Bellwether Techs Enjoy a Late-Day Surge

Just when it looked like those still confused by yesterday's market action would have a rare second chance to reanalyze, something changed. Or, at least, investors returned to something familiar, as bellwether tech names led a late-day surge for market proxies.

Certainly, there were similarities between today and yesterday, as divergences remain in vogue. Most notably, the Dow Jones Industrial Average established another record behind strength in resurgent cyclical stocks. Additionally, recently torrid brokerages suffered again, as did consumer-focused names. Drug makers were notable losers after Pfizer (PFE), which fell 10.1%, issued cautious comments about second-quarter earnings.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 51.06 +0.5% 10,462.72 +13.9% S&P 500 5.59 -0.4% 1322.85 +7.6% Nasdaq 14.49 +0.6% 2521.77 +15% Russell 2000 0.38 +0.1% 417.77 -1% TSC Internet 15.45 -2.2% 678.72 +67% TSC E-Commerce 1.51 -1.1% 133.64 +57% TREASURY BOND CHANGE VALUE YIELD 30-Year 8/32 96 1/32 5.524%

The Nasdaq Composite Index closed up 14.49, or 0.6%, to 2521.77 after falling as low as 2443.02 and spending most of the session mired in negative territory.

Tech bellwethers were led by Microsoft (MSFT), Dell (DELL) and Intel (INTC). The Nasdaq 100 rose 1.6% while the Philadelphia Stock Exchange Semiconductor Index gained 4.4%.

The Dow industrials overcame a decline to as low as 10,378.63 and closed up 51.06, or 0.5%, to 10,462.72, its seventh record in the past nine sessions.

Oil giants Chevron (CHV) and Exxon (XON) led the latest charge by the Dow's cyclical components. A 33-cent jump in the price of a barrel of crude oil to $16.80 helped energy stocks overall; the American Stock Exchange Oil & Gas Index jumped 4% and the Philadelphia Stock Exchange Oil Service Index climbed 6.4%.

Other Dow gainers included former doormats United Technologies (UTX), DuPont (DD), Goodyear-Tire (GT), 3M (MMM) and International Paper (IP). The Morgan Stanley Cyclical Index gained 2.3%.

Dow laggards were paced by American Express (AXP), Citigroup (C) and Johnson & Johnson (JNJ).

Meanwhile, the Russell 2000 extended its win streak to five, rising 0.38, or 0.1%, to 417.77.

"The market showed resiliency today," said Jim Herrick, managing director of trading at Robert W. Baird. "There was some panic selling earlier, and I think you started seeing some money flowing back into Internet and tech stocks when they got to valuations people thought were reasonable, whatever that means."

Additionally, traders have been emboldened by strong earnings and forecasts thereof by bellwethers such as J.P. Morgan (JPM) and Lucent (LU), Herrick said.

In New York Stock Exchange trading, 1.09 billion shares were exchanged -- the fourth busiest day in NYSE history -- while gainers led losers 1,757 to 1,272. In Nasdaq Stock Market activity 1.24 billion shares were exchanged -- the ninth busiest day in Nasdaq history -- while losers led 2,075 to 2,034. New 52-week highs bested new lows 71 to 55 on the Big Board but new lows led 109 to 67 in over-the-counter trading.

The S&P 500 lost ground for a third-straight session, falling 5.59, or 0.4%, to 1322.85, but off its intraday low of 1308.38. Weakness in drug makers and airlines weighed heavily on the index. The American Stock Exchange Pharmaceutical Index slid 4.1% and the AMEX Airline Index slid 2.2%.

Another retreat in the financial sector, which had been the market's leaders until a day or so ago, also stymied the S&P. Charles Schwab (SCH) typified the group's performance. After posting huge gains in recent weeks, Schwab slid 10.3% despite posting better-than-expected earnings. Similarly, Donaldson Lufkin & Jenrette (DLJ) fell 8.5% despite besting expectations.

The Philadelphia Stock Exchange/KBW Bank Index slid 0.6% while the American Stock Exchange Broker/Dealer Index shed 6%.

Interent banks and brokers suffered greater declines, much as their recent gains had been outsized.

AmeriTrade (AMTD) lost 7.8% despite posting better-than-expected earnings last night, while E*Trade (EGRP) shed 10.2%, and National Discount Brokers (NDB) slid 17.7%.

Weighed down in part by the aforementioned, TheStreet.com Internet Sector index fell 15.45, or 2.2%, to 678.72 while TheStreet.com E-Commerce Index shed 1.51, or 1.1%, to 133.64.

You're So Nude, Dude

It's the emperor's new clothes," Scott Bleier, chief investment strategist at Prime Charter, said of the Internet stocks. "Everybody was jumping in simply because everyone was making so much, so fast nobody stopped to think. The ones who said, 'You're not wearing any clothes' were the online banks; they were the final straw."

Bleier, who correctly predicted the Dow would hit 10,000 in the first quarter last December, has more recently been forecasting the market would top somewhere around April 15. Notwithstanding the market's performance today, he still thinks so.

"This flood of money into deeply cyclical, value-oriented companies comes as investors reach for the laggards at the end of a major bull move," he said. "Now we have to look forward to a period of consolidation that will last into the hot summer months."

The strategist views support for the Dow around 9500 but sees more troubling downside for Internet favorites.

"The games of trading big Internet stocks doesn't end so quickly, but the people who bought the bounce in the last two weeks are going to be stuck for a while," he said. "It's been parabolic. Historically with parabolic moves, you don't know how high they'll go but when they end, generally those are important and significant tops for all the stocks that have spiked like that" -- Schwab and America Online (AOL), which fell 4.6%, being prime examples.

