Stocks Finish Lower

The major indexes pulled back a bit in a narrow session after Monday's solid gains

Stock markets closed slightly lower Tuesday, in a narrow session as the market continued to consolidate after major indexes reached new recovery highs on Monday.

The Dow Jones industrial average finished 19.6 points lower, or 0.2%, to 9,838.8. The broader Standard & Poor's 500 index dipped 5.77 points, or 0.55%, to 1,053.25. The tech-heavy Nasdaq composite index lost 9.73 points, or 0.5%, to 1,957.97. Wireless services, and food retailers fell, while diversified metals and minerals were higher.

Wednesday will be a busy day, first on the corporate side with investors looking ahead to Cisco System's (CSCO ) earnings report. The day's economic docket includes the ISM non-manufacturing index and factory orders data. September factory orders should post a 0.3% month over month rise, while shipments jump 1.3%, says MMS.

In economic news on Monday, the Challenger report on planned corporate layoffs vaulted 125% higher, to 171,874 in October, up from a paultry 76,506 in September, according to the private survey. This is the highest since October, 2002, following a two-month decline. MMS reports that Challenger CEO John Challenger, continued to put a pessimistic spin on the data, saying he expected to see only a small rebound ahead, given productivity gains, outsourcing and consolidation.

U.S. chain store sales rose 0.5% in the week of November 1, compared to a 0.9% fall the week prior, according to BTM/UBS. Sales rose 5.1% compared to the same period last year. Halloween sales boosted spending, though the California wildfires restrained activity in the southern part of the state.

In company news, Tyco (TYC ) posted better-than-expected fourth quarter results -- loss of 11 cents per share, vs. 70 cents from continuing operations on a slight revenue rise -- but says its first quarter will fall short. The company will sell Tyco Global Network, and exit more than 50 other businesses, cutting about 7,200 jobs along the way. Tyco expects 2004 EPS as high as $1.52 (excluding the impact of divestiture, and a restructuring program). Tyco's stock ended 7% higher.

Fair Issac (FIC ) posted fourth quarter earnings of 64 cents per share, vs. a 55 cent loss on a 25% revenue rise. Needham is disappointed with the fourth quarter, but upgraded the stock to strong buy from buy based on an expected sell-off. S&P reiterated its buy rating. The stock ended down 12%.

KOS Pharmaceuticals (KOSP ) and Takeda Pharmaceuticals North America announced a three-year agreement to co-promote KOS Pharmaceutical's Niaspan and Advicor in the U.S. The deal is expected to add at least 10% to the company's 2004 revenue, and 10% to 15% to its earnings per share, and will be accretive throughout its term. The stock edged 11% higher.

Gillette (G ) gained 5.1% after posting third quarter earnings per share of 41 cents, vs. 33 cents on an 11% sales rise. The company notes that the third quarter was favorably impacted by early fourth quarter promotions, and a build-up of pantry supplies of batteries due to the recent blackout, and hurricane. Gillette expects a slow pace of fourth quarter sales growth.

McDATA (MCDTA ) finished 4% lower on news that the company, which makes enterprise switches and related software for connecting servers, cut its third quarter revenue guidance to a range of $93 million to $95 million, down from an upward range of $112 million.

MetLife (MET ) reported third quarter earnings of 81 cents, vs. 69 cents per share on 8% higher total premiums, and fees. The company says that the Securities and Exchange Commission is formally investigating an accounting error in the company's last quarter's results. The stock finished slightly lower.

Cephalon (CEPH ) posted third quarter earnings of 47 cents, vs. 35 cents on a total revenue rise of 46%. The company has agreed to acquire CIMA Labs (CIMA ), a maker of oral drugs that dissolve in the mouth without swallowing a pill, in a cash deal valued at $515 million, or $34 per CIMA share. CIBC World reiterated its sector outperform rating, and has a $65 target. Cephalon stock finished down slightly, while CIMA shares added 4.7%.

Intermagentics General (IMGC ) has offered to acquire Invivo (SAFE ) for $19 per Invivo share, consisting of $15 in cash, and $4 in Intermagnetics stock. Intermagnetics finished down slightly, while Invivo gained 21%.

The second half of the week remains dominated by economic news, with weekly jobless claims arriving on Thursday, along with chain store sales, and productivity data. "The productivity gain is probably going to be up there -- up 8% to 9%," says Rick MacDonald, a senior economist at MMS International. "The question is whether it's 'baked into the cake' or not." On Friday, the much-anticipated updated on employment for October is scheduled. MMS expects the unemployment rate to stay put at 6.1%. Wholesale trade and consumer credit are also scheduled for Friday.

Treasury Market

Treasury prices ended higher Tuesday, shrugging off Monday's strong data set, and posting corrective gains after the Challenger Layoff report was announced. "While the private report rarely aligns neatly with the payrolls report, it nonetheless encouraged bulls to take charge again," says MMS.

Fed Chairman Alan Greenspan will not testify on the banking industry before the Senate Banking Committee on Wednesday due to a scheduling conflict. Greenspan will discuss the economy during a satellite presentation on economic development on Thursday before the SIA conference in Boca Raton, Florida.

The dollar continued to lose some traction, off its best levels from Monday following strong U.S. data.

World Markets

European stocks finished lower, having backtracked marginally in low-volume trading on Tuesday. The Credit Suisse Group exceeded net third quarter profit expectations, but the tone of the report was downbeat, and weighed on the banking sector, reports S&P's MarketScope.

London's Financial Times-Stock Exchange 100 index finished down 2.3 points, or 0.05%, to 4,330.3. Traders mostly ignored a report that the U.K. October construction index rose to its highest level since July 2001.

In Paris, the CAC 40 ended 14.26 points lower, or 0.41%, at 3,424.81, as October French consumer confidence fell on concerns about jobs.

Germany's DAX index finished down 2.79 points, or 0.07%, to 3,741.71. Bayerische Motoren Werken, and Porsche were higher after reporting higher U.S. sales. Depfa Bank was lower, saying its biggest shareholder was selling his 40.8% sake in the company.

Asian markets rose higher on the back of a strong day on Wall Street. Japan's Nikkei 225 index added 288.38 points, or 2.73%, to finish at 10,847.97. Tokyo Electron surged 9.14%, and Advantest soared 6.84%. Toyota Motor and Nissan Motor rallied 9.27% and 8.36% respectively. Hong Kong's Hang Seng index gained 53.91 points, or 0.44%, to 12,440.72.

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