No Restraint: A Determined Wall Street Stays Focused on Buying

Like the snow in New York, the buying on Wall Street took its time to accumulate. Major proxies struggled but records fell again in a session marked by extremely high volume and notable volatility.

Major Indices INDEX CHANGE % VALUE YR TO DATE DOW 105.56 +1.1% 9643.32 +5% S&P 500 5.36 +0.4% 1275.09 +3.7% Nasdaq 18.73 +0.8% 2344.82 +6.9% RUSSELL 2000 3.40 +0.8% 431.23 +2.2% TSC Internet 24.67 +5.2% 499.77 +22.9% TREASURY BOND CHANGE VALUE YIELD 30-YEAR 24/32 99 19/32 5.325%

A stronger-than-expected employment report for December reestablished the market's faith in the economy's forward momentum. That, plus stronger-than-expected earnings from Alcoa (AA Quote), helped rekindle investor interest in cyclical stocks. But at the same time, fear of a stronger economy depressed bond prices and hampered defensive sectors such as pharmaceuticals.

The price of the 30-year Treasury bond fell 1 15/32 to 98 29/32, its yield rising to 5.32%, its highest level since Nov. 6.

The Dow Jones Industrial Average overcame some early jitters and rose as high as 9619.12 at midday. Paced by Alcoa, United Technologies (UTX Quote), and AT&T (T Quote) -- which set a 3-for-2 stock split and forecast better-than-expected earnings for 1999 -- the index survived some afternoon consternation, which took it nearly to breakeven. After reviving to rise as high as 9647.96 in the final hour, the index closed up 105.56, or 1.1%, to a new all-time high of 9643.32.

The Nasdaq Composite Index thundered ahead in the early going, reaching as high as 2369.55. Like the Dow, the tech-swamped index suffered in the afternoon but was reinvigorated in the final hour. Extending its streak of record-setting closes to six, the Nasdaq closed up 18.73, or 0.8%, to 2344.82.

Outside of Cisco (CSCO Quote), which rose another 3%, traditional tech giants were muted. Meanwhile, Internet stocks were downright outlandish.

TheStreet.com Internet Sector index jumped 24.67, or 5.2%, to a new high of 499.77. Yahoo! (YHOO Quote) dipped from its intraday heights but still closed up 7.4% to a new all-time high of 343 5/8. Broadcast.com (BCST Quote) led the way among secondary Net names, closing up 50.8% after management reportedly made bullish comments at a Morgan Stanley Dean Witter's tech conference.

In today's Midday Musings, Gary Kaltbaum, chief technical analyst at J.W. Genesis Securities, predicted the "end" for Internet stocks would come when they closed flat or down after a huge early move. That call looked prescient with the experience of Amazon.com (AMZN Quote), which closed up just 2 5/16 to 160 1/4 after rising as high as 199 1/8 intraday. The stock even dipped below break even briefly before the close.

"That's the making of a top for the Internet stocks," Kaltbaum said in a follow-up conversation. "Everyone who wanted to buy is probably in the stock and it's more likely sellers have the upper hand."

"What was really amazing about it was the rest of the market was gapping up and it got the rug pulled out from under it," added Dan Mathisson, head stock trader at D.E. Shaw Securities. "There was no specific news on it -- but these don't trade on news, of course. It was incredibly volatile today, but this is a stock that Monday morning was at 106."

Throughout the session, the S&P 500 lagged the Dow and Nasdaq Comp. After rising as high as 1278.05 early on, the S&P 500 struggled but managed to close up 5.36, or 0.4%, at a new all-time high of 1275.09.

Among the big negative influences were drug makers such as Eli Lilly (LLY Quote), retailers such as Sears (S Quote), consumer favorites such as Procter & Gamble (PG Quote), and tech names such as IBM (IBM Quote).

Small-cap names also trailed the big market averages but the Russell 2000 closed up 3.40, or 0.8%, to 431.23.

In New York Stock Exchange trading, 937.8 million shares were exchanged while declining stocks bested advancing issues 1,519 to 1,501. In Nasdaq Stock Market activity, 1.294 billion shares traded -- the second-busiest day in history -- while advancers led 2,362 to 1,813. The session marked the first time more than a billion shares have traded on the Nasdaq for three consecutive days. New 52-week highs bested new lows 93 to 16 on the Big Board and by 185 to 28 in over-the-counter trading.

In addition to Amazon's faltering, Kaltbaum was concerned by the weakness in some growth stocks.

"You're going to have this vicious rotation out of big name tech and leaders like drugs and foods," he said. "At the same time, a lot of cyclical stocks are coming to the forefront. As long as they hold up it will be OK, but it bears watching. It's not the making of a bear market but I think some of the lynchpins are coming out of the market."

