Rate Worries Keep Squeezing and Stocks Give In
Blue-chips suffered through the Tuesday trounce as financial stocks continued to slouch toward the poorhouse, weighing down a decent session for the techs.
The
Dow Jones Industrial Average
, off 120, or 1.1%, to 10,910.33, staged a decent imitation of the
San Francisco 49ers'
opening-day performance, which saw the Bay City Rollers get stomped by the
Jacksonville Jaguars
41-3 Sunday.
J.P.Morgan
(JPM) - Get JPMorgan Chase & Co. Report
and
DuPont
(DD) - Get DuPont de Nemours, Inc. Report
provided the largest negative influences on the blue-chip gauge in a weak session for stocks overall.
Meanwhile, the
Nasdaq Composite Index
TheStreet Recommends
, up 23.52, or 0.8%, to 2868.29, was alone among major stock proxies in closing in the green. Decliners outpaced advancers on both the
New York Stock Exchange
and the
Nasdaq Stock Market
.
Economic data took the blame for much of the selling pressure: A stronger-than-expected
retail sales
report for August put the squeeze on both stocks and bonds. Retail sales in the month rose 1.2%; excluding autos, sales rose 0.7%. Economists polled by
Reuters
were projecting retail sales would rise 0.8%, 0.4% ex-autos. The higher-than-anticipated jump in retail sales stoked fears that the
Federal Open Market Committee
would again raise interest rates when it meets Oct. 5. The FOMC has already raised rates twice this year.
With the retail sales data paving the way for a setback, still more economic news looms. At 8:30 a.m. EDT tomorrow, the
Consumer Price Index
is slated for release. According to a
Reuters
poll, economists are expecting the overall CPI to rise 0.3%, while excluding food and energy prices, they're projecting an increase of 0.2%.
"Strong retail sales by themselves do not make for another Fed rate hike," wrote Joel Naroff of
Naroff Economic Advisors
in a report after the release of the retail sales data. "But if tomorrow's CPI report is even a touch higher than expectations, the markets will turn on another dime and become convinced that the last of last fall's three eases will be reversed" at the Oct. 5 FOMC meeting.
In tech, semiconductor stocks were the stars as they continued to pad their already whopping gains for the year. Word of a jump in DRAM prices helped boost stocks in the sector: The
Philadelphia Stock Exchange Semiconductor Index
surged 5.1% and components
Intel
(INTC) - Get Intel Corporation Report
,
Motorola
(MOT)
,
Micron Technology
(MU) - Get Micron Technology, Inc. Report
and
Texas Instruments
(TXN) - Get Texas Instruments Incorporated Report
posted solid gains.
Meanwhile, the
S&P 500
slumped 7.84, or 0.6%, to 1336.29, and the small-cap
Russell 2000
slipped 1.41, or 0.3%, to 438.24.
TheStreet.com Internet Sector
index jumped 13.10, or 2.2%, to 625.56. Boosting the DOT the most was
RealNetworks
(RNWK) - Get RealNetworks, Inc. Report
, which surged 8.7%.
Jay Suskind, head of institutional equity trading at
Ryan Beck
, said interest-rate worries and fears -- set off by the retail sales numbers -- weighed on the market today.
As for tomorrow's economic data, Suskind said that if the CPI numbers are "even a touch negative," the market's going to sell off. That data's going to have to be really positive to get the market much higher, Suskind said.
Brocade Communications
(BRCD)
and
Qualcomm
(QCOM) - Get Qualcomm Inc Report
were stars on the upside on the Nasdaq.
Meanwhile,
Federal-Mogul's
(FMO) - Get Fiduciary/Claymore Energy Infrastructure Fund Report
profit warning yesterday after the close and some Wall Street downgrades doomed it to a huge loss today as it slid 22.9%.
As for the Treasury market, the 30-year Treasury bond tumbled on the strong retail sales report. The long bond was down 26/32 to 100 4/32, yielding 6.12%.
The battered bank sector got hammered again, continuing on the rough road those issues have traveled lately. The
Philadelphia Stock Exchange/KBW Bank Index
slipped 2%.
Brokerage stocks joined banks on the downside and posted a poor performance. The
American Stock Exchange Broker/Dealer Index
tumbled 2.1%.
Insurance stocks got slammed on the fear of what kind of damage Hurricane Floyd may cause in Florida. The
S&P Insurance Index
stumbled 2%.
And while the Nasdaq managed to close in positive territory, even there some analysts see trouble down the road.
