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Wall St. braces for CPI
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August 17, 1999: 6:47 a.m. ET
Investors also watching computer, retail stocks amid earnings reports
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NEW YORK (CNNfn) - Investors anxiously awaited a key economic report on consumer prices Tuesday, one of the last major pieces of data the Federal Reserve will consider before making a decision on interest-rate policy next week.
Early indications pointed to a flat opening for U.S. stocks, but the release of the Consumer Price Index at 8:30 a.m. ET could change that picture immediately.
S&P futures on the Globex exchange system were down 2.4 points at 1,337.00. That's a little more than a point above fair value for S&P futures -- a formula that takes into account interest and dividend effects -- which was estimated by London traders at 1,335.77. 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 added 73.14 points to 11,046.79 on the lowest volume of the year as many investors sat on the sidelines amid the run-up to the release of the CPI. The Nasdaq composite index rose 7.46 points to 2,645.27 and the S&P 500 index edged up 3.09 to 1,330.77.
In Asia, all major markets except Tokyo ended lower Tuesday amid anticipation of the U.S. economic data. Japan's Nikkei 225 index closed up 34 points, or 0.19 percent, at 17,860.09. In Hong Kong, the Hang Seng index ended down 111.6 points, or 0.87 percent, at 12,783.16.
In Europe, markets made a sluggish start early Tuesday. The FTSE 100 in London traded flat at 6,235.2 after Monday's modest loss, while the Xetra Dax index in Frankfurt narrowed earlier losses but remained down 21 points, or 0.4 percent, at 5,236.19.
In overnight trading in the Treasury market, the benchmark 30-year bond dropped 3/32 of a point for a yield at 6.08 percent, unchanged from Monday's close.
In the currency markets overnight, the dollar gained 0.11 to 114.69 against the Japanese yen and was up against the euro at $1.0517.
All eyes will be on Washington for the release of the July CPI. Economists surveyed by Reuters expect the key inflationary gauge to grow at a rate of 0.3 percent over the previous month. The core rate, which excludes food and energy prices, is anticipated to rise a smaller 0.2 percent.
But unless the CPI shows an unexpectedly high rate of growth, the Federal Reserve is unlikely to use the report as a justification for a rate increase, John Ryding, chief economist at Bear Stearns, told CNNfn's "Business Day."
"I think the Fed (policy-makers) will use the new tool in their arsenal and that is to adopt a tightening bias," toward raising rates, he said. With producer prices showing no inflation at the core level and retail sales beginning to soften, the Fed likely will wait until October to revisit the interest-rate issue, he said.
Also Tuesday, the Commerce Department will report on housing starts and building permits for July, which are each expected to total 1.6 million.
A separate report on industrial production is expected to show growth of 0.8 percent in July, with capacity utilization rising slightly to 80.7 percent in July from 80.3 percent in June.
In the news, an after-the-bell earnings report from Hewlett-Packard Co. (HWP) Monday could drive investor interest in the computer sector. The company reported a 37 percent rise in fiscal third-quarter profit, well ahead of Wall Street estimates, before charges associated with a broad restructuring plan. HP earned $853 million, or 85 cents a share, compared with estimates of 80 cents per share, according to the consensus forecasts of analysts polled by First Call.
Bullish investors snapped up shares of Hewlett- Packard stock Monday in anticipation of the report. The stock closed up 4-1/4 at 110-1/4.
Investors also will be awaiting the release later Tuesday of Dell Computer Corp. 's (DELL) fiscal second-quarter results. The company is expected to have earned 17 cents per share, up from 12 cents a year earlier. Dell shares finished unchanged at 41-7/16 Monday.
Also, Internet search engine Lycos, Inc. (LCOS) is expected to report breakeven results for its fourth quarter, compared with a loss of 3 cents per share a year earlier. Lycos shares rallied 2-1/2 to 40-7/16 Monday, well off their 52-week high of 72-11/16.
In other technology news, Microsoft Corp. (MSFT) said early Tuesday it is buying a $126 million stake in a Brazilian cable-TV operator and plans to spend more as it boosts Internet availability and usage in Latin America. Microsoft stock finished down 3/8 at 84-5/16 Monday.
Meanwhile, oil and gas producer Burlington Resources Inc (BR) late Monday agreed to acquire Canada's Poco Petroleums Ltd. for an estimated $2.5 billion in stock and debt. Burlington also will assume roughly $750 million of Poco debt. Burlington stock dropped 1-3/8 to 45-5/16 Monday.
Retail stocks also will be in the spotlight as a number of chain stores are expected to report quarterly earnings.
J.C. Penney (JCP) is expected to post second-quarter profit of 34 cents per share, up from 8 cents a year earlier; Dayton-Hudson Corp (DH), the operator of Target Stores, is anticipated to have earned 46 cents per share, up from 36 cents, and Saks Inc. (SKS) is expected to post second-quarter profit of 18 cents per share, up from 8 cents a year earlier.
AnnTaylor Stores Corp. (ANN) is expected to post second-quarter profit of 41 cents per share, up sharply from 27 cents a year earlier.
Also, The Limited (LTD) is expected to come in with profits of 26 cents per share, up from 13 cents in last year's second quarter, after telling Wall Street it enjoyed a better quarter than earlier projected.
Analysts predict that Home Deport Inc. (HD) earned 44 cents per share, up from 31 cents a year ago; upscale jeweler Tiffany & Co. (TIF) is expected to post earnings of 24 cents per share, up from 19 cents, while discounter BJ's Wholesale Club (BJ) is anticipated to have earned 34 cents per share, up from 27 cents. All are reporting second-quarter results.
Among initial public offerings, technology issue SilverStream Software Inc. is expected to debut Tuesday after pricing 3 million shares above the estimated range. Shares were priced at $16, up from an estimated $13 to $15. The company will trade under the ticker symbol "SSSW" on the Nasdaq. 
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