|
Slippery day on Wall St.
|
 |
August 23, 2001: 4:26 p.m. ET
With no sign of an economic turnaround, the markets grind lower
By Staff Writer Catherine Tymkiw
|
NEW YORK (CNNfn) - U.S. stocks floundered Thursday, moving lower after the minutes from the Federal Reserve's June meeting were released, reminding investors that the Fed still sees a stagnant economy.
Pockets of earlier strength were seen in technology issues, but the buying and selling both lacked conviction with volume remaining on the light side.
Analysts expect the ambivalent sentiment to continue in the near term.
"We're treading water today," wrote Paul McManus, senior vice president with Independence Investment LLC, in a note to clients. "With most of Wall Street on vacation, I think that's all we'll be doing until after Labor Day."
Just this week, the Federal Open Market Committee (FOMC) lowered rates for the seventh time and was greeted with disappointment after it left the door open for further cuts – a sign that the economy will continue its slow grind.
"It's been a real apathetic market and there hasn't been much in the way of real buying power behind anything," said Bryan Piskorowski, market commentator with Prudential Securities. "By virtue of the fact that the Fed is still concerned, you've seen the market show its concern."
Investors remain concerned about the timing of an economic and earnings recovery but analysts said corporate bad news should come as no surprise.
"We've known for a while that we are going to have long lines at the confessional booth and long faces through third-quarter earnings season," said McManus. "I just think that a lot of the pessimism right now seems overblown."
The Nasdaq composite index shed 17.04 to 1,842.97, while the Dow Jones industrial average flip-flopped before heading lower, falling 47.75 to 10,229.15. The Standard & Poor's 500 dipped 3.22 to 1,162.09.
The tech-heavy Nasdaq composite index was cautious throughout the session, straddling the breakeven point while select issues still managed to hold onto gains.
"There are some slight movements in technology stocks with sporadic gains, but nothing to write home about," said Peter Cardillo, director of research with Westfalia Investments.
Those attracting attention included fiber-optic equipment maker Ciena (CIEN: up $0.36 to $17.80, Research, Estimates), which is being added to the S&P 500, and beleaguered telecommunications equipment maker Lucent Technologies (LU: down $0.03 to $6.65, Research, Estimates), which reaffirmed its profit guidance.
But the larger focus was on building a base for some sustained move higher. The major indexes carved out gains Wednesday but analysts said more concrete evidence is needed.
"It's really a 'show me' kind of market," said Piskorowski. "We're at the point where we have to start culling more economic data and see if we can find some kind of consensus."
Most individual investors opted to sit on the sidelines and digesting corporate news while shrugging off economic data showing a rise in jobless claims.
And, with traders driving the market action, previous gains in manufacturing issues such as Dow components 3M (MMM: down $1.46 to $108.35, Research, Estimates) and Caterpillar (CAT: down $1.50 to $51.80, Research, Estimates) gave way.
Also keeping pressure on the Dow were shares of Merck (MRK: down $2.71 to $68.51, Research, Estimates). The drugmaker still is feeling the impact of a study in this week's Journal of the American Medical Association suggesting there are increased risks of heart attack associated with two arthritis drugs – Merck's Vioxx and Pharmacia's (PHA: down $0.80 to $42.40, Research, Estimates) Celebrex, which is co-marketed by Pfizer (PFE: unchanged at $40.68, Research, Estimates).
"From a technical standpoint, the fact that the market is testing the lower end of the trading range with low volume suggests the risk of the yearly lows being tested increases," said Cardillo.
Market breadth was negative. On the Nasdaq, decliners topped advancers 2,135 to 1,507 on volume of 1.33 billion shares. On the New York Stock Exchange, decliners beat gainers 1,683 to 1,418 as 921 million shares changed hands.
In overseas stock markets, Asia's were mixed and Europe's rallied. Treasury securities rose. The dollar was weaker against the euro and the yen.
Hope springs eternal
Analysts still were heartened by the trading action despite its indecisiveness.
"From a trading desk standpoint, you'd rather be long (own stocks) here than short, and that starts to build its own dynamic and attract its own level of interest," said Richard Cripps, chief market strategist with Legg Mason Wood Walker. "The market is oversold and selling pressure is easing."
With no clear fundamental catalyst to drive the action, the markets are expected to remain in a narrow range as investors hope for some signs that the Federal Reserve's seven interest rate cuts will finally take hold. This week, the Federal Open Market Committee (FOMC) lowered the key federal funds rate by a quarter of a percentage point to 3.5 percent.
But the central bank's accompanying statement left the door open for further cuts, disappointing those looking for stabilization rather than more rate reductions.
Until there are more signs that an economic and earnings rebound are imminent, investors have little to get excited about.
"I think we're in a bottoming process so we'll see the market back and fill a little bit," Tim Hayes, global equity strategist with Ned Davis Research, told CNNfn's Market Call.
Individual companies drive action
With the economy on the back burner, investors are keying in on what individual companies have to say about their business past, present and future.
"Largely people are taking a look at historic information," John Davidson, chief investment officer with Circle Trust, told CNNfn's Before Hours. "They're looking at earnings and job cuts, and people are concerned. I think we're going to grind it out until earnings come back."
Krispy Kreme Doughnuts (KKD: down $2.87 to $32.11, Research, Estimates), the ubiquitous hawker of doughnuts and a darling of investors and analysts, reported a rise in fiscal second-quarter earnings to 10 cents a share from 6 cents a year earlier. That topped the 9-cent-a-share consensus estimate of analysts surveyed by the research firm First Call. Krispy Kreme also said it expects earnings for the current fiscal year to surpass expectations by 2 cents a share.
Kmart (KM: down $1.13 to $10.97, Research, Estimates), the nation's No. 2 discount retailer, reported a fiscal second-quarter loss of 4 cents a share, in line with analysts' forecasts, compared with earnings of 5 cents in the year-earlier period.
Limited (LTD: down $1.27 to $13.93, Research, Estimates) posted earnings of $77 million, or 8 cents a share, down from earnings of $157.1 million, or 17 cents a share, a year earlier. The retailer also warned it would miss third-quarter and full-year estimates.
Victoria's Secret parent Intimate Brands (IBI: down $1.22 to $13.39, Research, Estimates) posted lower second-quarter earnings yet beat Wall Street estimates. The company also warned that it expects to break even in the third quarter, compared with forecasts for 6 cents a share earnings.
Barnes & Noble (BKS: up $1.21 to $41.97, Research, Estimates) said it broke even in the second quarter, a better performance than analysts expected, as the nation's No. 1 bookseller logged higher sales. But the company reiterated future earnings guidance.
Office Depot (ODP: up $0.32 to $13.22, Research, Estimates) said it remains comfortable with Wall Street's third-quarter expectations, and the nation's No. 1 office supply retailer said the economic slowdown is continuing to pinch its business customers.
Jobless claims rise
The economy still is on the hot seat for investors, but the day's news did little to grab immediate attention. Most still want to see stronger signs of stability.
The number of new jobless claims in the United States rose last week, hinting at weakening conditions in the job market.
New claims for state unemployment benefits rose to 393,000 in the week ended Aug. 18 from a revised 385,000 the prior week, the Labor Department reported. Analysts surveyed by Briefing.com had forecast new claims of 390,000. 
Click here to send mail to Staff Writer Catherine Tymkiw
|
|
|
|
|
 |
|