Philip Roth, chief technical analyst at
Morgan Stanley Dean Witter
, said he's looking for the market to take another hit in the October-November period. Roth pointed out that though the tech sector hasn't quit, it's "very extended." He said the market won't make a good bottom until after the tech sector corrects.
Roth said that in the current market environment, it "behooves" market participants to focus on economically sensitive issues like the basic-materials and energy sectors.
On the NYSE, decliners thumped advancers 2,147 to 844 on 723.9 million shares. On the Nasdaq, losers beat winners 2,217 to 1,696 on 1.01 billion shares.
On the NYSE, 196 issues set new 52-week lows while 48 touched new highs. On the Nasdaq, 78 issues set new 52-week highs while new lows totaled 64.
On the Big Board,
America Online
(AOL)
was most active with 14.4 million shares changing hands. On the Nasdaq,
Dell
(DELL) - Get Dell Technologies Inc Class C Report
was most active with 22.6 million shares changing hands.
Among other indices, the
Dow Jones Transportation Average
fell 0.84, or 0.03%, to 3090.69,
Dow Jones Utility Average
surrendered 2.63, or 0.8%, to 310.91 and the
American Stock Exchange Composite Index
slipped 3.02, or 0.4%, to 801.48.
Elswhere in North American equities, the
Toronto Stock Exchange 300
increased 3.98 to 7122.10 and the
Mexican Stock Exchange IPC Index
fell 48.85 to 4967.27
Tuesday's Company Report
By
Tara Murphy
Staff Reporter
(
Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.
)
Mergers, acquisitions and joint ventures
Privately held trading system
Archipelago
said that
General Electric's
(GE) - Get General Electric Company Report
business news cable channel
CNBC
paid an undisclosed amount for a 12.4% interest in the company.
Goldman Sachs
(GS) - Get Goldman Sachs Group, Inc. Report
,
E*Trade
(EGRP)
,
J.P. Morgan
(JPM) - Get JPMorgan Chase & Co. Report
and
Merrill Lynch
(MER)
have all previously invested in the electronic communications network. Industry sources told
Reuters
that E*Trade, J.P. Morgan and Goldman spent about $20 million to $25 million on their positions of roughly 20% to 25% each. Shares of GE slid 1 13/16 to 116 3/4.
Cendant
(CDT)
slipped 3/4 to 21 15/16 after it said it set a pact with
Carlyle Group
to sell its
Entertainment Publications
unit for $345 million. The agreement calls for Carlyle Group to pay Cendant $325 million in cash, while Cendant will maintain a 16% interest in the division, which it values at $20 million. Cendant said it would see a $140 million after-tax gain from the transaction.
Delta Air Lines'
(DAL) - Get Delta Air Lines, Inc. Report
Delta Shuttle
unveiled plans to add on 16 new
Boeing
(BA) - Get Boeing Company Report
737-800 Stage III aircraft. Delta said it would receive the planes in July 2000. Shares of Delta climbed 1/2 to 50 5/8, while Boeing declined 1/4 to 44 9/16.
Separately,
Thai Airways International
is seeking to obtain $576 million in new 12-year foreign currency loans to finance the acquisition of five
Boeing
(BA) - Get Boeing Company Report
aircraft.
Finnish telecom giant
Nokia
stumbled 5/8 to 88 7/16 despite winning a $76 million deal with
Picus Communications
, Virginia Beach, Va., to supply high-speed data and voice digital subscriber line, or DSL, broadband network technology.
Motorola
(MOT)
hopped 2 13/16 to 93 3/16 after it said it inked deals
IBM
(IBM) - Get International Business Machines Corporation Report
,
QNX Software Systems
and
Embedded Planet
to create technology for "smart cars," which use computers to supply real-time traffic updates and play music on demand. Motorola said it expects the invention to be ready for 2002 or 2003 car models.
Qualcomm
(QCOM) - Get Qualcomm Inc Report
soared 17, or 11%, to 170 1/2 after it said it was in talks with several interested parties while it considers strategic alternatives for its phone business. Qualcom hopes to forge a deal by the end of the year. The company also said that it expects fourth-quarter earnings to meet or exceed the consensus estimate of 87 cents a share.
Sauer
(SHS)
fell 1 7/8, or 13.9%, to 11 9/16 after it said it is in talks to acquire
Danfoss Fluid Power Business
.
