GLOBAL MARKETS-Stocks drop for fourth straight week;bonds flat
Reuters, 09.20.02, 6:50 PM ET
(Updates throughout with Wall St close)
By Daniel Bases
NEW YORK, Sept 20 (Reuters) - U.S. stocks edged higher on
Friday but failed to avoid a fourth losing week, while bond
prices held steady as investors kept to government debt on
concerns over the U.S. economy and the threat of war with
Iraq.
The Japanese yen fell to three-year lows against the euro
and a three-month low against the U.S. dollar on worries that
Tokyo's economic recovery plans are floundering.
"There is a lot of uncertainty out there with what's going
on in the Middle East and what's going on with the (U.S.)
economy," said Charles White, president of Avatar Associates,
which oversees $2 billion. "We are getting to a point where the
economy is turning, but people are cynical because allegedly
it's been turning for a year and a half now."
Meanwhile, investors look forward to a crucial Federal
Reserve meeting on interest rate policy on Tuesday. Wall Street
expectats the central bank to keep interest rates unchanged at
1.75 percent, a four-decade nadir, given the low inflation,
spotty economic data and dour corporate results.
The Dow Jones industrial average <.DJI> remained below
8,000, gaining 43.63 points, or 0.55 percent, to close at
7,986.02.
For the week, which was marked by profit warnings from
companies like computer services company Electronic Data
Systems Corp.
(nyse: EDS - news - people) and financial giant J.P. Morgan Chase &
Co. Inc.
(nyse: EDS - news - people), the Dow fell 3.93 percent.
On Friday, there was a bright spot for U.S. stocks as
Qualcomm Inc.
(nasdaq: QCOM - news - people) said it would ship more cellular phone
chips than previously thought, sending its stock up $2.358, or
9.17 percent, to $28.08, and lifting the wireless sector.
The Nasdaq Composite Index <.IXIC> gained 4.64 points, or
0.38 percent, to 1,221.09, after rising more than 1 percent at
the open. For the week, the Nasdaq lost 5.44 percent.
The broader Standard & Poor's 500 index <.SPX> gained 2.07
points, or 0.25 percent, to 845.39. For the week the index lost
4.99 percent.
"Right now, the biggest thing on people's minds is
earnings," said David Memmott, head of listed trading at Morgan
Stanley. "Pre-announcements have been very negative. Were
investors expecting them to be this bad? Probably not."
European blue-chip stock index FTSE Eurotop 300 index
<.FTEU3> edged up 0.33 percent at 849.57 points. On Thursday
the benchmark closed at its lowest level since May 1997, ahead
of the Asian crisis that year. For the week, the index lost
6.17 percent.
Beleaguered French telecoms firm Alcatel <CGEP.PA> rose
over 12 percent as investors reacted to news of a fresh
restructuring that includes 20,000 more job cuts.
Despite the rise in European stock indexes, analysts were
not optimistic going forward.
"Everyone knows the market is cheap compared to bonds, but
until the Iraq situation is out of the way and oil prices come
down it is hard to take a long-term view," said Alain Bokobza,
European equity strategist at SG Securities.
Japanese stocks closed down nearly 2 percent on Friday,
with Kyocera Corp <6971.T> hit by a profit warning and other
blue chips hurt by another slump on Wall Street Thursday.
The benchmark Nikkei average <.N225> fell 1.95 percent or
188.54 points to 9,481.08, however for the week the Nikkei
gained 131.70 points, or 2.59 percent, due primarily to the
rally induced midweek by the Bank of Japan's shocking
announcement that it would buy equities directly from banks.
The ongoing U.S. earnings warning season, war worries and
questions about the U.S. economic recovery have helped keep
bond prices high and yields, which move inversely to their
price, at 41-year lows by the end of trade on Friday.
Bond bulls had been counting on further carnage in the
equities markets after Thursday's rout. But the upbeat news
from Qualcomm
(nasdaq: QCOM - news - people) took some of the steam out of the bond
market rally.
The two-year notes <US2YT=RR> recovered some of their early
losses to trade near flat at 100-12/32, yielding 1.92 percent
-- down 13 basis points on the week.
The benchmark 10-year <US10YT=RR> was also unchanged at
104-27/32, yielding 3.78 percent, compared with 3.91 percent
last Friday. The current 10-year note yield is the lowest since
May 1961.
At the long end, the 30-year bond <US30YT=RR> fell 17/32 to
109-28/32, taking yields to 4.75 percent from 4.77 percent last
Friday.
"These are times when retention of principal is more
important than almost anything and that has to be a plus for
Treasuries longer term," said Paul Thomas, head of fixed-income
trading at Merrill Lynch.
YEN TAKES HIT
During the Asian session, an auction of Japanese government
10-year bonds failed -- for the first time -- to attract enough
investors. Traders also expressed exasperation with Prime
Minister Junichiro Koizumi, who failed to produce immediate
plans to counter deflation or dispose of the nonperforming
loans encumbering Japan's banking sector.
Traders said the failed auction and Koizumi's inaction
converged with ongoing confusion over the Bank of Japan's
announcement earlier this week that it would buy shares
directly from banks. That proved sufficient to drag the yen
lower across the board.
"Last night the 10-year auction was really poor," said Tod
Van Name, senior vice president at Mizuho Corporate Bank in New
York. "If the BOJ adds liquidity either by buying mutual fund
shares or bank shares, one of the by-products is that it's not
good for bonds."
Against Europe's common currency, the yen <EURJPY=> fell as
low as 121.41, its weakest since August 1999 and off more than
1 percent from its prior U.S. close.
The yen set a 3-month low against the U.S. currency at
123.72 yen<JPY=>, down over 1.7 percent from Thursday's close.
The early gains in Wall Street stocks boosted demand for
the dollar against European currencies. The euro fell to a
session low of 97.83 cents before inching back up to 98.22
cents <EUR=>, a loss of 0.47 percent on the day.
Copyright 2002, Reuters News Service
|
