Collapse in Nasdaq, Reversal in Dow Has Market Players on Edge
"Rotation" and "parabolic" were the watchwords on Wall Street last week. Today, traders (re-)added "fear" and "ugliness" to the lexicon.
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Roll the Ugliness
"It's starting to look ugly," said Ronny Kraft, CEO of Gotham Capital Management. "As I noted last week, this is the beginning of a correction in the Nasdaq and S&P. Cyclical stocks are doing well but the reality is, everyone is in tech: You can have the majority of stocks moving higher but people losing money." Like most players, Kraft could identify no fundamental reason for the about-face today. He observed some "major, major" sell programs enacted at Dow 10,700, potentially "a sign large institutions and the smart money are making a market bet." So-called regression models comparing the Dow's performance in the past 145 trading days with other years show an 80% correlation between the most recent period and the 145 days that preceded the market tops of 1929, 1973 and 1987, Kraft said. "This could potentially be the beginning of something problematic," he said. "I see potentially 5% upside but as much as 30% downside. I think this is an inflection point." Kraft, who entered today shorting Amazon.com (AMZN Quote) and Net.B@nk (NTBK Quote) and is recommending bets against a variety of others, remains similarly concerned about prospects for big-cap tech stocks. The Nasdaq closed below its 50-day moving average of 2405 today, while simultaneously breaking the intermediate-term "trendline" in place since November, he noted. "Any violation of the trendline and 50-day moving average is twice as significant," he said. "The reality is, the Nasdaq could come back down to its 100-day moving average, around the mid-2300s. That's a heck of a drop. We could see Dell, Cisco, and Microsoft 25% lower than where they are right now." The hedge fund manager expressed concern for retail investors, because while institutions are "scaling out" of AOL and Amazon.com, "the public is buying with the notion you're supposed to buy on dips," he said. "The reality is, one of these dips is not going to be a pivot point." Among other indices, the Dow Jones Transportation Average rose 38.01, or 1.1%, to 3566.71, but off its intraday best of 3679.47; the Dow Jones Utility Average gained 2.27, or 0.8%, to 298.42; and the American Stock Exchange Composite Index fell 10.30, or 1.4%, to 735.11 after hitting a 52-week high of 754.65 intraday. The price of the 30-year Treasury bond rose 23/32 to 96 2/32, its yield falling to 5.52%. Elsewhere in North American equities, the Toronto Stock Exchange 300 dropped 105.54, or 1.5%, to 6907.69 and the Mexican Stock Exchange IPC Index skidded 92.27, or 1.7%, to 5464.17.Monday's Company Report
By Heather MooreStaff 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.) Citigroup (C Quote) knocked off 1 to 70 5/8 after rising as high as 76 1/4 on its first-quarter earnings of $1.04 a share. The profit topped both the 22-analyst estimate for 87 cents and the year-ago 90 cents. Separately, Dime Bancorp (DME Quote) lost 7/16 to 22 3/4 after news it's buying Citigroup unit Citibank's automobile finance business. Dime fell 7/16 to 22 3/4.
Maybe it's all these new patchouli-scented '60s movies, but -- aside from all the tech carnage -- a little nostalgia kicked in today. And it ended up a good day -- yes, a good day -- for what (overly?) eager Internet players call the dead-tree folks. Paper conquers virtual -- for a day, at least. Still flexing from last week's solid earnings, newspaper stocks soared: New York Times (NYT Quote) rose 1 5/8, or 5%, to 34 1/8; Times Mirror (TMC Quote) rose 4 11/16, or 8.2%, to 62 1/8; Tribune (TRB Quote) rose 1 15/16 to 80 15/16; Dow Jones (DJ Quote) rose 1 11/16 to 53 7/16; and Gannett (GCI Quote) rose 3 3/16 to 73 1/8. Meanwhile, the Philadelphia Stock Exchange Forest & Paper Products Index lifted 0.7%.
Sorry, Compaq (CPQ Quote) -- you're, like, so last week's news. Chief Executive Eckhard Pfeiffer and CFO Earl Mason resigned yesterday. Big whoop, the stock only dribbled down 7/8 to 22 3/4 (an annual low, however).