Scottish & Newcastle
, one of the largest pub companies in the U.K., agreed to buy 826 bars, restaurants and hotels from
Greenalls
for $1.8 billion, in an effort to keep pace with fast-growing rivals.
Solectron
(SLR)
advanced 1 11/16 to 75 7/16 after it said it would buy
Smart Modular Technologies
(SMOD)
in a deal valued at $2 billion in stock. Earlier today,
Banc of America
raised Solectron's fiscal 2000 earnings estimates to $1.58 a share from $1.50. Shares of Smart Modular jumped 11 15/16, or 51%, to 35 3/8.
Earnings/revenue reports and previews
Able Telecom
(ABTE)
added 15/16, or 10%, to 9 1/2 after it reported third-quarter earnings of 17 cents a share, in line with the single-analyst estimate and reversing the year-ago 72-cent loss.
Best Buy
(BBY) - Get Best Buy Co., Inc. Report
sunk 5 3/4, or 9.5%, to 54 3/4 despite posting second-quarter earnings of 28 cents a share, beating both the 15-analyst estimate of 27 cents and the year-ago 21 cents.
Interstate Bakeries
(IBC)
skidded 5/8 to 22 3/8 after it reported first-quarter earnings of 47 cents a share, in line with the nine-analyst estimate and flat with year-ago EPS.
Kroger
increased 15/16 to 24 5/8 after it posted second-quarter earnings of 24 cents a share, in line with the 14-analyst estimate and better than the year-ago 12 cents.
Mark IV
(IV)
slipped 5/8 to 20 3/16 after it posted earnings of 36 cents a share, missing the three-analyst estimate of 37 cents but better than the year-ago 31 cents.
Miller Industries
(MLR) - Get Miller Industries, Inc. Report
advanced 1/16 to 2 15/16 after it reported first-quarter earnings of 3 cents a share, in line with the two-analyst estimate and down from 6 cents a year ago.
Pier 1 Imports
(PIR) - Get n.a. Report
climbed 1/8 to 5 13/16 after it reported second-quarter earnings of 12 cents a diluted share, in line with the 16-analyst estimate and down from 17 cents a year ago. The company said same-store sales for the quarter declined 1.8%.
Analyst actions
Anaren Microwave
(ANEN)
popped 1 1/2, or 5.8%, to 27 7/16 after
U.S. Bancorp Piper Jaffray
upped its price target to 35 from 30.
Cabletron
(CS) - Get Credit Suisse Group AG Report
hopped 1 5/16, or 7.7%, to 19 5/8 after
SG Cowen
analyst Chris Stix upped his fiscal 2001 earnings estimates to 85 cents a share from 65 cents and his price target to 25 to 30 from 15 to 20.
Cabot Industrial Trust
(CTR) - Get ClearBridge MLP & Midstream Total Return Fund Inc. Report
advanced 1/16 to 20 1/16 after
Salomon Smith Barney
lowered its rating to neutral from outperform.
Bank of America
(BAC) - Get Bank of America Corp Report
slid 2 11/16 to 56 1/2 after
Credit Suisse First Boston
analyst Michael Mayo sliced his earnings estimates for the second half of 1999, citing soft trading in August and possible problems associated with Y2K
Estee Lauder
(EL) - Get Estee Lauder Companies Inc. Class A Report
jumped 2 15/16, or 7.2%, to 43 1/2 after
Merrill Lynch
raised the stock's rating to accumulate from neutral and set a share price target close to 50.
EMC
(EMC)
slipped 3/8 to 68 3/8 after SG Cowen analyst Richard Chu began coverage of the stock with a buy rating and set a price target of 77.
Federal-Mogul
(FMO) - Get Fiduciary/Claymore Energy Infrastructure Fund Report
plummeted 9, or 22.8%, to 30 3/8 after Merrill Lynch cut its rating on the shares to near-term neutral/long-term accumulate from near- and long-term buy, citing earnings expectations.
Credit Lyonnais
also cut the stock to hold from a buy.
Merrill Lynch initiated coverage of healthcare distribution companies including
Bergen Brunswig
(BBC) - Get Virtus LifeSci Biotech Clinical Trials ETF Report
, with an intermediate neutral and long-term accumulate, and
Cardinal Health
(CAH) - Get Cardinal Health, Inc. Report
, with an intermediate accumulate, long-term buy rating. The firm also gave
McKesson HBOC
(MCK) - Get McKesson Corporation Report
an intermediate neutral and long-term accumulate rating and
AmeriSource Health
(AAS)
an intermediate neutral and long-term accumulate.