Additionally, he noted the struggles of Net banks such as Net.B@nk (NTBK), which dipped 5.9%, Florida Banks (FLBK), off 12.9%, and Atlantic Bank (ATLB), which shed 19.6%.

"It's going to take another giant frenzy or companies actually being able to execute to get stocks back to peaks," he said.

Among other indices, the Dow Jones Transportation Average rose 10.25, or 0.3%, to 3453.57; the Dow Jones Utility Average climbed 2.37, or 0.8%, to 293.96; and the American Stock Exchange Composite Index rose 1.18, or 0.2%, to 737.93.

The price of the 30-year Treasury bond fell 8/32 to 96 1/32, its yield rising to 5.52%.

Elsewhere in North American equities today, the Toronto Stock Exchange 300 rose 41.59, or 0.6%, to 6990.49 and the Mexican Stock Exchange IPC Index hopped 193.27, or 3.6%, to 5490.62.

Thursday'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.)

Pfizer deflated down 14 5/8, or 10.1%, to 130 after reporting that first-quarter Viagra sales dropped to $193 million from $236 million in the fourth quarter. The company forecast single-digit second-quarter earnings-per-share growth, citing a strong year-ago quarter due to Viagra's launch, but it said it's comfortable with analysts' full-year earnings estimates. Pfizer posted first-quarter earnings of 62 cents a share, on target with the 24-analyst prediction and ahead of the year-ago 53 cents. TheStreet.com columnist James Cramer weighed in on the report in a piece this morning.

Pfizer's bad vibes spread throughout the sector: Merck (MRK) lost 1 1/8 to 77 3/8; Amgen (AMGN) lost 3 to 68 7/8; Pharmacia & Upjohn (PNU) lost 3 5/16, or 5.3%, to 59; and SmithKline Beecham (SBH) lost 3 3/8 to 66 15/16.

Elsewhere in earnings, General Motors (GM) dropped 3 3/16 to 86 9/16 even after posting first-quarter earnings of $3.04 a share, beating the 16-analyst estimate of $2.89 and moving up from the year-ago $2.27. And Ford (F) added 1/16 to 62 13/16 after reporting first-quarter earnings of $1.46 a share, topping the 10-analyst outlook for $1.39 and higher than the year-earlier $1.22.

Earnings/revenue reports and previews

Advanced Micro Devices (AMD) surged 1 5/8, or 11%, to 16 3/8 after late yesterday reporting a first-quarter loss of 81 cents a share, narrower than the 13-analyst estimate of a loss of 92 cents. TheStreet.com took a closer look at the report in a story last night.

Briggs & Stratton (BGG) climbed 3 1/16, or 5.1%, to an all-time high of 63 1/2 after late yesterday posting third-quarter earnings of $1.79 a share, beating the four-analyst view of $1.47 and the year-ago $1.45.

Columbia Energy (CG) sloughed off 5/8 to 49 1/4 after recording first-quarter earnings of $1.80 a share, including a gain from a settlement. The 12-analyst estimate called for $1.78 vs. the year-ago $1.77.

Nalco Chemical (NLC) jumped 3 3/16, or 10.9%, to 32 5/16 after saying it sees first-quarter earnings coming in 20% higher than the year-ago 49 cents a share thanks to strong sales growth. The eight-analyst forecast called for 46 cents.

For additional earnings, see the earnings table.

Offerings and stock actions

McLeodUSA (MCLD) vaulted 7 1/8, or 14.8%, to 55 7/16 after late yesterday saying it will file for a secondary offering of up to 9 million shares.

Analyst actions

Alcoa (AA) tacked on 9/16 to 53 13/16 after Morgan Stanley Dean Witter upgraded the stock to neutral from underperform.

Brooktrout Technology (BRKT) expanded 1 13/16, or 12.2%, to 16 11/16 after Prudential Securities increased it to strong buy from accumulate.

CNF Transportation (CNF) hopped 2 1/4, or 6%, to 40 1/16 after Merrill Lynch lifted the stock to near-term accumulate from neutral but downgraded it to long-term accumulate from buy.

Kaiser Aluminum (KLU) lifted 1/2, or 8.4%, to 6 7/16 after Goldman Sachs upgraded it to market performer from underperformer.

Microsoft added 2 7/8 to 88 7/8 after Warburg Dillon Read started coverage with a buy and a price target of 110 a share.

Miscellany

Advanced Polymer Systems (APOS) rocketed 1 15/16, or 44.9%, to 6 5/16 on word the company hired Warburg Dillon Read to advise it on strategic alternatives.

Friedman Billings Ramsey (FBG) soared 4 5/8, or 47.1%, to 14 7/16 on news it plans to launch an online investment bank, fbr.com. The company said online investors will have the chance to register to participate in all of the firm's future IPOs. Meanwhile, other companies that spiked on their connections to online banking and investing late last week continued this week's fall. Ameritrade tumbled 11 9/16, or 7.8%, to 136 5/8; E*Trade tumbled 11 1/2, or 10.2%, to 101 7/16; and Net.B@nk tumbled 10 1/16, or 5.9%, to 160.

Peapod (PPOD) shot up 2 13/16, or 23.7%, to an all-time high of 14 7/8 after announcing it achieved "click-through rates" -- which show how often computer users point their mouse at an ad and ask for more information -- as high as 30% for advertisers on its Web site.

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