THE DAY AHEAD: Market Preview

3 min read

Blue chips may take a backseat to a tech rebound on Thursday. Asia was mixed and Europe dipped. The Dow looks to begin the day in negative territory.


Large cap stocks, which regained some ground yesterday, may slide once again. The preliminary gross domestic product for the first quarter is expected to be flat at a 4.5 percent growth rate. The Commerce Department reports the data at 8:30 a.m. EST.

The GDP, for intents and purposes, is pulse of the economy. It's the total of all consumer and government purchases, investments and spending on goods and services. The GDP chain deflator, which measure the change in prices in total GDP and for each part, are also reported. Deflators are used to compare quarter-to-quarter changes in the GDP.

The GDP is reported quarterly and is reported three times for each quarter, advance, preliminary, and final. Since the first quarter data hasn't been adjusted downward, it bodes poorly for stocks as a whole. A significant rise in the GDP has been seen as a sign that the economy is overheating, leading to inflation. While the Fed left interest rates alone at its last meeting May 18, the GDP data gives the central bank cause to consider a rate hike in the near future.

First hit from the report will be the big Dow stocks, though stocks as a whole may take a bit of a hit. Tech stocks, which have been decimated in last several days, may get a boost as investors drift out of income stocks back to growth stocks. The recent slump among techs may tempt some bargain hunting.

Among Thursday's stocks to watch: Computer Sciences landed a $500 million contract, Fatbrain.com hit its first quarter numbers, J.D. Edwards beat its second quarter expectations, Informix settled a lawsuit for $142 million, PSINet filed a $300 million shelf and Teltrend met estimates for its third quarter.

On Wednesday, bargain-hunting investors snapped up Internet stocks on the cheap. The Dow rallied up 171 points to close at 10,702.16 and the Nasdaq picked up 45 points to 2,426.26.

Recapping the IPO train wreck on Wednesday: StarMedia was the sexiest among the ugly, DLJDirect received an ambivalent welcome for its huge offering of tracking shares and Edgar Online and Ziplink probably should not have gone public. Investors, with so many IPOs to choose from, are becoming a lot pickier. Finally, some common sense is being seen in Net IPOs. It's about time.

The Inter@ctive Week @Net Index gained 14 to 293 on Wednesday.

At the Bell

The Dow Jones industrial average is set to open on the down side. The Standard & Poor's 500 index for June futures contracts slipped 3.5 points to 1,301 at 7:24 a.m. EST in 24-hour electronic trading, are indicating a 28-point dip in the global bellwether.


Asia was mixed. The Nikkei 225 in Tokyo dropped 0.33 percent to 16,177, the Seoul composite in South Korea gained 0.92 percent to 726, Singapore's Strait Times index added 1.16 percent to 1,915 and Hong Kong's Hang Seng declined 0.81 percent to 12,308.

NEC Corp. (Nasdaq: NIPNY) lead a decline among chipmakers after the Japanese company said it was doubling its memory chip production. Last month, Micron Technology Inc. (Nasdaq: MU) said it was stepping up its chip production, spurring concerns that the ramp up was premature and that supply still had yet to be soaked up.


European markets declined on concerns about a continued economic slump throughout the continent. London's FTSE 100 dipped 0.33 percent to 6,217, the CAC 40 in Paris lost 0.41 percent to 4,358 and the Xetra DAX in Frankfurt fell 1.26 percent to 5,118 at 7:42 a.m. EST.