Traders Look Ahead But Averages Haunted by Yesterday

Investors wondering if Friday's record-setting session was the end of the summer rally as we know it should still be wondering, and might even be worrying a bit.

Sure, it's encouraging that after yesterday's harsh selloff, the major equity indices were up for most of the morning. But following a day like yesterday -- when the Nasdaq Composite Index suffered its fourth-largest point drop ever -- stocks are bound to have something of a bounce to them, regardless of whether the near-term future holds a new leg up or a repeat of last summer. And come lunchtime on Wall Street, the Dow Jones Industrial Average had taken a dip into the red while the Comp was off its early high.

Major Indices INDEX CHANGE % VALUE Dow 3.80 -0.03% 10,992.23 S&P 500 1.56 +0.1% 1378.66 Nasdaq 13.41 +0.5% 2745.59 Russell 2000 0.23 -0.1% 453.32 TSC Internet 15.80 +2.8% 609.53 TREASURY BOND CHANGE VALUE YIELD 30-Year 8/32 90 28/32 5.906%

Plus -- and this is a big plus -- market players are waiting for Fed Chairman Alan Greenspan's Humphrey-Hawkins testimony tomorrow morning. Given recent inflation-friendly economic data, most folks expect Greenspan's comments to be relatively even-handed .

Gary Kaminsky, managing director of the asset management group at Neuberger & Berman, expects Thursday's G-SPAN to be relatively eventless -- as least as far as interest rates are concerned. "I don't think we'll get any indication either way, beyond the economy is growing and the world is stable. I don't think we'll get any indication of the next move, so we'll just continue to invest," he said.

"Yesterday's action was a trading story," Kaminsky continued. "And that had more to do with Monday's action and fears about a top of the market. That anniversary got into short-term traders' focus. It made for an interesting storyline." He referred to July 20, 1998, which marked the Nasdaq's peak before an almost-30% late-summer plummet last year.

"There are two ways '99 is like '98," he added. "The market has been doing well for the last six months, and there was a feeling for profit-taking. But the interest-rate scenario is obviously different, and more importantly, we are not faced with an emerging-markets crisis. Unless there is a Long-Term Capital [Management] hiding somewhere, you can't compare the two [years]. ... It was just a day-trader type thing."

Although many attributed yesterday's selling to growing concerns about the year 2000 and the strain it may put on the PC industry, Kaminsky said that was just an excuse. "Regardless of whatever happens, Microsoft (MSFT) is always going to be cautious about the coming quarter, always. So why after 40 quarters, people would be worried beats me. I guess we have new investors that get involved with Microsoft every quarter. But, you know, in the second quarter of 2000, people will be blaming the 'post-2000' influences."

The Dow, meanwhile, was busy being influenced by the ongoing -- relentless, never-ending, evil, as some chart-compiling journalists might describe it -- earnings season. The blue-chip proxy lately was down 3.80 to 10,992, off an intraday high of 11,055.97.

Component Goodyear (GT), down 4.5%, was getting punished for missing numbers; Kodak (EK), up 0.5%, was being moderately congratulated for beating estimates; and Exxon (XON), down 1.5%, was getting lightly slapped for merely meeting expectations. Among the Dow leaders to the upside were Hewlett-Packard (HWP) (on yesterday's list of most injured), Coca-Cola (KO) and United Technologies (UTX).

The Nasdaq had been recovering, gliding as high as 2769.60, but was lately up 13.41 or 0.5%, to 2745.59. Broadcasting from Netland (which this week has garnered some enthusiasm from IPOs), TheStreet.com Internet Sector index was climbing nearly 16 to 609.53, below an earlier high of 617.73.

The broader S&P 500 was up 1.56 to 1379 after trading as high as 1387 and as low as 1375. The small-cap Russell 2000 was down 0.23 to 453.32.

Market internals were mixed on lukewarm volume. On the New York Stock Exchange, decliners were leading advancers 1,444 to 1,292 on 426.3 million shares. But the ups still had the downs in Nasdaq Stock Market activity by 1,829 to 1,764 on 580.5 million shares. New 52-week highs were outpacing new lows 33 to 29 on the Big Board and 70 to 21 on the Nasdaq.

Bonds, yesterday's salvation from the equity tempest, were giving back some gains. The 30-year Treasury was down 8/32 to 90 29/32, yielding 5.91%. (For more on the fixed-income market, see today's early Bond Focus.)

Paul Rich, a trader at BT Brokerage, said today's trading won't provide any answers. "We're just lingering around here, hanging out, waiting for Humphrey-Hawkins," he said. Like Kaminsky, the trader doesn't expect to get any breakthrough news out of Greenspan's testimony. Rich went on to say he doesn't expect the Federal Open Market Committee to change rates at its late-August meeting.

As for Tuesday's sell-off, he said: "What a wonderful run-up we've had. Yes, it was a decent sell-off, but certainly not cause for any alarm. ... We had a whole bunch of earnings overshadowed by the momentum yesterday, and I think that just shows what a momentum market this is becoming. We have all these new players in this market with access to the Internet and third-market brokers. And there are just a whole new set of parameters -- it's pretty funky."

