Led by techs, stocks head north
Amazon’s good news ignites Net stocks
|By Julie Rannazzisi, CBS.MarketWatch.com
|Last Update: 9:46 AM ET Apr
NEW YORK (CBS.MW) – Positive news from Amazon and an upgrade of
Motorola sparked buying in the tech sector out of the chute Monday and
propelled the broad market as well.
The Dow Jones Industrial Average ($DJ) put on 64 points, or 0.7
percent, to 9,857.
The Nasdaq Composite ($COMPQ) added 20 points, or 0.6 percent, to
1,741 while the Nasdaq 100 Index ($NDX) ascended 29 points, or 2.1
percent, to 1,477.
The Standard & Poor’s 500 Index ($SPX) gained 0.7 percent while
the Russell 2000 Index ($RUT) of small-capitalization stocks rose 0.4
Volume came in at 54.5 million on the NYSE and at 96.3 million on the
Nasdaq Stock Market. Market breadth was marginally positive, with
advancers beating decliners by 13 to 7 on the NYSE and by 15 to 11 on
Earnings and fund flow watch
First Call/Thomson Financial details that only 7 percent of the
S&P 500 companies have thus far unveiled their quarterly results.
The earnings compiler expects the final results for the first quarter to
show a decline of 8 or 9 percent and expects the second quarter’s
decline to be even deeper – possibly 11 to 13 percent.
Separately, Trim Tabs said U.S. equity funds lost an estimated $9
billion in the three days ending April 5 while outflows from all
equities was $11.1 billion – the highest level since the $15.9 billion
in redemptions during the period ending Jan. 2.
The fund flow tracker notes that liquidity stayed negative in March
and that liquidity has been negative for eight out of the past 10 weeks.
“We remain neutral right up until taxes are due next Monday. While
we would hope that most of the tax selling has been done, it won’t take
much to spook the market lower,” Trim Tabs said in its research
Chip stocks sagged following a number of cautious comments from
analysts. Leader Intel lost 1 percent while the Philly Semiconductor
Index shed 0.1 percent.
Lehman Brothers’ Dan Niles was one analyst to come out with negative
comments on the chip sector in a morning note. He said he believes
second-quarter revenues are likely to be down 10 percent
quarter-over-quarter with no signs of growth for the third quarter other
than hopes on the interest rate front. And full-year revenues are seen
falling 18 to 20 percent in the semiconductor space.
“The worst year for semi revenues in the history of the industry
so far was 1985: down 17 percent. We predict 2001 will be worse,”
Niles told clients. The end of the “free wheeling’ spending by
dot.coms and the resulting pullback in spending by old economy concerns
adds another layer to the negative end-market demand environment, the
analyst commented. “We believe it took 9 to 12 months to create
this supply/demand imbalance and that it will take a minimum of another
6 to 9 months to hit bottom,” he warned.
But Motorola (MOT) shot up 5 percent following a crushing sell-off on
Friday that took the stock 23 percent lower. Catalyst for the upward
move in the pre-market was a Morgan Stanley Dean Witter upgrade of
Motorola to a “strong buy” from an “outperform.”
Morgan Stanley said that while there’s no near-term good news for the
stock, it believes the bad news is already reflected in the price and
that credit crunch fears are overblown. The risk/reward ratio is
attractive, the brokerage said, adding that it sees upside to the $20s.
Sanford Bernstein said in a research note that it sees little chance
of an upside surprise when Motorola reports its results on Tuesday as
the company struggles in an environment of sagging consumer spending and
a dramatic reduction in carrier spending. “We expect the company to
remain cautious in its outlook and suggest full year EPS guidance below
our 14-cent estimate.” Bernstein also said that, contrary to recent
speculation, it does not believe that Motorola is in immediate danger of
Amazon.com (AMZN) informed investors that it expects a first-quarter
loss from operations of 22 cents a share, less than the loss of 30 cents
a share that had been expected by First Call/Thomson Financial and less
than the 35-cent-a-share loss posted in the same quarter last year.
Amazon cited strong demand in the electronics division. The company also
reiterated its 2001 guidance. The stock surged 37 percent to $11.49.
Vignette (VIGN), meanwhile, told investors that it expects to
register a loss of 1 cents a share in the first quarter, better than the
2 cents a share projected by First Call. The stock climbed 8.4 percent.
Foundry Networks (FDRY) said it expects revenue for the first quarter
to be in the $78 to $81 million range and blamed the shortfall to lower
customer orders due to the economic slowdown and weaker than expected
spending trends within the network infrastructure equipment industry.
The company also said it expects to be “cash flow positive”
for the quarter. Wall Street currently pegs first-quarter EPS at 13
cents. Shares rallied 15 percent.
Treasury prices continued to trade mixed, looking to equities for
The 10-year Treasury note was off 1/32 to yield ($TNX) 4.89 percent
while the 30-year government bond lost 3/32 to yield ($TYX) 5.465
No economic releases are on tap for Monday. The highlights on the
economic front this week include March retail sales, the March producer
price index and the Michigan consumer sentiment index. View Economic
Preview and economic calendar and forecasts.
In the currency arena, dollar/yen jumped 1.0 percent to 125.25 while
euro/dollar edged down 0.3 percent to 0.9015.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York.