A Wall Street Journal Online News Roundup
Stocks are expected to slip at the open Thursday, as investors take profits following Wednesday's rate-cut rally.
Futures on the Standard & Poor's 500-stock index about 90 minutes before the New York Stock Exchange's open indicated that the Dow Jones Industrial Average will slide about 40 points at the opening bell.
Preliminary third-quarter nonfarm productivity figures released an hour before the market's open by the Labor Department Thursday showed a gain in productivity of 4%, compared with a gain of 1.5% in the second quarter. Economists had forecast a gain of 4.3%.
Shortly after the report, S&P futures indicated the Dow industrials will fall 70 points at the open.
Shortly after Wednesday's afternoon rate news, the Dow industrials jumped, to close up 92.74 points, or 1.07%, at 8771.01, while the Nasdaq Composite Index added 17.82, or 1.27%, to 1418.99.
The decision by the Federal Reserve policy makers under Alan Greenspan to cut their target interest rates by half a percentage point -- trumping wide expectations of a quarter-point cut -- coupled with a clear Republican electoral victory, sent stocks up even as many traders feared a round of profit-taking.
Investors concluded "that the Fed is taking a definitive action to stem any fears that things will get worse than they are," said Keith Gertsen, head of Nasdaq trading at brokerage firm Deutsche Bank Securities in New York. The Fed move, together with the election result and the resignation of the controversial chairman of the Securities and Exchange Commission, all are reinforcing the view that the current rally can continue, he said.
But not all analysts were as optimistic.
"Consumer confidence is low with the prospect of a lackluster holiday shopping season," said Sung Won Sohn, chief economist at Wells Fargo & Co. "Businesses are shell-shocked from a series of body blows; they are reluctant to hire people, build inventories or purchase capital goods."
"This move could also backfire by announcing to the world that the economy is so weak that Chairman Greenspan has to use what little ammunition he has left to shore up the economy," he said.
United Kingdom food and beverage company Diageo, owner of Guinness, Johnnie Walker and Seagram's, will be among closely watched stocks Thursday after announcing that its plans for a $2.26 billion sale of its Burger King fast-food business are at risk of collapsing. The expected buyers, private-equity firm Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners, have requested fresh talks over the terms of the July deal, which had included certain performance targets. Diageo shares fell 1.3% to 708.5 pence early in London.
Meanwhile, signs of slowing growth at networking heavyweight Cisco could hit the tech sector. After the close of trading Wednesday, Cisco reported a swing to a profit for its fiscal first quarter but warned that revenue in its current quarter could fall as much as 4% sequentially. Strict cost controls have helped boost the company's profit margin even as the tech market suffers. Cisco shares rose 27 cents, or 2.1%, to 12.96 Wednesday on the Nasdaq Stock Market.
In major U.S. market action Wednesday:
Stocks advanced. On the Big Board, where 1.64 billion shares traded, 2,166 stocks rose and 1,071 fell.
Bonds gained. The 10-year Treasury note rose 10/32, or $3.125 for each $1,000 invested. The yield fell to 4.035%. The 30-year bond was up 13/32 to yield 5.055%. Early Thursday, the 10-year note was up 18/32 to yield 4.012%, while the long bond was down 4.32, yielding 5.067.
The dollar was mixed. Late in New York, it traded at 121.83 yen, up from 121.79, while the euro rose against the dollar to $1.0031 from $1.0002. Early Thursday in New York, the dollar bought 121.74 yen and traded at $1.0016 to the euro.
For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com.
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