But other technical analysts were not ready to make such a drastic call.

"We're definitely seeing some weakness but I don't think you can draw any conclusions yet," said Richard Dickson, technical analyst at Scott & Stringfellow in Richmond, Va. "If you start seeing some serious cracks in technology then we might have some problems. But if you get a little profit-taking I'm not sure it's wise to make a run for the hills."

Dickson said he was not as concerned about the performance of pharmaceutical or food stocks because they have not been substantive market leaders in the rally off the Oct. 8 lows. More disconcerting is the bond market's continued weakness.

"That could be the thing that unravels the market," he said. "Where's the break point where people start saying based on these yields valuations are a little high or bonds start to offer pretty good competition? I don't know, but we're obviously getting closer the more yields move up."

Bond prices dipped again after the Labor Department reported nonfarm payrolls surged 378,000 in December, well above the consensus forecast for a gain of 212,000. The components of the report were also stronger than expected.

"It's an extremely curious market," Dickson continued. "People are buying cylicals but all the economists say things are slowing down. My instincts say the guys who are buying the cyclicals are wrong based on the inability of cyclical stocks to maintain any leadership since October."

Today, however, cyclical stocks rose in concert with Alcoa. As a result, the Morgan Stanley Cyclical Index rose 3.2%. Paper products companies were the best performers: The Philadelphia Stock Exchange Forest & Paper Products Index gained 5.6% as industry giants Weyerhaeuser (WY Quote) and International Paper (IP Quote) rose 8.7% and 7.5%, respectively.

Among other indices, the Dow Jones Transportation Average rose 40.61, or 1.2%, to 3360.28; the Dow Jones Utility Average lost 1.05, or 0.3%, to 310.14; and the American Stock Exchange Composite Index rose 3.78, or 0.5%, to 707.76.

For the week, the Dow industrials rose 461.89 or 5%; the S&P 500 gained 45.86, or 3.7%; the Nasdaq Comp rose 152.13, or 6.9%; the Russell 2000 added 9.27, or 2.2%; TheStreet.com Internet Index gained 93.35, or 22.9%; the Dow transports surged 210.97, or 6.7%; the Dow utilities slid 2.16, or 0.7%; and the Amex Composite rose 18.77, or 2.7%.

Elsewhere in North American equities today, the Toronto Stock Exchange 300 rose 66.74, or 1%, to 6868.93 and the Mexican Stock Exchange IPC Index fell 26.70, or 0.7%, 3638.55. For the week, the TSE 300 rose 383.40, or 5.9%, and the IPC lost 266.62, or 6.8%.

Friday's Company Report

By Heather Moore
Staff Reporter

(Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.)

As noted above, Dow component Alcoa shot up 7 7/8, or 10.2%, to an annual high of 85 1/8 after reporting fourth-quarter earnings of $1.18 a share, beating the 15-analyst consensus of $1.06 and the year-ago $1.04. The company also set a 2-for-1 stock split, increased its dividend by 50% to 38 cents a share and announced a 10 million-share buyback program.

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Also as mentioned earlier, AT&T rung in 2 13/16 to an all-time high of 85 1/16 after surprising Wall Street and scrapping plans for one of the two tracking stocks it was going to issue as part of its $48 billion acquisition of TCI (TCOMA Quote). When the merger was first announced, Telephone said it would separate its consumer businesses into a new unit with its own tracking stock. AT&T still plans to issue tracking stock, called Liberty Media Group, to stockholders of TCI's cable TV programming and other businesses. The company also announced plans for a $4 billion repurchase program and said it will split 3-for-1 after the merger is completed. Excluding the impact of the merger, AT&T expects earnings for 1999 of $4.20 to $4.30 a share, above the anticipated $4.09. TCI lifted 1 3/8 to an all-time high of 62 1/4.

Mergers, acquisitions and joint ventures

Lycos (LCOS Quote) jumped 19 7/16, or 27.2%, to an all-time high of 91 3/4 after yesterday saying it's partnering with IBM to offer personalized start pages on Big Blue's Aptiva PCs.

MCI WorldCom (WCOM Quote) slipped 1/16 to 75 after confirming it won't make a bid for AirTouch Communications (ATI Quote). That leaves Bell Atlantic (BEL Quote) and Vodafone (VOD Quote) to duke it out for the company. AirTouch lost 3 to 79, Bell rose 5/8 to 56 5/8 and Vodafone lost 3 1/8 to 173 1/8.

