Market briefing---Matt (slowt)
NYSE---Deb (fast)
Full year earnings result---Erin (slow)
Currency market
Investors Bank and Trust---Mazanec, Tim---Currency Strategist
trend that’s been developing here. take a look at the relationship, we’ve been talking about this rotation out of some of the best performers this year, and that’s some of the semiconductor stocks . take a look at how energy has been performing. we’re seeing these flip-flops over the past month. look at the performance in energy. it’s going up, while semiconductor and semiconductor equipment seems to be going down. and that really kind of just shows you over the past month this kind of rotation that we keep talking about through some of the laggards for the year. take a look at energy stocks . we saw some highs today, b.t. conoco, chevron texaco, and marathon oil all hitting 52-week highs in today’s session. one of the things with energy stocks we’re seeing, and one of the reasons they’re performing so well, that is because crude oil inventories dropped more than expected, sending crude oil within reach of $34 a barrel during today’s session. we also saw gasoline, heating oil, and jet fuel prices rallying as well, and that could lift profits at some of the companies. so one of the reasons we saw those sharply higher. semiconductors once again, as we mentioned, some of the laggards recently. they were laggards in today’s session. some of the worst performers in the s&p 500. so today, what we saw, pretty much a sideways market. that after reaching yesterday’s 19-month highs, seeing that once again in today’s session. tech and financials dropping in today’s session. you kind of look at some of those financials and what we’re talking about, take a look at the amex broker dealer index and how it performed in today’s session, kind of a rocky road. but finally by the end we did see them performing quite well. bear stearns was higher after reporting higher than expected reports. lehman brothers, you can see they actually were sharply lower, one of the biggest trades, and they did report a quarterly profit that more than doubled on gains of bond trading. but shares yesterday actually gained 3%. that was their biggest one-day advance since august 6, so we did see gains in lehman brothers before yesterday. also, etrade providing a lift, raising its 2003 and 2004 earnings forecast. back to you in the studio.
>> ok, deborah kostroun, thank you very much. moving on here, goldman sachs and stanley morgan will report their fourth quarter and full-year earnings results before the beginning of trade, the opening bell, if you will, tomorrow. erin burnett prepared this preview.
>> strong earnings expected from two of wall street’s most prestigious names. at goldman sachs, profits likely rose 45% in the fourth quarter. $730 million. stanley morgan expected to say earnings rose 9% after accounting a year ago. analysts say trading may account for half of revenues at goldman and more than 30% at stanley morgan, with fixed income in particular driving profit.
>> what is driving the earnings right now and has been driving earnings all year is fixed income trading. what will really determine the strength of the quarter is whether fixed income trading remains as strong in the fourth quarter as it has been throughout 2003.
>> the future for goldman and stanley morgan hinges on a continued rise in the stock market and more mergers. the firm, traditionally strong in equity underwriting, are the top two underwriters this year, leading in the most lucrative category, initial public offerings. they are six times higher than in the fixed income underwriting business. morgan and goldman also dominate the u.s. merger and acquisition playing fields with nearly 2/3 of the market. in the fourth quarter, the firms advised on the three biggest deals of the year, including bank of america’s $48 billion buyout of fleetboston. there are signs of strength in 2004 already. merrill lynch estimates the merger backlog is up as much as 50%. and while rising interest rates will hurt fixed income trading, some analysts say the banks may also find new ways to make money in bonds.
>> there are other businesses within fixed income, secular growth businesses, like credit derivatives, like the opportunity in europe, where there’s more secular growth. that business may be able to account, you know, cover up for some of the weakness in the rate-sensitive businesses. so next year might not be quite the bust that people think it will in fixed income.
>> goldman’s chief operating officer says the firm is aiming for a top spot in credit derivatives. those are instruments that reduce interest rate risk. he estimates the credit derivatives market will hit $4.7 trillion next year, more than doubling in size from 2002. back to you.
>> for the record, that growth won’t necessarily translate into hiring. stanley morgan and goldman sachs recently said they don’t plan to hire investment bankers even if merger activity surges, and overall, merrill lynch estimates head count at the two firms will rise just 2% to 3% next year. current employees, though, will take home bigger bonuses, according to the new york state cromp toller’s office, which says bonuses will jump 25% on average this year from last year to nearly $11 billion total. well, in the currency market, the euro rose to a record high against the dollar. investors are speculating that the european central bank won’t sell its own currency to stem the 18% advance in the euro this year against the dollar. joining us to discuss today’s top currency story, as well as the broader markets, is tim mazanec at investors bank and trust, and he joins us now from boston. tim, 124, the latest milestone to go by the wayside, a dollar euro. obviously a key level, but how key is it? is it the last milestone we’re going to see here?
>> probably not. it’s been a pretty swift move this year in the euro. in fact, we bottomed out in march of 2002, and ever since then seeming the been a one-way trade. i look for it to continue, especially with the twin deficit here in the united states and also the widening interest rate differentials. we saw treasury yields went lower, and obviously the price of the bonds went higher. so as long as that continues, one should expect the euro to continue to gain against the dollar.
>> has the recent surge or the recent breach of 124 had any effect on your own forecast and outlook?
>> yeah, it’s time to rise, time to look how high we can actually go. we gained 21% last year and 21% this year f. we get additional 21% next year, we’re talking 147. so what was once unheard of is a possibility now, especially if you go back the other day, we saw the p.p.i. figures, you know, somewhat disinflationary, that’s obviously going to keep the fed on hold for some time to come. as you mentioned before, the e.c.b. looks to be very much in pat, and they are very happy with―they believe that the euro, these levels are more in terms of the long-term averages. so talk of the 130 and possibly higher is probably a good bet for looking ahead three to six months.
>> 130? wow. let me ask you, the e.c.b. has never sold its own currencies. why would they suddenly do that now?
>> i don’t think they actually will. we have other banks, but the e.c.b., we saw the chief economist come out today, he said that he was pretty much satisfied with the level. it’s a potential threat in the future that we see comments by the president discussing their displeasure if the euro moves too high, too fast. but right now we haven’t seen that, so talks of intervention might have been premature.
>> we only have 10 seconds, but the gyrations we saw in the aussie dollar today, are they a short-term thing or something longer term?
>> just intraday short term. you know, just trading intraday. i think that’s the movement higher as well, and look for that to continue.
>> all right, tim mazanec, senior strategist at investors bank and trust in boston, always a pleasure to have you on. after struggling all day, stocks managed to finish the day higher today, except for the nasdaq, that is. we’re going to take a closer look at all the numbers and talk to a fund manager, next.
