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Asian rally may cue Dow
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November 20, 1998: 7:28 a.m. ET
Increasing confidence and overseas rallies put markets in good mood
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NEW YORK (CNNfn) - As investors continued to sidle back into the stock market in the wake of the Federal Reserve's credit easing and as overseas markets rallied, the Dow appeared set Friday to resume its two-day march above 9,000 on an ebullient note.
The Dow could open anywhere from 45 to 50 points higher based on activity on the pacesetting Globex trading system. Contracts for S&P 500 futures were up 6.10 in price at 1164.80, as traders voiced hope that Japan may cut taxes as part of a $195 billion stimulus plan.
(Click here to view latest S&P500 futures figures on Globex)
The 30-year benchmark Treasury bond rose 2/32 in price, pulling the yield back to 5.23 percent.
But after a buying spree in Internet stocks sputtered to a halt Thursday, some investors cautioned that some of the cash flowing in may ebb.
Jeff Davis of State Street Global Advisers said that while recession has been staved off for now, new concerns - about money supply - may soon arise.
"We've been in a state of mind where we've been worried about a slowdown dragging down the U.S. economy," Davis said. "Now the reverse might be the case…Is there too much money chasing too few goods?" If so, he added, "that would imply an end to the Fed easing right now."
European bourses charged out of the starting blocks Thursday, cheered by signs that Japan's latest economic recovery plan may be in earnest. Asian markets rallied amid news that Japan's ruling Liberal Democratic Party would form a coalition with the opposition Liberal Party, fueling hopes they would step up efforts to lower taxes, traders said.
After tumbling Thursday, the red-hot Internet retailer Amazon.com announced a three-for-one split of its common stock, payable to shareholders as of Dec. 18, that could give the firm a lift in Friday trade. Shares of Amazon (AMZN) - up a meteoric 416 percent since January - plunged 10-3/4 to 153-1/4 Thursday on the Nasdaq.
Elsewhere in the web sector, Internet media company Lycos Inc. may be poised for a pick-me-up after the company reported a narrower-than -expected first quarter loss of six cents a share after the end of trade Thursday, beating Wall Street consensus estimates by a penny. The results included a $10.1 million gain from the sale of Lycos's stake in online bookseller Amazon.com.
The results were apparently not enough for investors. Lycos (LCOS) stock had closed down 2-3/8 at 62 Thursday, and fell an additional two points in after-hours trade.
North America's largest farm equipment maker, Deere & Co., may have a bumpy ride Friday after the company announced plans to temporarily lay off about 2,400 employees at an Ohio tractor plant. The layoffs follow an earlier round of 300 workforce reductions in October; the company employs 7,700 agricultural equipment production workers.
Deere (DE) stock ended up 7/8 at 39 Thursday on the New York Stock Exchange.
Automotive service provider Midas Inc. is getting a detailing of its own. Midas said Thursday it would take a pre-tax charge of $55 million to $60 million against fourth quarter earnings as it seeks to upgrade its image and relocate the company's Chicago headquarters to a suburb of the city.
Shares of Midas (MDS) slipped 7/16 Thursday, to close at 29.
Friday is a data-less day in the economic realm, but investors may be extra vigilant as futures and options contracts simultaneously expire in a "double-witching" session.
A deadline loomed Friday for more than a dozen remaining states to sign on to an agreement with tobacco makers under which the industry would pay $206 billion over 25 years to settle claims for smoking-related health costs.
Cendant Corp., a diversified conglomerate, confirmed it planned to sell its consumer software unit to French media group Havas for as much as $1 billion. Cendant said it expects to post a $450 million gain from the spin-off.
Shares of Cendant (CD) ended up 1-1/16 at 14-7/16 Thursday.
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