Earnings/revenue reports and previews

CHS Electronics (HS Quote) took in 11/16 to 19 1/8 after saying its December net sales reached a record $1 billion.

Coldwater Creek (CWTR Quote) vaulted 3 13/16, or 38.9%, to 13 5/8 after last night reporting third-quarter earnings of 44 cents a share, 4 cents higher than the four-analyst outlook and 3 cents above the year-ago estimate.

Gucci (GUC Quote) expanded 7 7/16, or 11%, to an annual high of 74 7/8 after saying combined revenue for November and December rose 23% compared to the year-ago period.

Hibbett Sporting Goods (HIBB Quote) slid 4 3/8, or 18.5%, to 19 1/4 after last night saying it expects its fourth-quarter sales to be flat to slightly negative.

Interface (IFSIA Quote) plunged 29/32, or 10.1%, to an annual low of 8 1/16 after saying last night it sees fourth-quarter earnings coming in at 18 cents to 22 cents a share. The five-analyst forecast called for 29 cents vs. the year-ago 51 cents.

Oxford Health Plans (OXHP Quote) climbed 1 5/16, or 7%, to 20 1/32 after saying it may record a profit in the second half of this year. The 10-analyst outlook calls for a third-quarter loss of 22 cents a share, vs. the year-ago loss of 58 cents, and a fourth-quarter loss of a 14 cents, vs. loss of 76 cents.

Pharmacopeia (PCOP Quote) scored 2 3/8, or 26.8%, to 11 1/4 after saying it expects fourth-quarter earnings to top the penny a share expected by five analysts. In the year-ago period, the company lost 10 cents.

Programmer's Paradise (PROG Quote) brought in 4 3/8, or 39.8%, to an all-time high of 15 1/2 after reporting an annual sales increase of 30% to $230 million. The company, which sells PC-based technical software, credited a 490% jump in Web sales.

Vimpel-Communications (VIP Quote) fell 1, or 6.5%, to 14 1/2 after saying it expects reduced revenue in the fourth quarter compared to the third quarter and that it will report a net loss for the year due to extraordinary charges in the third quarter and lower income for the fourth quarter.

Offerings and stock actions

Biogen (BGEN Quote) hopped 3 1/4 to 82 1/2 after Merrill Lynch upgraded it to buy from accumulate.

Compuware (CPWR Quote) jumped 2 13/16 to 72 3/8 after last night setting a 2-for-1 stock split.

Data Broadcasting (DBCC Quote) soared 6 5/16, or 31.6%, to an all-time high of 26 3/8 on investor enthusiasm over next week's IPO of Marketwatch.com, a joint venture between Data Broadcasting and CBS (CBS Quote). CBS added 1 9/16 to 35 1/8.

FactSet Research Systems (FDS Quote) rose 4 1/2, or 7.2%, to an all-time high of 66 3/4 after setting a 3-for-2 stock split.

Analyst actions

First Data (FDC Quote) lifted 3 13/16, or 11.9%, to 35 3/4 after Morgan Stanley Dean Witter upgraded it to strong buy from neutral.

Lexmark (LXK Quote) took in 3 1/8 to 100 9/16 after Credit Suisse First Boston started coverage with a buy, predicting 22% growth in earnings in 1999 and 2000.

Southwest Airlines (LUV Quote) flew up 3 1/16, or 12%, to an all-time high of 28 9/16 after an upgrade to strong buy from outperform at Morgan Stanley Dean Witter.

Tiffany (TIF Quote) excelled 4 13/16, or 8.3%, to an all-time high of 62 5/8 after Goldman Sachs raised it to market outperform from perform.

Miscellany

Didax (AMEN Quote), which claims to be the nation's leading Christian network, powered up 4 11/16, or 51.7%, to 13 7/8 after the oft-wrong Inside Wall Street column in BusinessWeek made a bullish case for the company, saying the stock was poised for another run-up. The column also said Finova (FNV Quote), which provides secured commercial loans to small and midsize companies, was looking for acquisitions. FNV, which yesterday said it will buy Sirrom Capital (SIR Quote), hopped 2 1/4 to 57 11/16. Sirrom added 1/8 to 8 1/8.

Ford (F Quote) leapt 3 3/16, or 5.2%, to an all-time high of 65 after last night saying it will put its luxury sport utility vehicle/pickup truck, the Lincoln Blackwood, into production after the truck drew praise at auto shows. The automaker is rumored to be in talks to acquire Volvo (VOLVY Quote), which grew 1 3/8 to 30 1/8. Elsewhere in autoland, General Motors (GM Quote) picked up 2 1/2 to an all-time high of 80 1/16 after reporting sales of its Mexican unit rose about 23% in 1998.