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Markets await Fed moves
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August 23, 1999: 6:45 a.m. ET
But takeover bids in utility, materials sectors to keep Wall St. occupied
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NEW YORK (CNNfn) - Wall Street prepared to launch the trading week Monday with a countdown to Tuesday's key Federal Reserve meeting, with many observers split on whether the Fed will decide to raise short-term interest rates again.
But despite investor anxiety, preliminary indications pointed to a slightly stronger opening for U.S. stocks in the wake of Wall Street's strong session Friday.
S&P futures on the Globex exchange system were up 4.3 points at 1,344.00. That's about 3.5 points above fair value for S&P futures -- a formula that takes into account interest and dividend effects -- which was estimated by London traders at 1,340.66. 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 Friday, the Dow industrials gained 136.77 points, or 1.25 percent, to 11,100.61, as investors' bargain-hunting overshadowed jitters over Tuesday's Fed meeting. The Nasdaq composite index rose 26.90 points, or 1.03 percent, to 2,648.33, and the S&P 500 index gained 13.02 points to 1,336.61.
In Asia, Japanese blue chips managed modest gains Monday as a planned $1.3 trillion bank alliance lifted financial stocks. Tokyo's Nikkei 225 closed more than 135 points higher at 18,233.55. In Hong Kong, the Hang Seng index rose 234 points or 1.73 percent to 13,801.11, in a session that began late because of bad weather.
In Europe, London climbed more than 1.6 percent by midday Monday in the wake of gains on Wall Street and in Asia. London's FTSE 100 jumped 102.3 points to 6,283.1, while Germany's Xetra Dax gained 53.42 points to 5,299.00, a rise of 1 percent. Buyers were pulled in after Deutsche Bank and Dresdner Bank, two of Germany's top banks, confirmed that they are holding talks about an alliance in their retail operations.
In overnight trading in the Treasury market, the benchmark 30-year bond slipped 2/32 of a point in price for a yield of 5.98 percent, unchanged from Friday's close.
In the currency markets overnight, the dollar dropped 0.09 to 111.14 against the strong Japanese yen -- and stood at $1.0648 against the euro.
The economy takes center stage this week, with investors awaiting the Federal Open Market Committee meeting in Washington on Tuesday. Contradictory data about the rate of growth of the economy and inflationary pressure has left market watchers divided over whether the Fed will choose to raise interest rates.
Investors also are awaiting additional economic reports later in the week, including data Wednesday on July's durable goods orders and another reading on the second-quarter gross domestic product due Thursday.
In the meantime, Wall Street has reports of several possible deals to consider Monday.
Carolina Power & Light (CPL) reportedly is buying another Southern utility, Florida Progress Corp. (FPC), in a cash and stock deal valued at $5.3 billion. The deal reportedly is worth $54 a share, a 21 percent premium over Florida Progress's closing price of 44-5/8 Friday in New York.
Meanwhile, acquisition-hungry French conglomerate Suez Lyonnaise des Eaux said early Monday that it had made a friendly, $1 billion takeover bid for United Water Resources (UWR), the second-largest U.S. water distributor. Suez, which already owns 33 percent of UWR capital, offered to pay $35 per UWR share, plus a special dividend of 48 cents per share. UWR shares jumped 3-1/16 to 31-1/16 Friday.
Meanwhile, Internet service provider PSINet Inc. (PSIX) has agreed to buy data communications firm Transaction Network Services Inc. (TNI) for $705 million, The Wall Street Journal reported Monday. The boards of both companies have approved the deal, the newspaper said. Transaction Network shares soared 6-1/16 to 34-1/4 Friday amid reports of a deal. PSINet stock slipped 21/32 to 45-9/16.
In other deal news, British shipping company Peninsular & Oriental Steam Navigation Co. Plc has turned down an $11.3 billion takeover bid from U.S. rival Carnival Corp. (CCL), according to a published report Sunday. The Financial Mail reported that Carnival is thought to be interested only in P&O's cruise business and would dispose of other assets. Shares in Carnival gained 1-5/8 to 47 Friday in New York.
In the banking sector, law enforcement officials reportedly are investigating whether Bank of New York Co. (BK) was one of a chain of banks that were conduits for money that may have been diverted from loans to Russia made by the International Monetary Fund.
The Wall Street Journal, citing people familiar with the situation, said about $200 million may have been diverted from IMF loans. Shares in Bank of New York added 3/8 to 37-3/8 Friday.
Investors also will be watching the copper sector, after No. 1 copper producer Phelps Dodge Corp. (PD) late Friday raised its hostile bid for two rivals. Phelps Dodge, moving quickly following an earlier rejection from Cyprus Amax Minerals (CYM) and Asarco (AR), said its revised, $2.7 billion bid raises to about 30 percent the premium on shares of each of those companies. Shares of Cyprus shot up 2-7/8 to 17-3/8 Friday. Asarco soared 4 to 22-7/16. while Phelps Dodge added 3-3/4 to 62-5/16.
Meanwhile, drugmaker American Home Products Corp. (AHP) announced late Friday that a California judge has denied class-action status to a group of former "fen-phen" diet drug users who are suing the company. Courts in six other states have granted class-action status to former users of the drugs who are seeking medical monitoring. AHP recalled the drugs in late 1997 after regulators said some patients had developed possible signs of heart valve damage. Shares of AHP closed up 1-11/16 at 47-1/16 Friday..
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