Mergers, acquisitions and joint ventures
Consolidated Natural Gas (CNG Quote) picked up 3 9/16, or 6.8%, to 56 after Columbia Energy Group (CG Quote) yesterday made a $6.7 billion hostile bid for the company. Columbia Energy gave up 1 1/2 to 46 3/4. In February, Consolidated Natural agreed to be bought by Dominion Resources (D Quote) for $6.3 billion in stock but that deal's value has fallen to about $5.5 billion as Dominion's stock price has slumped. Today, Goldman Sachs lifted Consolidated Natural Gas to market outperformer. Hertz (HRZ Quote) vaulted 3 1/8, or 5.2%, to an all-time high of 63 after signing a multimillion-dollar agreement to become the premier car rental sponsor on AOL. Qwest Communications (QWST Quote) closed unchanged at 82, after leaping as high as 92 1/8, after BellSouth (BLS Quote) agreed to invest $3.5 billion for a 10% equity stake in the company. BellSouth tacked on 11/16 to 41 7/8.Earnings/revenue reports and previews
Eli Lilly tumbled 9 7/16, or 11.5%, to 72 7/8 after saying worldwide quarter sales rose 8% to $2.3 billion but that sales of Prozac fell 4% to $589.9 million. The company also posted first-quarter earnings of 53 cents a share, in line with the 24-analyst estimate and up from the year-ago 46 cents. Nicor (GAS Quote) slipped 3/16 to 36 1/8 after reporting first-quarter net earnings of 82 cents a share, including a gain for the sales of its interest in QuickTrade electronic-energy trading system. The seven-analyst view called for operating earnings of 88 cents vs. the year-ago 75 cents. Vantive (VNTV Quote) plunged 3 1/16, or 32.7%, to 6 5/16 after warning it expects to post break-even results for the first quarter -- below estimates for a 6-cent profit -- and naming Thomas Thomas chairman and CEO. In other earnings news:| Upside Surprises | |||||||
| Company | Qtr | EPS | First Call View | Yr. Ago EPS | Number of Analysts | Price Change | Close |
| Amcol (ACO Quote) | 1Q | 21c | 14c | 12c | 3 | +1 9/16 | 11 1/4 |
| Amtran (AMTR Quote) | 1Q | $1.22 | $1.13 | $1.02 | 4 | +1 1/2 | 23 3/8 |
| AVX (AVX Quote) | 4Q | 9c | 8c | 34c | 4 | +1 11/16 | 19 1/2 |
| BankAmerica (BAC Quote) | 1Q | $1.08 | $1.03 | $1.11 | 25 | -1 1/4 | 71 3/4 |
| Case (CSE Quote) | 1Q | -68c | -85c | 88c | 16 | +2 | 34 15/16 |
| CNF Transportation (CNF Quote) | 1Q | 58c | 51c | 33c | 12 | +1 7/8 | 41 7/8 |
| Consolidated Freightways (CFWY Quote) | 1Q | 30c | 28c | 29c | 6 | +1 11/16 | 12 |
| Cooper Tire & Rubber (CTB Quote) | 1Q | 41c | 39c | 34c | 7 | +1 7/8 | 23 |
| Dana (DCN Quote) | 1Q | $1 | 99c | 84c | 11 | +2 15/16 | 50 |
| Diebold (DBD Quote) | 1Q | 42c | 41c | 39c | 5 | +1 1/2 | 26 1/2 |
| FMC (FMC Quote) | 1Q | 92c | 84c | 75c | 6 | +3 7/8 | 65 3/4 |
| Lexmark (LXK Quote) | 1Q | 96c | 88c | 69c | 8 | -6 3/4 | 101 1/4 |
| Mercantile Bancorp (MTL Quote) | 1Q | 74c | 73c | 75c | 14 | +5/16 | 49 3/4 |
| Orckit Communications (ORCTF Quote) | 1Q | -38c | -39c | -13c | 7 | -6 5/16 | 22 5/8 |
| Rent Way (RWY Quote) | 2Q | 33c | 30c | 18c | 7 | +2 3/16 | 29 7/16 |
| Rockwell (ROK Quote) | 2Q | 74c | 70c | 60c | 10 | +3 7/8 | 52 13/16 |
| Rohm & Haas (ROH Quote) | 1Q | 61c | 58c | 58c | 9 | +2 7/8 | 39 15/16 |
| Ryerson Tull (RT Quote) | 1Q | 42c | 28c | 28c | 8 | +1 1/2 | 21 1/16 |
| Station Casinos (STN Quote) | 1Q | 18c | 13c | -7c | 11 | +1 9/16 | 16 1/8 |
| Temple-Inland (TIN Quote) | 1Q | 33c | 21c | 47c | 12 | -1 3/16 | 68 3/4 |
| Tower Auto (TWR Quote) | 1Q | 51c | 44c | 37c | 10 | +4 3/16 | 26 |
| United Dominion Industries (UDI Quote) | 1Q | 35c | 30c | 35 | 8 | +1 1/2 | 23 1/4 |
| USG (USG Quote) | 1Q | $1.71 | $1.70 | $1.35 | 8 | +5 1/16 | 63 3/16 |
| In-Line Reports | |||||||
| Company | Qtr | EPS | First Call View | Yr. Ago EPS | Number of Analysts | Price Change | Close |
| Bank of New York (BK Quote) | 1Q | 41c | 41c | 36c | 23 | +1/8 | 37 11/16 |
| Crown Cork & Seal (CCK Quote) | 1Q | 20c | 20c | 21c | 8 | -- | 33 15/16 |
| Microwave Power Devices (MPDI Quote) | 1Q | 8c | 8c | 2c | 3 | -1 5/8 | 9 1/2 |
| Northern Trust (NTRS Quote) | 1Q | 82c | 82c | 73c | 15 | +3 1/16 | 97 3/16 |
Analyst actions
Amgen (AMGN Quote) sliced off 5 13/16, or 8.7%, to 60 15/16 even after CIBC Oppenheimer lifted it to strong buy from buy. Boise Cascade (BCC Quote) grew 2 1/16, or 5.5%, to 39 3/4 after Prudential raised it to strong buy from hold. First American Financial (FAF Quote) shot up 2 5/8, or 17.6%, to 17 9/16 after Merrill Lynch pushed it up to intermediate-term accumulate from neutral. Nuevo Energy (NEV Quote) climbed 1 3/8, or 9.8%, to 15 3/8 after J.P. Morgan upped it to buy from market performer. TeleBanc (TBFC Quote) stumbled 14 1/2, or 16%, to 74 15/16 even after Merrill Lynch started coverage with a near-term accumulate and a long-term buy. Wellman (WLM Quote) jumped 1 3/8, or 11.1%, to 13 3/4 after Morgan Stanley Dean Witter upgraded it to outperform from neutral. Ziff-Davis' (ZD Quote) Internet unit, ZDNet (ZDZ Quote), tanked 8 1/8, or 20.4%, to 31 5/8 even after Goldman Sachs started coverage at market outperformer.Miscellany
Central European Media Enterprises (CETV Quote) slouched 2 7/16, or 21.2%, to 9 after dismissing its general director, Vladimir Zelezny.- Loading Comments...
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