive ahead of some big-name earnings releases this evening.
But first, the good news.
The $109 billion megamerger between
America Online
(AOL)
and
Time-Warner
(TWX)
got the green light from the U.S.
Federal Trade Commission
, which voted unanimously to approve the largest deal in American history. The road to an AOL-TWX merger isn't totally complete, since both have to face off with the
Federal Communications Commission
, but the biggest stumbling block is now in the rearview.
Both companies traded much higher on the news, with Time Warner up 2.6% to $74.50, and AOL up 3.2% to $50.
And now the bad news.
Quite a sizable chunk of technology made a beeline to the dumper. The dot-coms were the most disappointing, shrugging off the AOL gain and focusing on their own problems, namely, the slowing amount of money given to Internet companies and the pall of death that is hanging over the industry. Bellwethers
Yahoo!
(YHOO)
and
Amazon.com
(AMZN) - Get Amazon.com, Inc. Report
were lower, while the
TheStreet.com Internet Sector Index
, or DOT, dropped 4.6%.
Tonight, DOT member
CMGI
(CMGI)
will release earnings after the bell, along with
Microsoft
(MSFT) - Get Microsoft Corporation Report
rival and Unix-supporter
Red Hat
(RHAT)
.
But all eyes are on one company --
Oracle
(ORCL) - Get Oracle Corporation Report
. Larry Ellison's software giant will release earnings after the closing bell today and ahead of that, it was trading relatively flat.
Sector Watch
There was a tremendous amount of red on the tape overall, with many sectors sliding as those fears of an economic slowdown creep out of technology and into the lifeblood of other sectors. Retail has already felt the effect, as speculation continues that those clogged sales racks will cut into the profits of many a mall outlet. After taking a hit yesterday after a market-wide rally, the
S&P Retail Index
was relatively flat today, trading to the downside.
Transports were also hurt, especially after
FDX
(FDX) - Get FedEx Corporation Report
, the parent company of shipper
FedEx
, said it would beat second-quarter estimates by three cents a share, but that the future wasn't quite as peachy. FedEx warned that 2001 could be a rough year, with the slowing American economy and horrible weather cutting into profits. And that makes sense. Since fuel costs are still quite high, taking on additional costs due to weather-delayed shipments could affect not only FedEx, but also the entire transportation industry.
As a result, the
Dow Jones Transportation Average
fell 3.8%. FDX slipped 9.5%, while rival
UPS
(UPS) - Get United Parcel Service, Inc. Class B Report
dropped 6.3% to $58.69.
Petroleum-related stocks were easing, with the recently hot natural gassers coughing up a lot of their gains. The
American Stock Exchange Natural Gas Index
fell 2.9%. Nearly every inch of the petroleum world was weaker, with the
American Stock Exchange Oil & Gas Index
slipping 3.4%, and the
Philadelphia Stock Exchange Oil Service Index
slipping 2.5%.
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Bonds/Economy
Bond prices were higher after a report showed little change in goods prices at the wholesale level, suggesting that inflation will remain under control.
The benchmark 10-year
Treasury note was up 7/32 at 103 29/32, dropping its yield to 5.229%. Bond yields have touched new lows today, though they are off their lowest levels of the day.
The
Producer Price Index
(
definition |
chart |
), which measures prices paid by businesses for goods, rose 0.1% in November, in line with the average forecast of economists polled by
Reuters
. The annual rate of increase of producer prices held steady at 3.6%.
The core PPI, which excludes food and energy prices, was unchanged. Its annual rate also held steady, at 1%.
In other economic news, first-time claims for unemployment insurance fell for the second week in a row, indicating increasing demand for workers. Bond investors would rather see slackening demand, which would signal economic weakness.
Initial jobless claims
(
definition |
chart |
source
) fell to 320,000, the lowest in six weeks, from 352,000. The four-week average fell to 343,250 from last week's 28-month high of 345,250.
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