Shares of Bergen Brunswig fell 1/4 to 13, while Cardinal declined 1 1/8 to 61 13/16. McKesson HBOC slipped 1 5/16 to 32 5/18 and Amerisource Health slid 3/8 to 24 3/8.
Lexington Corporate Properties
(LXP) - Get Lexington Realty Trust Report
was unchanged at 11 1/4 after Salomon sliced the stock's rating to a neutral from outperform.
Mack-Cali Realty
(CLI) - Get Mack-Cali Realty Corporation Report
was unchanged at 27 3/8 after Salomon Smith Barney downgraded the shares to outperform from buy.
Mypoints.com
(MYPT)
skidded 11/16 to 20 15/16 after Salomon rolled out coverage of the stock with a buy rating.
PairGain
(PAIR)
rose 7/8 to 12 7/8 after
Warburg Dillon Read
sliced its third-quarter estimate to a 5-cent loss from a 2-cent profit, and slashed its year estimate to a 2-cent loss from a 24-cent profit. U.S. Bancorp Piper Jaffray, meanwhile, cut its third-quarter estimate to a 3-cent loss from a 2-cent profit and its fiscal 1999 target to a 4-cent profit from a 17-cent profit.
Offerings and stock actions
Chesapeake
(CSK)
slid 1/2 to 34 3/8 after it set a plan to buy back up to 2 million shares over the next year.
Mellon Bank
(MEL)
tumbled 15/16 after it said it would ask its board to approve a 25 million-share repurchase program and change its name to
Mellon Financial Corp.
The company said the name change follows research that showed the word "financial" better emphasizes the bank's shift in focus to a wider array of financial services.
PurchasPro.com
(PPRO)
soared 14 3/16, or 118.2%, to 26 1/8 in its trading debut.
U.S. Industries
(USI) - Get Principal Ultra-Short Active Income ETF Report
rose 1/16 to 16 5/8 after it said it would buy back up to $100 million worth of common stock.
Miscellany
Many Florida businesses are preparing for the torrential rains and winds of Hurricane Floyd.
BP Amoco
(BPA)
has closed a main oil products marketing terminal in Port Everglades at the request of the U.S. Coast Guard, while the
American Airlines
unite of
AMR
(AMR)
and Delta have canceled flights to and from Florida.
Hibbet Sporting Goods
(HIBB) - Get Hibbett Inc Report
skidded 1/16 to 17 11/16 after it tapped President and COO Michael Newsome to become its first CEO. Newsome will continue act as the company's president.
National Semiconductor
(NSM)
hopped 1 3/4, or 5.3%, to 34 1/2 after Executive Vice President Patrick Brockett said at SG Cowen's technology conference that the company was set to report "very solid profits" for its fiscal second quarter, citing a large demand for its analog and wireless chip product lines.
Earlier today, National Semiconductor said it would retain ownership of its manufacturing plant in Greenock, Scotland, citing a surge in demand for analog products. In October, the company had said it would seek out investors to spin out the operation independently.
Silicon Graphics
(SGI)
fell 7/16 to 12 9/16 after it forecast a second-quarter profit. The company now plans to slash 3,000 jobs, doubling its initial estimate, set in August. CFO Steve Gomo said at the SG Cowen technology conference that SGI's bottom line could be hurt by the departure of CEO Rick Belluzzo.
Sony
soared 11 11/16, or 8.5%, to 148 3/16 on yesterday's announcement that it expects its
PlayStation 2
video game console to hit shelves in Japan on March 4, 2000.
Bank stocks may be ripe for a beating, according to today's Heard on the Street column in
The Wall Street Journal
. Bank stocks have fallen 11% since the last
Federal Reserve
rate increase, compounding banks' existing problems of slower loan growth and other revenue challenges. Bigger problems may lie ahead, the column says, as a result of declining commercial loan quality and rising interest rates weighing down securities portfolios.
Federal prosecutors charged
Princeton Economics International
Chairman Martin Armstrong with securities fraud for allegedly stealing $1 billion from Japanese investors. Prosecutors said that Princeton Economics, which isn't affiliated with the Ivy League university, hid hundreds of millions in trading losses in 300 Japanese investors' accounts. Officials claim that Princeton, which told investors that their accounts would be individually handled and conservatively invested, combined the accounts, applying money from one to the interest payments on another. Armstrong could serve up to 10 years in jail if convicted.
