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Market Wrap

A Quiet Monday as Investors Wait on Greenspan

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     04-19-2004            High     Low     Volume Advance/Decline
DJIA    10437.82 - 14.12 10451.76 10399.47 1.46 bln   1437/1373
NASDAQ   2020.43 + 24.69  2020.45  1991.14 1.65 bln   1749/1349
S&P 100   555.78 +  0.84   555.94   552.73   Totals   3186/2722
S&P 500  1135.82 +  1.21  1136.18  1129.84 
RUS 2000  586.95 +  3.58   587.38   579.17
DJ TRANS 2923.77 - 15.70  2939.65  2911.67
VIX        15.42 +  0.48    16.08    15.33
VXO        15.08 -  0.59    16.11    15.08
VXN        21.40 -  1.15    23.49    21.17
Total Volume 3,446M
Total UpVol  2,182M
Total DnVol  1,224M
52wk Highs     255
52wk Lows       76
TRIN          1.84
PUT/CALL      0.67

A Quiet Monday as Investors Wait on Greenspan
By James Brown

The action on Wall Street was rather mild on Monday. Major indices traded in a narrow range as investors continue to fret over higher interest rates despite generally positive earnings news. Tech stocks did manage to out perform as the SOX semiconductor index and the NASDAQ both ended a four-day losing streak. The Dow Industrials were weighed down by a decline in McDonalds (MCD) after its Chairman and CEO Jim Cantalupo died unexpectedly of a heart attack. Investors are still focused on the situation in Iraq as Spain's new socialist Prime Minister made good on his campaign promise and ordered the country's 1,300 soldiers to return home immediately. Closer to home many in America's heartland quietly remembered the ninth anniversary of the Oklahoma City bombings were 168 people lost their lives.

Global stock markets trended flat to down. The Japanese NIKKEI turned in a volatile day with an intraday drop of nearly 180 points before recovering to close down -60 points at 11,764. The Chinese Hang Seng, the English FTSE, the German DAX and the French CAC all closed within nine points of unchanged on the session. Here at home the Dow Industrials dropped 14 points to 10,437. The NASDAQ Composite added 24 points to end back above the 2000 level and breakout over its 50-dma (2014) to close at 2020. The S&P 500 added just over 1 point to close at 1135.

Buying was strongest in tech stocks with software, Internets, semiconductors and biotechs all performing well. Healthcare stocks also bounced higher after their recent declines. Boosting traders interest in technology shares was an upgrade for chipmaker AMD and news that MSFT had settled an antitrust case with the state of Minnesota. Monday's weakest sectors were airlines, metals and housing stocks. Homebuilders continue to feel the heat as mortgage rates have risen sharply and investors rotate out due to growing concerns that the Fed will feel forced to raise rates.

Market internals were mixed. It was an even race on the NYSE as advancers nudged past decliners 14 to 13. Up volume outpaced down volume by a small margin as well on the NYSE. The NASDAQ reported more bullish readings with advancers beating decliners 17 to 13 and up volume better than three times down volume. However, overall volume was pretty light.

Chart of the Dow Industrials:

Chart of the NASDAQ Composite:

This is the busiest week for earnings with 179 companies in the S&P 500 reporting their first quarter results and dozens more who are not in the index. However, even though corporate reports are coming in fast and furious Wall Street remains focused on Federal Reserve governor Alan Greenspan's two congressional appearances this week. Most of the focus is on his Wednesday 10:00 AM meeting with the Joint Economic Committee but tomorrow afternoon he comes before the Senate Banking Committee. Many market pundits feel that investors are merely marking time until these two appearances are through on hopes that Alan will drop some sort of hint regarding the Fed's outlook on rates. The recent string of super-strong economic reports have created a lot of doubt on just how patient the Fed can afford to wait.

Case in point this morning's Conference Board index of Leading Economic Indicators rose a predicted 0.3% in March. Drilling down into the numbers shows that demand remains strong fueled by consumers more than happy to spend their tax refunds. Some analysts are starting to suggest that the U.S. economy may be growing faster than the currently forecasted 4.3%.

Speaking of growth there is almost no doubt that McDonald's Chairman and CEO Jim Cantalupo is responsible for turning around the world's largest restaurant chain. Cantalupo had come out of retirement to save the struggling fast-food giant. Some of his accomplishments involved redesigning the menu to provide healthier choices and axing the supersize menu due to a growing fervor over America's obesity problem. He was 60 years old when he died of a heart attack this weekend. MCD quickly named COO Charlie Bell as a replacement CEO and probably saved the stock from a deeper loss than the 2.5% drop it felt today.

A couple of today's big earnings reports came from Dow-component MMM and drug giant LLY. MMM, known for its ubiquitous Post-it notes and Scotch tape, said worldwide sales reached a record- breaking $4.94 billion for the quarter. This beat analysts' estimates for $4.82 billion. Earnings came in at 90 cents a share compared to estimates of 87 cents and 44% higher than earnings a year ago. 3M's Chairman and CEO James McNerney Jr. was very upbeat with his comments, "Worldwide sales in local currencies increased in all seven of our businesses, and we generated double-digit increases in operating income and earnings per share. We are off to a great start in 2004." MMM also raised its Q2 guidance and its full year guidance. Unfortunately, shares of MMM didn't react much to the report. The stock added 3 cents to $83.76. I suspect investors are concerned about just how much the weak dollar influenced those results. Meanwhile Eli Lilly Co (LLY) jumped 1.3% to $73.40 after reporting earnings of 70 cents per share, beating analysts' estimates by 4 cents. LLY, known for its Prozac antidepressants, saw its numbers boosted by a fivefold increase in sales of its newly launched ED drug Cialis, which is jointed marketed by partner ICOS. Total revenues rose 17% to $3.38 billion for the quarter. Investors' lackluster reaction was probably due to LLY's inline guidance for Q2 and the year.

Two more high-profile movers today were Dow-component Coca-Cola (KO) and biotech firm Imclone (IMCL). Shares of KO surged 2.06% to a new 18-month high on Wall Street's expectation that the company will make a bid to steal away Gillette's (G) CEO Jim Kilts. KO also released news that it would soon be launching Coca-Cola C2, a low-carb coke with half the calories and carbs of regular coke. The company is due to announce earnings on Wednesday and estimates for at 44 cents a share.

Imclone Systems (IMCL) jumped almost 12% to $66.30 and fueled a 2.8% rise in the BTK biotech index. Sparking the move was a company announcement that the FDA had approved its most recent filing to review the company's new facility to produce its headline Erbitux drug. Not hurting the stock was a "buy" rating from Bank of America who slapped a $91 price target on IMCL. Of course Wall Street was quick to notice that IMCL is now trading above the level where Martha Stewart and Sam Waksal sold the stock back in 2001.

Looking ahead to tomorrow we have a HUGE earnings day with well over a hundred well-known companies reporting their first quarter numbers. Some of the headliners are likely to be Dow components Alria Group (MO), General Motors (GM) and Pfizer (PFE) who all report before the opening bell. We'll also hear from telecom companies Lucent (LU), Motorola (MOT) and Sprint (PCS & FON). Tuesday will also bring the Chain Store sales numbers and the Redbook Retail sales numbers. Plus Fed governor Pinalto will make an appearance but it will be overshadowed by Greenspan's afternoon meeting.

Trade carefully. I would probably look for continued strength in the NASDAQ tomorrow but watch those stops.


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