Nasdaq scores gains for third session; Dow declines - UPDATE 18 18.06.2003 22:12 Headlines NEW YORK (AFX) -- The Nasdaq scored gains for a third straight session on Wednesday to end at fresh 13-month highs while the Dow Industrials was held back by an ugly profit warning from Eastman Kodak. Chip and networking stocks paced the tech rally following positive brokerage remarks. Airline shares also rallied thanks to analyst upgrades in the group. "Those positive comments are providing more confidence to buy on the dip. The semis really started to move and that got the Nasdaq going," remarked Peter Boockvar, equity strategist at Miller, Tabak & Co. Sellers took down brokerage stocks amid heady losses in Morgan Stanley and Bear Stearns following their profit reports. And gold issues logged losses as gold for August delivery tumbled $6 to $357.8. and The Dow Jones Industrial Average broke a two-day winning streak, surrendering 29 points, or 0.3 percent, to 9,293 after falling up to 91 points intraday. The Nasdaq Composite rose 8 points, or 0.5 percent, to 1,677 after declining as much as 15 points early in the session. The Nasdaq 100 Index closed up 8 points, or 0.7 percent, to 1,247. Keith Keenan, vice president of institutional trading at Wall Street Access, said structural forces have been pushing stocks higher. "The tax cuts, the Fed forcing down long-term rates and performance anxiety among money managers that are underperforming their benchmarks are dominating the market," Keenan said. "These forces will only help stocks in the short term." He cautioned that a sustainable recovery will only be possible if end demand picks up. He feels that investors are overestimating the economy's potential. Terry Danish, technical analyst at Maxim Group, said the market's rise is no longer in the early stages and that the stock-picking environment has thus become more selective. "A greater emphasis has recently been placed on value, perhaps showing that the early speculative phase seen over the past month or two may be slowing," Danish pointed out. The Standard & Poor's 500 Index lost 0.2 percent while the Russell 2000 Index of small-capitalization stocks fell 0.1 percent. Volume totaled 1.46 billion on the NYSE and 2.05 billion on the Nasdaq Stock Market. Decliners outpaced advancers by 20 to 13 on the NYSE while winners roughly matched losers on the Nasdaq. Kodak slides; Clorox, NY Times also decline Kodak slid 10 percent after slashing its second-quarter earnings projections to 25 to 35 cents a share from its prior forecast of 60 to 80 cents a share. The Dow component blamed significantly lower-than-anticipated consumer film and photographic paper sales in Asia as reason for the glaring shortfall. The firm conceded that economic weakness, reduced tourism and geopolitical turmoil would continue to negatively impact sales and earnings for the rest of the year. Meanwhile, Clorox Co. fell 6.3 percent after trimming its profit projections for the fourth-quarter and full year, citing the negative impact of the wet spring, which reduced consumer demand for auto and seasonal products. Still reeling from its recent editorial shake-up, The New York Times warned that second-quarter earnings would miss Wall Street's expectations as the Iraqi war, SARS (severe acute respiratory syndrome) and a tough job market all contributed in curtailing advertising growth. Shares gave up 6.9 percent. Computer services firm EDS Corp. unveiled restructuring efforts, which will result in a charge in 2003 and the elimination of about 2 percent of its workforce. EDS backed its second-quarter profit outlook while its earnings projections for the second half of the year were lighter compared with Wall Street's consensus estimates. The stock climbed 8.4 percent. The battle between Oracle and PeopleSoft raged on, grabbing headlines in the software sector. Oracle upped its bid for PeopleSoft to $6.3 billion in cash, up from the $5.1 billion originally offered on June 6. Oracle also said it would file suit against PeopleSoft, its board, and J.D. Edwards in response to their suits against it. J.D. Edwards has agreed to merge with PeopleSoft. All of the mentioned stocks notched gains, led by PeopleSoft's 5.3-percent advance. Brokers retreat after MWD, Bear results Two major brokerages kicked off the second-quarter earnings season by unveiling their results Wednesday morning. Morgan Stanley posted a second-quarter profit of 55 cents a share, including a pre-tax charge of 16 cents a share. Analysts surveyed by Thomson First Call had projected earnings of 68 cents a share. The stock fell 5.7 percent in recent trades. And Bear Stearns reported a second-quarter profit that handily topped analysts' expectations. Shares gave up 2.1 percent. In other earnings news, Best Buy checked in with a first-quarter profit that surpassed Wall Street's estimate. For the second-quarter, the electronics retailer's profit projection matched Wall Street's. Shares eased 0.5 percent. Read for the latest individual stock action. Chips, airlines boosted by upgrades Chip stocks led the tech sector higher amid upgrades in the communications group from Lehman Bros. Applied Micro Circuits , PMC-Sierra and Vitesse Semiconductor were all raised to "equal weight" ratings from "underweight" on belief the companies' telecom businesses will improve. Vitesse checked in with the biggest rally, climbing 12.5 percent. In the equipment segment, leader Applied Materials climbed 2.4 percent and rival KLA-Tencor put on 2.3 percent. Industry tracker Semiconductor Equipment and Materials International (SEMI) announced late Tuesday that North American-based manufacturers of chip equipment saw a second straight month of declines in orders in May. Cisco Systems took networkers higher, rallying 3.6 percent after Prudential bumped up its price target and fiscal 2004 profit estimate on the stock. Apple Computer was also a standout, tacking on almost 6 percent following an upgrade from Needham & Co. to a "buy" from a "hold." In the airline sector, AMR Corp. and America West were on a tear following upgrades from Merrill Lynch to a "buy" rating from a "neutral." AMR tacked on 5.8 percent and America West rallied 16.6 percent. Meanwhile, Lehman Bros. hoisted its price targets on a number of industrial conglomerates, including Dow components General Electric , Honeywell and 3M , on expectations the general economy will improve in the second half of the year. Among the mentioned names, Honeywell climbed 1.5 percent, GE edged down 0.3 percent and 3M put on 0.9 percent. Mattel fell 4.1 percent following a downgrade from UBS to a "neutral" from a "buy" while Host Marriott slid 4.4 percent after a UBS downgrade to a "reduce" on valuation worries. Treasurys make it three in a row Government bonds slipped for a third straight session, with longer-maturity issues again taking the biggest hit. The 10-year Treasury note slid 25/32 to yield 3.355 percent while the 30-year government bond plunged 1 18/32 to yield 4.39 percent. No economic news is set for release Wednesday. The balance of the week will see mostly second-tier reports, including May leading economic indicators and the Philly Fed index for June. Most market participants are projecting a quarter-point rate cut when the Federal Reserve meets next week to decide on monetary policy. Check The National Bureau of Economic Research said it needs more time to determine whether the recession that began in March 2001 is now over. "Additional time is needed before interpreting the movements of the economy over the past two years," the NBER said. In the currency sector, the U.S. dollar edged higher against its major counterparts, climbing 0.3 percent to 117.78 yen while the euro declined 0.8 percent to $1.1685. This story was supplied by CBSMarketWatch. For further information see www.cbsmarketwatch.com.
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