Note, Mr. Greenspan: No Inflation in the Stock Market Today

Stocks have been flat-to-down all morning, the yield on the 30-year bond is at 6% and it's been a rough week. As the most concentrated earnings week this quarter comes to a close, the mood -- among the few taking part in the action today -- is contemplative: What's next? And why did Greenspan have to be so mean yesterday?

While many market watchers maintain the Fed head said nothing shocking in his Humphrey-Hawkins testimony (guess what? Stocks just might be overvalued), certainly investors don't appear to be thrilled with what they heard. It seems, despite recent inflationless data, they're still worried about another rate hike come Aug. 24, when the central bank's policymaking committee meets next.

Major Indices INDEX CHANGE % VALUE Dow 41.79 -0.4% 10,927.43 S&P 500 3.24 -0.2 1357.73 Nasdaq 2.35 -0.1% 2682.09 Russell 2000 3.17 -0.7% 448.32 TSC Internet 10 -1.7% 583.75 TREASURY BOND CHANGE VALUE YIELD 30-Year 23/32 89 10/32 6.029%

Or ... not. Tony Dwyer, chief market strategist at Ladenburg Thalmann, said today's trading is simply profit-taking in "vulnerable" bond and stock markets after recent rallying and strong second-quarter earnings. Greenspan, he said, just provides another excuse to rake in some gains. But the usually bullish strategist believes we ain't seen nothing yet.

"I'm calling for the end of the summer rally," he declared. "Fundamentals are the same -- still positive -- [but] they've just priced in 30 times operating earnings. All the positives have been discounted and there is some negative news. And I don't think it's interest rates, even though I think the Street thinks it's interest rates. I think it's Y2K. And I think it will be the catalyst for a technical correction."

Dwyer foresees the Dow Jones Industrial Average plunging to as low as 9700 over the next two months.

If that's the truth, Wall Street doesn't know it yet. The major equity proxies so far have been as inspired as a lazy atheist.

Down, But Not Out

The Dow recently was down 42, or 0.4%, to 10,927, with Hewlett-Packard (HWP) playing the hare and J.P. Morgan (JPM) in the role of the tortoise.

The broader S&P 500 was down 3.24, or 0.2%, to 1358, and the small-cap Russell 2000 was down 3, or 0.7%, to 448.

The lately slaughtered, tech-driven Nasdaq Composite Index was down 2.35, or 0.1%, to 2682 vs. its intraday high of 2708.87. On strong earnings and analyst upgrades, Sun Microsystems (SUNW) was up 4.1%. TheStreet.com Internet Sector index was off 10, or 1.7%, to 584.

Robert Harrington, co-head of block trading at PaineWebber, said tech is a mixed bag today and will be until we get a better handle on interest rates in the coming weeks and then on the third-quarter earnings outlook. "I think we'll be backing-and-filling for a while," he said. "This group has been sold pretty good, but I still think we'll have some up, some down after that run-up going into [second-quarter] earnings."

Harrington said he has seen some investors "getting a little defensive," taking money out of tech and putting it into utilities. At midday, the Dow Jones Utility Index was up 0.15 to 321.41. Otherwise, the trader said all is calm on this summer Friday: "We're trying to read into a tape that's a quiet tape."

Market internals were negative on low volume. On the New York Stock Exchange, decliners were leading advancers 1,813 to 916 on 369 million shares. And the downs had the ups 2,161 to 1,421 on 559.3 million shares in Nasdaq Stock Market activity. New 52-week highs were outpacing new lows 76 to 50 on the Nasdaq, but new lows were outnumbering new highs 65 to 37 on the NYSE.

The 30-year Treasury was down 23/32 to 89 10/32, its yield rising to 6.03%. (For more on the fixed-income market, see today's early Bond Focus.)

Dwyer, meanwhile, says he was spooked by Lucent's (LU) comments earlier this week about lower fourth-quarter sales and the impact of the year 2000.