Wednesday's Midday Watchlist

By Thomas Lepri
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.)

Three Dow components reported second-quarter earnings today with varying success. Eastman Kodak was up 3/8 to 73 5/8 after posting hot earnings of $1.52 a share, topping the 11-analyst estimate by a penny and up from last year's $1.38. Goodyear Tire was scuttling down 2 9/16, or 4.5%, to 55 1/16 after it said it earned 41 cents a share, missing the seven-analyst call of 45 cents and down from the previous year's $1.25. And Exxon's second-quarter numbers were just right -- 49 cents a share, in line with the 20-analyst consensus and down from the year-ago 65 cents. But in-line earnings are not a warm bowl of porridge, and Exxon was lately off 1 3/16 to 76 3/4.

Mergers, acquisitions and joint ventures

Centocor (CNTO) was rocketing up 8 1/8, or 16.4%, to 59 9/16 after Johnson & Johnson (JNJ) set plans to buy the biotech company for $4.9 billion in stock, or about $61 a Centocor share, based on yesterday's closing prices.

Fiber optic carrier IXC Communications (IIXC) was lately up 2 3/16, or 6%, to 38 7/16 on news Cincinnati Bell (CSN) is buying it for about $3.2 billion, including assumed debt. Under terms of the deal, each share of IXC stock will be converted into 2.0976 shares of Cincinnati Bell stock.

Earnings/revenue reports and previews

Allstate (ALL) was losing 1 1/8 to 35 7/16 after posting second-quarter earnings of 75 cents a share, four cents below the 18-analyst view and up a penny from last year's figure.

Bristol-Myers Squibb (BMY) was off 1 9/16 to 69 15/16 after it reported second-quarter earnings of 47 cents a share, in line with the 23-analyst estimate and up from the year-ago 41 cents.

EMC (EMC) was gaining 2 3/8 to 62 7/16 after posting second-quarter earnings of 27 cents, beating the 18-analyst estimate of 24 cents and up from the year-ago 18 cents.

Schering-Plough (SGP) was inching up 5/8 to 53 1/4 after it said it earned 37 cents a share in its second-quarter, beating the 23-analyst estimate of 36 cents and up from the year-ago 31 cents.

In other earnings news:

Upside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts	Price Change	Current Price
AMR (AMR)	2Q	$1.70	$1.66	$2.30	12	+7/16	69 15/16
Alltel (AT)	2Q	67c	65c	52c	10	+2 5/8	71 3/4
Bear Stearns (BSC)	4Q	$1.85	$1.44	$1.17	5	-1/8	43 5/8
Colgate (CL)	2Q	36c	34c	31c	13	-13/16	51
Chase Manhattan (CMB)	2Q	$1.55	$1.37	$1.21	22	+1 1/8	82
Georgia Pacific (GP)	2Q	$1.20	$1.06	17c	13	-1 7/16	50 3/8
BFGoodrich (GR)	2Q	90c	86c	74c	7	+1/2	42
Honeywell (HON)	2Q	$1.09	$1.07	95c	10	+1 1/8	120 3/8
Northrup Grumman (NOC)	2Q	$1.64	$1.58	$1.34	9	+1 3/16	74 1/8

Downside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts	Price Change	Current Price
CMS Energy (CMS)	2Q	67c	68c	62c	15	-1/8	38 3/16
Cyprus Amax (CYM)	2Q	-43c	-35c	-4c	14	+1/16	13 1/4

In-Line Reports
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts	Price Change	Current Price
Avon Products (AVP)	2Q	46c	46c	42c	12	-1 7/16	51 9/16
Bell Atlantic (BEL)	2Q	75c	75c	68c	21	+9/16	65 3/4
Burlington Resources (BR)	2Q	8c	8c	13c	25	+3/16	40 15/16

Offerings and stock actions

Art Technology (ARTG) heads today's list of Net IPOs, lately advancing 7 5/8, or 63.5%, to 19 5/8 in its first day of trading, having been priced at $12 a share last night by lead underwriter Hambrecht & Quist.

Hoover's (HOOV), an online provider of business information, was lately up 15 1/16, or 107.5%, to 29 1/16 in its trading debut. Lead underwriter J. P. Morgan priced the stock last night at $14 a share, at the top of its pricing range.

Insight Communications (ICCI) was up a relatively modest 6, or 25%, to 30 1/2 in its first day on the market. Lead underwriter Donaldson Lufkin & Jenrette priced Insight yesterday at $24.50 a share, above its expected range of $21-$23.

MP3.com (MPPP) was surging 60, or 214.2%, to 88 after the IPO was priced by Credit Suisse First Boston at a whopping $28 a share, above its $24-$26 range.

Weatherford International (WFT) was off a scant 1/2 to 35 15/16 after setting plans to spin off its oilfield drilling products division, Grant Prideco, to its shareholders.

Analyst actions

Boston Scientific (BSX) was sinking 3, or 6.6%, to 42 3/8 after ABN Amro downgraded it to hold from buy.

IDEC Pharmaceuticals (IDPH) was plummeting 4 3/8, or 5.3%, to 77 5/8 after Morgan Stanley Dean Witter cut it to neutral from outperform.

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