Message-ID: <5557914.1075852558957.JavaMail.evans@thyme> Date: Thu, 25 Oct 2001 06:34:18 -0700 (PDT) From: schwabalerts.marketupdates@schwab.com To: jeff.dasovich@enron.com Subject: Morning Market View for October 25, 2001 Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Schwab Alerts X-To: Dasovich, Jeff X-cc: X-bcc: X-Folder: \JDASOVIC (Non-Privileged)\Deleted Items X-Origin: Shankman-J X-FileName: JSHANKM (Non-Privileged).pst Charles Schwab & Co., Inc. Email Alert Morning Market View(TM) for Thursday, October 25, 2001 as of 9:30AM EDT Information provided by Schwab Center for Investment Research ECONOMIC DATA DAMPEN OUTLOOK AT OPEN Equity index futures fell and bonds rose following this morning's release of a flurry of economic data. While most of the data was generally in line with expectations, durable goods orders dropped sharply, lending further support to the notion of a contraction in 3Q. Against the backdrop of the tame inflation and steady jobless picture reflected in this morning's data, durable goods orders for the month of September plunged, owing to weakness in transportation orders, particularly aircraft. The 8.5% drop in durable good orders was much worse than forecast. In equities news, Electronic Data Systems (EDS,62,f2) posted 3Q earnings, excluding items, of $0.69 per share, $0.01 ahead of the Street's mean estimate. The CFO said he expects the computer systems consultant to continue to grow earnings in the double-digit range, and the company remains comfortable with the Street's 4Q consensus earnings forecast of $0.78 per share. Long-distance and data services company WorldCom Group (WCOM,12.45,f1) reported a 41% decline in 3Q profits to $0.16 per share, matching the First Call consensus forecast. Revenues rose 12%, boosted by growth in the company's data and Internet services segments. The company's CEO said he expects WorldCom's growth segments to gain market share, despite the current economic malaise. Dow Chemical Co. (DOW,35,f2), the largest U.S. chemical maker, reported a 3Q profit, excluding restructuring costs, of $0.16 per share, in line with the Street's mean estimate. Dow said it sees 4Q profits of $0.10-$0.20 per share, compared to the Street's consensus of $0.17 per share. ---------------------------------------------------------------- TREASURY AND ECONOMIC SUMMARY Bonds rose across the curve following the release of a slew of economic data this morning. Durable goods orders for September fell 8.5% according to the Commerce Department, much worse than the expected 1.3% decline per Dow Jones Newswires, suggestive of a potential 3Q economic contraction. Excluding transportation, orders fell 5.5% as aircraft orders plummeted 29%. Orders for communications equipment and electronic products fell, while semiconductor and defense capital goods orders rose. Initial jobless claims rose by 8,000 to 504,000 for the week ended Oct. 20, according to the Labor Department. Analysts per Dow Jones Newswires were looking for an increase to 500,000. The four-week moving average of claims rose to 505,000, a 10-year high, and continuing claims for the week ended Oct. 13 increased to 3,654,000, an 18-year high. The 3Q employment cost index rose 1.0%, slightly above the Dow Jones Newswires forecast of a 0.9% increase. Most of the increase was attributed to a 1.6% rise in benefits costs for the quarter, while wages and salaries rose 0.8% versus 2Q's 1.0% rise. The government said the data was not distorted by the Sept. 11 attacks. ---------------------------------------------------------------- WORLD MARKETS European markets were under pressure following the European Central Bank's decision to leave the benchmark lending rate unchanged at 3.75%. Pharmaceutical, telecom and auto stocks contributed to the declines in European markets, with the Bloomberg European 500 Index down 1.86% as of 8:55 a.m. EDT. The euro fell against the U.S. dollar in the absence of a rate cut but recouped all of those losses following the bleak U.S. economic data. Asian markets closed higher with Japan's Nikkei-225 Index up 0.72%, paced by strength in banking and drug stocks. In equities news, Sony Corp. (SNE,41) reported a first-half operating loss in line with expectations due to weakness in its core electronics division. The dollar was down against the yen following this morning's dismal U.S. economic data, despite earlier comments by financial diplomat Haruhiko Kuroda, which intimated more FOREX intervention to weaken the Japanese currency as necessary. ---------------------------------------------------------------- FUTURES WATCH In the December Globex futures contract as of 8:55 a.m. EDT, the S&P 500 Index was down 10 points (11 points below fair value), while the Nasdaq 100 index was down 28 points (35 points below fair value). The December DJIA futures contract was down 85 points (99 points below fair value), and the December crude oil futures traded on the NYMEX were down $0.11 at $22.22/barrel. 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