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Markets await the Fed
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August 24, 1999: 6:45 a.m. ET
Traders cautious ahead of session; telecom, tech shares in focus
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NEW YORK (CNNfn) - Investors prepared cautiously for Tuesday's trading session, with traders focused on Washington awaiting any surprises in the Federal Reserve's decision on the future of interest rates.
Wall Street rallied into record territory Monday ahead of the meeting, with many investors celebrating in advance the widely held expectation that the Fed will enact only one small rate increase for the rest of the year. But as the decision neared, early indications pointed to a restrained opening for U.S. stocks Tuesday.
S&P futures on the Globex exchange system were down 3.7 points at 1,362.50. That's nearly 2 points below fair value for S&P futures -- a formula that takes into account interest and dividend effects -- which was estimated by London traders at 1.364.17. Typically, a point of difference between the futures index and fair value equals eight points on the Dow Jones industrial average as trading begins.
On Monday, the Dow industrials soared 199.15 points, or 1.79 percent, to a record 11,299.76, as investors bet that the expected rate hike would likely be the last for the year. The Nasdaq composite index rallied 71.24 points, or 2.69 percent, to 2,719.57, and the S&P 500 index rose 23.61 points to 1,360.22.
In Asia, stocks in Tokyo fell Tuesday as investors cashed in on the recent strong rally in banking stocks, while other major markets were cautious ahead of the Fed meeting. Japan's Nikkei 225 fell 138 points to 18,095.41. In Hong Kong, the Hang Seng opened for the afternoon after being shut for the second morning in row as tropical storms battered the region. The index closed up 60 points at 13,633.87.
In Europe, stocks in most major markets edged downward by mid-morning Tuesday. In London, the FTSE 100 slipped 25.6 points to 6,296.50, and Germany's Xetra Dax continued to retreat, losing 0.32 percent to 5,285.11.
In overnight trading in the Treasury market, the price of the benchmark 30-year bond was unchanged, keeping the yield at 5.97 percent.
In the currency markets overnight, the dollar slipped 0.04 to 111.68 against the firm Japanese yen -- and stood at $1.0520 against the euro.
Tuesday's trading is expected to be overshadowed by the meeting of the Federal Open Market Committee, which is scheduled to release its decision at 2:15 p.m. ET. Most analysts expect Fed policymakers to increase short-term interest rates a quarter of a point to 5.25 percent as a preemptive strike to cool off too-rapid expansion of the U.S. economy.
In the news, a federal appeals court has ordered reconsideration of a judge's restrictions against shipments by Microsoft Corp. (MSFT) of software containing Java programming language, dealing a blow to Sun Microsystems (SUNW). The injunction prohibited Microsoft from distributing products that used Sun's Java copyrights, unless Microsoft conformed to Sun's standards for Java. Before Monday's ruling, Microsoft shares rose 3-1/16 to close at 86-7/16. Sun shares gained 9/16 to 74-13/16.
In other technology news, Intel Corp. (INTC) has cut prices on its Pentium III processors as much as 41 percent in an effort to fuel demand for PCs during the holiday shopping season. Intel now has competition in the high end of the PC market from Advanced Micro Devices Inc. (AMD). Intel shares added 3 to close at 82-15/16 Monday. AMD climbed 15/16 to 19-3/16.
Meanwhile, SBC Communications Inc. (SBC) is expected to launch a telephone service package for customers that aims to compete with similar "bundles" planned by rival AT&T Corp. (T), the Wall Street Journal reported Tuesday. SBC plans to offer packages that include Internet access, entertainment and local-telephone services to consumers in Fremont, Calif., and Dallas -- two markets that AT&T has targeted as well, the newspaper said. SBC stock closed down 7/8 at 51. AT& gained 3/8 to 47-1/4.
In other news, yogurt maker Yogen Fruz Worldwide Inc., the largest shareholder of Eskimo Pie Corp. (EPIE), said late Monday it will not support a bid by an undisclosed private investment group to buy all of the company. Eskimo Pie said earlier Monday it has received an offer for $10.125 per share. The company's stock closed up 1/16 at 10-1/16 Monday.
Also late Monday, online mortgage company E-Loan Inc. (EELN) agreed to acquire online auto loan provider CarFinance.com from Bank of America (BAC) for about $67 million in stock. E-Loan shares finished the day up 1-1/8 at 23-3/8.
Shares of implantable biomedical device maker Medtronic Inc. (MDT) could be active after the company reported fiscal first-quarter results on par with analysts' estimates. The company earned $248.9 million, or 42 cents a share, up 9 percent from the year-earlier period. Shares slipped ¼ to 75-1/8 ahead of the announcement.
A few earnings reports will trickle in. Networking products firm Newbridge Networks (NN) is expected to post fiscal first-quarter profit of 16 cents a share, up from 14 cents a year earlier; fashion designer Perry Ellis International (PERY) is expected to post profit of 17 cents per share for the second quarter, up from 15 cents in the prior year. Also, pork products manufacturer Smithfield Foods Inc. (SFDS) is anticipated to post profit of 18 cents per share for its first quarter, compared with a 14-cent loss a year earlier.
Among new issues slated to debut, online travel company Cheap Tickets Inc. late Monday priced 5 million shares at $38 apiece. Half the shares were offered by the company and half were offered by existing holders. The company is expected to begin trading Tuesday on the Nasdaq, under the symbol "CTIX."
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