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Giving back gains

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What gains a bull found yesterday and held overnight are going to be given back at the open as stock futures show a lower open.

Shares of Dow component General Electric (NYSE:GE) $23.35 are falling 90-cents to $22.45, or -3.85% after Morgan Stanley cut 2003 earnings estimates to $1.70 a share from $1.79 a share, citing concerns over continued weakness in the company's short- cycle business, deterioration in its power and aerospace businesses and losses in GE Capital's portfolio. Analyst Scott Davis reiterated his "equal weight" rating, but said the risk of a "perfect storm" is rising.

Adding insult to injury with a downgrade of a Dow component, Abby Joseph Cohen of Goldman Sachs lowered her 12-month targets for the Dow Industrials (INDU) 7,501 to 10,800 from 11,300 and for the S&P 500 Index (SPX.X) 798.55 to 1,150 from 1,300, saying higher investor risk aversion will take longer to dissipate. Meanwhile, Cohen said that stocks are currently undervalued, as they already reflect "ugly scenarios," and the embedded large risk premiums embedded provide a cushion.

Treasuries are seeing some strong buying this morning and the YIELD on the benchmark 10-year Treasury ($TNX.X) 3.580% is now challenging the recent low YIELDs of 3.56% found last week. Should YIELD on this bond move much below the 3.55% level, it would most likely signal further just how defensive market participants are.

S&P futures (sp02z) are currently down 11.2 points (-1.39%) to 789.90. NASDAQ futures (nd02z) are off 10 points (-1.22%) to 804.50 and Dow futures (dj02z) are lower by 110 points (-1.46%) to 7,400.

Fair value for the S&P 500 today is $0.48. That price will not change during the day. HL Camp & Company has their computers set for program buying at $1.64 and set for program selling at $-1.62. Fair value for the NASDAQ-100 today is $2.90.

Jeff Bailey

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