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Downgrades and cautious outlooks have stock futures lower

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A host of broker-driven downgrades along with words of caution from the Wall Street Journal on Dow component Boeing (NYSE:BA) $31.96, AOL Time Warner and Citigroup (NYSE:C) $30.38 have stock futures looking lower and indicating a downside open for stocks.

Select stocks in the automotive sector has Merrill Lynch downgrading shares of Ford (NYSE:F) $8.32, General Motors (NYSE:GM) $34.78, Dana Corporation (NYSE:DCN) $10.41 and Delphi Corporation (NYSE:DPH) $7.58 to "neutral" from "buy" to reflect worsening auto industry fundamental. Merrill said it believes continuing deterioration in new and used care prices is an increasingly strong headwind raising the risk of further margin compression for each of these companies, which have both high operating leverage and constrained financial flexibility.

The Wall Street Journal reports that Boeing (NYSE:BA) is expected to ratchet down jet production through at least 2004, a year longer than originally anticipated. Senior executives have hinted that at best, deliveries of new planes in 2004 will remain flat with the level of 2003.

Further conflicts of interest are cited in a Wall Street Journal report that a private holding company controlled by former WorldCom CEO Bernard Ebbers received $679 million in loans from the Travelers Insurance subsidiary of Citigroup (C), adding to the potential conflicts of interest face by Citigroup in its dealing with WorldCom, according to a lawsuit filed on Friday.

In a separate report, the Wall Street Journal reports that AOL Time Warner (NYSE:AOL) $11.78 is beginning to feel the effects of a relentless assault by Microsoft's (NASDAQ:MSFT) $48.86 MSN Internet access service, and now MSFT is set to launch its MSN 8 that could increase it competitive threat.

Positive news in the biotech sector has Chiron (NASDAQ:CHIR) $38.65 announcing that it expects its Q3 and 2002 financial results to exceed consensus estimates as a result of improved performance in all of its business units, expecting Q3 EPS of $0.45, which is well above consensus estimates for $0.32 EPS. For 2002, CHIR raised its EPS guidance upward to $1.25-$1.30 from previous guidance of $1.10-$1.20. Shares of CHIR jumped $2.00 to $40.65 per share in Instinet trading.

Retailing giant Wal-Mart (NYSE:WMT) $53.80 ticked 5-cents higher after the company reaffirmed October same store sales, saying it is seeing sales up 2-4%. The company said it saw sales improve through last week as cooler weather set in.

Stock futures currently have S&P futures (sp02z) trading down 9.10 points at 829.40. NASDAQ futures (nd02z) are lower by 12.50 points at 883.00 and Dow futures are down 97.00 points at 7,765.

Fair value for the S&P 500 today is $0.40. That price will not change during the day. HL Camp & Company has their computers set for program buying at $1.52 and set for program selling at $-2.30. Fair value for the NASDAQ-100 today is $2.70.

Jeff Bailey

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