Stocks Drift Mildly Lower
Monday turned out to be a session of mild profit taking after Friday's big rally. The earnings parade is starting to dwindle and this week's economic reports are due out on Thursday and Friday. This doesn't give investors much news to trade on and many believe the markets will churn sideways ahead of Greenspan's appearances before congress this week. There was a $4 billion technology merger announced but it wasn't enough to inspire a rally in the NASDAQ. The tech-heavy index lost less than four points to close at 2060. The S&P 500 lost less than three points to close at 1139 and the DJIA dropped 14 points to close at 10,579.
Foreign markets were generally positive after the G7 meeting. Global finance ministers agreed that "excess volatility" was unhealthy for the markets but their statement did not suggest any policy intervention and the meeting closed with the current agreement to keep currency markets "flexible". Some analysts interpreted the G7 statement regarding volatility and "disorderly movement" as "undesirable for market growth" as an okay for Japan to continue its intervention policies. Japan sold a record 20 trillion yen last year and another 7 trillion yen just last month in an effort to slow the yen's rise against the dollar, which makes Japanese goods more expensive overseas and specifically in the U.S. The G7 news to keep currency markets flexible sent the dollar lower again and the Japanese NIKKEI index lost 58 points to close at 10,402. Surprisingly the Chinese Hang Seng rose 267 points to 13,576. Meanwhile a Dow Jones news story reported that EU finance ministers met this afternoon in Brussels in talks to discuss "all possible ways" to slow the euro's rise. The dollar bounced higher on this news and the English FTSE, the German DAX and the French CAC 40 indices all rallied into the close.
Closer to home investors took some money off the table in semiconductors, drug stocks and airlines. The networking index also took a hit after shares of Juniper networks fell 11% today, but more on that in a bit. Those stocks that garnered the most buying interest today were gold & silver, natural gas, oil services and oil issues. The XAU rallied on a $3.70 gain in gold futures. Natural gas stocks rallied on bump in gas prices and news that Ferrellgas Partners (FGP) would buy Blue Rhino (RINO) for $340 million, or $17 per share, in cash. Oil and oil services stocks were higher on a 35 cent jump in crude oil to $32.83 a barrel and positive analyst comments. Drilling demand has been growing around the world due to energy demand picking up as the global economy recovers. Oil stocks could move again tomorrow as OPEC ministers meet in Algeria to discuss their current quotas but most industry watchers expect them to remain unchanged. The 11-member cartel controls about 40 percent of the planet's oil supplies.
U.S. market internals were mixed and reflected the sideways churn witnessed throughout much of the session. The NYSE reported nearly 15 advancing stocks for every 13 decliners. On the NASDAQ it was almost the same picture with 17 winners for every 14 losers. Down volume edged past up volume on the NASDAQ but it was reversed on the NYSE with up volume outpacing down. Overall it was a very low volume session. Part of the problem was a technical glitch that prevented trading of stocks and ETFs on the American Stock Exchange until 12:30 PM ET.
One of the big news stories today was the $4 billion acquisition announced by Juniper Networks (JNPR) for NetScreen Technologies (NSCN). JNPR is offering 1.404 shares of its own stock for each share of NSCN. As of Friday's closing price for JNPR that would be a 57% premium for NSCN. While many felt that this may be a high price to pay for NSCN, a company who's products make networks more secure, most agreed it was a good strategic move to broaden JNPR's portfolio of products and compete more directly with its larger rival Cisco Systems (CSCO). JNPR dropped 11% to $26.18 on the news and NSCN soared 36% to $35.94. Shares of CSCO closed down 7 cents to $24.67.
Monday also brought more M&A news as PeopleSoft's Board of Directors once again unanimously rejected Oracle's takeover bid, after ORCL raised their offer to $26 per share last week. Meanwhile rumors that Vodafone (VOD) was considering a bid for AT&T Wireless (AWE) was confirmed today. Cingular Wireless had been the frontrunner as Wall Street speculates over who might bid for AWE. Should VOD end up being high bidder it would have to sell its 45% stake in Verizon Wireless.
On the earnings front the House that Diller built appears to be firing on all cylinders. Better known as InterActive Corp and previously known as USA Interactive, the growing Internet empire run by Barry Diller reported earnings this morning that beat Wall Street's estimates by 6 cents. IACI owns Hotels.com, Hotwire.com, Expedia.com, Match.com, uDate.com, LendingTree.com, the HomeShoppingNetwork (HSN) and Home Shopping Europe as well as Ticketmaster (Ticketmaser.com). The fourth quarter numbers showed net profits at 29 cents a share and revenues soaring almost 36% to $1.8 billion, both of which surpassed analyst estimates. The stock rose 3.4% to $33.04.
In other news U.S. poultry-related stocks traded lower after Japan, Malaysia, Singapore and S. Korea announced bans on imported chicken from the U.S. after word spread of a bird flu outbreak in Delaware. The state has already killed 12,000 chickens in an effort to stop the spread of the disease and officials say this strain is different than the avian flu currently spreading in several Asian countries believed to be responsible for 18 (human) deaths. Stocks trading lower on the news are PPC, SAFM, and TSN.
Two of the Dow's better performers today were Coca-Cola Co (KO) and Disney (DIS). Shares of KO hit new 16-month highs, breaking out over resistance at $51.00, after an analyst with Goldman Sachs reiterated their "out perform" rating and suggested that other firms' estimates could be too low. Goldman's KO analyst believes that a strong January in Japan could boost KO's up coming earnings report due out Wednesday, February 11th before the market open. Consensus estimates for KO are 44 cents a share.
Disney also announces earnings on February 11th but reports after the closing bell. Yet today's story was not about DIS' earnings or analyst estimates, currently pegged at 23 cents a share, but the ongoing feud between Roy Disney and ally Stanley Gold and their fight with Disney's board and CEO Michael Eisner. Roy and Stanley have been turning up the heat on their efforts to get rid of Esiner in anticipation of the March 3rd annual shareholder meeting for Disney (the company) where Eisner and three other board members are expected to be reelected. In its defense the Board of Directors sent a letter to shareholders defending Eisner and to "set the record straight". Both Roy Disney and Stanley Gold are former board members of DIS and the letter states that both of them "... fail to tell you they voted to approve, and in some cases championed, the very business decisions they now condemn." One agency reports that the letter to shareholders states the board's belief that DIS' earnings should grow 30 percent in 2004. Credit Suisse First Boston would agree that conditions are bullish for DIS and one of its analyst suggest that DIS could trade above the $30 level by the end of the year. In unrelated news DIS announced a deal with Microsoft (MSFT) to deliver digital content to consumers' homes and portable media players. Shares of DIS closed up 1.79% to $23.77.
Without any immediate economic reports and investors' tendency to sit on their hands before any Greenspan meeting we're going to see a lot more company-specific movement and probably less market movement. Tomorrow we'll hear earnings reports from Viacom Inc (VIA) and the Marriott (HMT) before the opening bell. This week also brings us earnings from Dell (DELL) who is expected to announce after the closing bell on Thursday. In the meantime brush up on your Greenspeak for Alan's first of two congressional appearances is Wednesday.