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Broad selling, still finds some gains

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Stocks have been stuck near the lower end of their daily trade as the Dow Industrials (INDU) 8,138 -2.7% has been oscillating either side of the 8,150, with one Dow component McDonald's (NYSE:MCD) $15.00 (unch) just now backing from positive territory of $15.31. While gains are minimal in this beaten down Dow component, some other names that investor's may be familiar with are bucking an otherwise bearish session.

Share of Starbucks (NASDAQ:SBUX) $22.66 +13.2% are surging higher after gapping up from yesterday's close of $20.02 after last night's earnings report, which had the company reporting Q1 earnings that beat the Street's estimates by two cent. Today's gains are found after the company raised its FY03 earnings outlook to $0.67-$0.68 per share. CIBC upgraded the shares to "sector outperform" from "sector perform" on unexpectedly strong sales and earnings momentum from its first-quarter and said there is a strong likelihood that fundamentals will outpace peer food and beverage stocks over the next year.

Rebounding from a recent 52-week low are shares of heavy equipment maker Terex Corporation (NYSE:TEX) $11.28 +16.28% after the company said it would take a four-quarter restructuring charge of $51 million in its fourth quarter. TEX said the charge taken is a result of restructuring several of its business units, which is expected to have a positive cash impact of over $20 million in 2003. CEO Ronald DeFeo said TEX expects to report Q4 earnings (excluding charges) in the $0.10-$0.14 cent per share range with EBITDA in the $40-$45 million range. That guidance had analyst's estimates at the high end, with consensus of $0.14 per share. However, today's bullish price action came after DeFeo said, "We remain confident as to our ability to meet or exceed current market expectations for earnings in 2003." Analysts polled by First Call currently expect TEX to earn $1.53 per share, putting the stocks current price/projected earnings ratio at 7.37.

Yesterday, Dow component and fellow heavy equipment manufacturer Caterpillar (NYSE:CAT) $43.84 -3.6% reported earnings which beat analysts estimates, but said 2003 full year earnings would be weaker than expected, with profits down about 5% on flat sales. Based on CAT's 2002 earnings of $2.30 per share, guidance given has CAT looking at 2003 earnings per share of $2.18, which was at the lower end of First Call estimates for $2.50. Based on forward looking EPS for 2003 of $2.18, CAT currently trades on a forward looking P/E ratio of 20-times earnings, and perhaps a bit "pricey" on this type of valuation comparison to Terex.

Yesterday, CAT shares traded a double-bottom sell signal on their point and figure chart and has the bearish vertical count currently building to a price objective of $37.00. While the stock currently trades above its bullish support trend at $39, the stock look vulnerable to that level.

Today's trade sees volume levels at the NYSE and NASDAQ both running at 1.3 billion shares, and with trading curbs in for the bulk of session, may be hard pressed to trade the 1.3 billion share mark.

Market breadth is extremely weak today with NYSE showing decliners outnumbering advancers by a 5 to 1 margin, while NASDAQ breadth is negative at 11 to 1.

Some of the observations made from "softening" in the new highs/new lows category in recent sessions are playing themselves out today, with negative breadth from this indicator. The NYSE currently shows 68 stocks trading new 52-week highs compared to 79 stocks trading new lows, while NASDAQ's trade is still holding a somewhat bullish tint, but barely so with 52 stocks trading new highs compared to 49 stocks hitting new lows.

Jeff Bailey

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