Today's Market: Pushed by Intel, Dow and Nasdaq Struggle at Midday - TheStreet

Today's Market: Pushed by Intel, Dow and Nasdaq Struggle at Midday

<LI>J.P. Morgan and Chase lower.</LI> <LI>Intel sagging.</LI> <LI>Brokerages having tough day.</LI>
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Brokerages and computer box makers are under pressure. These sectors, along with a downgrade of

Intel

(INTC) - Get Report

, were keeping the major indices in the negative today.

With the announcement that

Chase Manhattan

(CMB)

plans to purchase

J.P. Morgan

(JPM) - Get Report

, the takeover juice has now been squeezed out of the brokerage names, and they're dropping.

The

Dow Jones Industrial Average was lately off 84.72, or 0.75%, to 11,148.80; the

S&P 500 dropped 4.73, or 0.32%, to 1477.26, and the

Nasdaq Composite Index shed 2.5, or 0.06%, to 3847.0. The small-cap

Russell 2000 dropped 1.22 to 531.21.

TheStreet.com Internet Sector

, or the

DOT index was up 0.1 to 793.3.

Both the Dow and the Nasdaq are feeling the impact of Intel's losses. The company was downgraded, along with fellow semiconductor maker

Advanced Micro Devices

(AMD) - Get Report

, by

Banc of America Securities

analyst Richard Whittington. He broadly cited concerns about demand from PC makers and Intel's delivery problems. Intel was lately down 4.5%, while AMD lost 6.6%.

Money managers are regarding Intel and AMD's woes as stock specific today -- the

Philadelphia Stock Exchange Semiconductor Index

was lately up 0.4%. But chip stocks have come under fire from a number of analysts in recent weeks. They are worried about strength in demand, low prices for DRAM, which is a commodity chip, and the ability of manufacturers to meet current demand.

"Semiconductors have been on the defensive the last couple of weeks, and they're trying to make a stand here, but there's still some pressure on the group," said Scott Curtis, trader at

Kaufman Brothers

.

Concerns over weakening PC demand are being highlighted this morning by the earnings

warning from electronic components maker

SCI Systems

(SCI) - Get Report

, which said fiscal first-quarter profits would be lower than expected due to diminished demand. SCI is one of the

New York Stock Exchange's biggest losers today, dropping $11.38, or 20.3%, to $44.69.

The

Philadelphia Stock Exchange Computer Box Maker Index

is down 0.4%, with the biggest losses coming from SCI's two largest PC

customers,

Compaq

(CPQ)

, down 3.6%, and

Hewlett-Packard

(HWP)

, off 3.8%.

Big deals, lower prices

After a hefty round of consolidation that culminated with today's Chase-J.P. Morgan announcement, the brokerage stocks are sagging today. There's a sense among traders that the wave of

consolidation may be nearing an end, unless a European player comes in to purchase another brokerage firm. The latest merger is designed to enhance Chase's

clout against other recently announced combinations.

If consolidation among bulge-bracket firms dies down, the sense is that these stocks are overvalued.

"They've all been running, and nobody quite knew who would be in play," said Curtis. "J.P. Morgan was the cheapest on a valuation basis."

Other firms considered takeover plays include

Lehman Brothers

(LEH)

, down 3%, and

Bear Stearns

(BSC)

, which is off 3.7%. J.P. Morgan itself is down today, losing 3.7%.

"There's the risk inherent in the pricing," said Roseanne Lang, vice president of program trading at

Cantor Fitzgerald

. "They've just been priced so high and they're speculative at best in terms of the pricing of these deals."

Knight Trading

(NITE)

was flying, up 20.8%, on speculation that the market maker could be

acquired by

Morgan Stanley Dean Witter

(MWD)

. The company is the largest independent market maker out there, with two of its large competitors recently being snapped up by larger firms, including

Goldman Sachs'

(GS) - Get Report

announced purchase of

Spear Leeds & Kellogg

.

Market Internals

Breadth was mixed on moderate volume.

New York Stock Exchange: 1,286 advancers, 1,355 decliners, 573.5 million shares. 114 new 52-week highs, 34 new lows.

Nasdaq Stock Market: 1,610 advancers, 2,048 decliners, 887 million shares. 56 new highs, 65 new lows.

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Most Active Stocks

NYSE Most Actives

  • Chase Manhattan: 28.5 million shares.
  • Lucent (LU) : 17.5 million shares.
  • Nortel (NT) : 17.1 million shares.

Nasdaq Most Actives

  • Cisco (CSCO) - Get Report: 43.1 million shares.
  • Intel: 40.3 million shares.
  • Knight Trading: 31.3 million shares.

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Sector Watch

Transportation stocks were having a strong day. The

Dow Jones Transportation Average

rose 1.3%, and the

Amex Stock Exchange Airline Index

gained 2.2%. The

Dow Jones Utility Average

hit a new all-time high of 400.06 today, and was still strong lately, up 1.98 to 397.24, as investors continue to buy these stocks. Crude oil has dropped a bit from its recent high, lately at $34.25.

Diversified manufacturers were coming under a bit of pressure today.

Corning

(GLW) - Get Report

was dropping, losing 1%, and

United Technologies

lost 0.4%.

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Bonds/Economy

Bond prices are higher, but not as high as they were earlier in the session. As oil and stocks have moved off their lows of the day, Treasuries have given back some of their gains. Treasury traders are also paying close attention to the corporate bond market, where more than usual new issues are competing for investor dollars.

Meanwhile, while there is no major economic news today,

fed funds futures are discounting lower odds than ever that the

Fed will hike interest rates again this year. The December fed funds contract is putting the odds of a hike in the rate to 6.75% from 6.5% currently at just 5%, down from 21% yesterday.

The benchmark 10-year Treasury note, up as much as 9/32 earlier, lately was up 7/32 at 100, dropping its yield to 5.749%.

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International

Techs and telecoms were a drag on

European markets today. The

FTSE 100

closed down 77.30 to 6478.20. Across the channel, the

CAC 40

in Paris ended off 128.91 to 6568.89, and the

Xetra Dax

in Frankfurt was off 130.86 to 7004.89.

The embattled euro was lately trading at $0.8640 amid rumors that the

European Union

would intervene to prop up the currency. The rumors were denied.

Tokyo stocks rose overnight after two days of losses, while markets in Korea and Hong Kong were closed for a national holiday.

Japanese shares climbed higher after mutual and pension fund managers vigorously picked up selected technology shares in an otherwise lethargic trading day. The

Nikkei 225

index rose 150.29 to close at 16,190.52.

The greenback slowly inched higher against the yen and closed at 106.97 in Tokyo trading. The dollar was lately trading at 106.98 yen.

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