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Leading indicators fall 0.2%

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For the fourth-straight month, the Conference Board's Leading Indicators Index declined, hinting that the current economic recovery remains suspect.

The Conference Board's Leading Index fell -0.2% in September, while the coincidence index was flat and lagging index fell -0.6%.

Five of the 10 leading indicators fell in September, led by stock prices, weekly jobless claims, and the interest rate spread. The conference board noted that all three of these indicators have improved so far in October.

Ken Goldstein, an economist at the boar said, "Four consecutive declines in the leading economic indicators once again raises the question of a 'double dip,' while a stalling out of recovery is a more reasonable prospect than the economy falling back into recession."

Over the past six months, the leading index is down -0.3% with 50% of the indicators contracting. The board said recessions are typically signaled by a six-month decline of 3.5% or more with half of the indicators falling.

Just after the release of this economic report, stocks fell to their lowest levels of the session, but have since battled back with the Dow Industrials (INDU) 8,327 +0.05% edging into positive territory after declining 91 points earlier in the session.

Dow gainers have Philip Morris (NYSE:MO) $41.89 +4.59%, General Motors (NYSE:GM) $35.44 +3.29% and McDonald's (NYSE:MCD) $18.10 +3.71% offsetting weakness in Merck (NYSE:MRCK) $49.65 -2.7%, Microsoft (NASDAQ:MSFT) $51.94 -2.3% and AT&T (NYSE:T) $12.43 -1.81%.

Earlier this morning, UBW Warburg downgraded shares of drug giant Merck (MRK) to "hold" from "buy" on view that the stock is fully valued given recent run up in price. UBS reduced its 2003 estimates to $3.29 from $3.40 (consensus $3.38) to reflect more conservative top-line assumptions, deteriorating operating margins as a result of increased R&D, and an expected increase in SG&A in 2003. On Friday, Merck reported earnings that were in line with expectations.

The NASDAQ-100 Index (NDX.X) 947 -0.94% is the weakest major market index with sector weakness in Biotechnology (BTK.X) 345 -1.64%, Software (GSO.X) 94.57 -1.25% and Semiconductor (SOX.X) 265 -1.20%.

Chipmaker Texas Instruments (NYSE:TXN) $16.20 -5.26% drives the semiconductor weakness after Credit Suisse First Boston said it believes consensus estimates for TXN are still too high, and lowered it FY02-03 estimates and gross margin assumptions. CSFB cuts FY02 rev/EPS estimates to $8.5 billion/$0.27 from $8.6 billion/$0.29 and FY03 to $9.2 billion/$0.49 from $9.6 billion/$0.57. However, CSFB said it does prefer TXN over rival Intel (NASDAQ:INTC) $14.65 +1.38%.

Jeff Bailey

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