"That must have come from their customers," he said. Equity weakness from Y2K "is going to be corporate and individual. People are overly optimistic in their fourth-quarter estimates. I think the individual mentality right now is people are not worried [about Y2K], but there's going to be a slowdown and we're going to see people take out some cash and lower that money flow. The end of the year is out there, and I think portfolio managers are starting to think about that."

None of this means Dwyer thinks there will be any actual problems from the turn of the millennium, however. "All the financials and banks are compliant [with government standards] in America," he said, "and Europe is a little behind but they're working on it." The real silver lining is that a nice, healthy correction could make for some mighty fine buys, he said.

"If we let corporate growth catch up to valuations, that could provide a wonderful buying opportunity [in October]. The market trades near-term on perception and long-term on reality. Last year, the perception was that Asia was going to fall apart; this year, Y2K will drive the market down."

Friday'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.)

The earnings story of the day is boxmaker Gateway (GTW), which was lately soaring 9 11/16, or 15.4%, to 72 9/16 after it yesterday posted second-quarter earnings of 56 cents a share, a penny above the 23-analyst First Call view and ahead of the year-ago 38 cents. The strong report unleashed a flurry of upgrades: ANB Amro raised it to outperform from hold; Donaldson Lufkin & Jenrette to buy from market perform; Deutsche Banc Alex. Brown to strong buy from buy; PaineWebber to attractive from neutral; ING Baring Furman Selz to strong buy from neutral; and Salomon Smith Barney to buy from neutral. (Bandwagon, anyone?)

Separately, Gateway also denied recent rumors that it's negotiating to acquire a major Internet service provider, such as Earthlink (ELNK) or MindSpring (MSPG).

Meanwhile, two Dow components reported upside surprises today, but (Jimmy crack corn) no one cares very much about any of it. Merck (MRK) was lately off 1/4 to 69 1/8 after it reported second-quarter earnings of 61 cents a share, in line with the 24 analyst consensus and up from last year's 54 cents. And Chevron (CHV) was up a scant 3/8 to 94 after reporting second-quarter earnings of 73 cents a share, 3 cents above the 20-analyst forecast but down from the year-ago 94 cents.

Mergers, acquisitions and joint ventures

Safeway (SWY) was advancing 2 11/16, or 5.3%, to 53 7/16 after the food and drug chain said it will acquire privately held supermarket chain Randall's Food Markets for more than $1.4 billion in cash and stock.

Earnings/revenue reports and previews

Copper Mountain Networks (CMTN) was surging 13, or 14.4%, to 103 after the company yesterday reported second-quarter earnings of 9 cents a share, a marked improvement from the four-analyst forecast of break-even results and last year's pro forma loss of 21 cents a share. Morgan Stanley Dean Witter raised Copper Mountain to outperform from neutral today.

Ericsson (ERICY) was rising 4 1/8, or 14.9%, to 31 3/4 despite a 44% decline in the company's pretax profit in the first half of 1999. Investors instead focused on CEO Lars Ramqvist's prediction the company will be "back on track by the end of this year."

Mobil (MOB) was up 3/8 to 101 5/16 after posting second-quarter earnings of 81 cents a share this morning. That's 8 cents above the 21-analyst call and even with the year-ago figure.

Software firm Sapient (SAPE) was adding 5 7/8, or 11.4%, to 57 1/2 after it reported second-quarter earnings of 27 cents a share, two cents above the 18-analyst and up from last-year's 18 cents.

Sun Microsystems (SUNW) was lately up 2 3/4, or 4.1%, to 69 15/16 after yesterday posting fourth-quarter earnings of 48 cents a share after the close yesterday, beating the 19-analyst estimate by 2 cents and up from the year-ago 35 cents.

In other earnings news:

Upside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Allied Waste Industries (AW)	2Q	29c	28c	21c	9
Anadigics (ANAD)	2Q	12c	9c	2c	8
Bemis (BMS)	2Q	60c	56c	51c	8
Cabot Oil and Gas (COG)	2Q	0c	-3c	9c	10
Eastman Chemical (EMN)	2Q	54c	49c	$1.21	10
Fortune Brands (FO)	2Q	59c	58c	37c	11
International Home Foods (IHF)	2Q	34c	32c	26c	6
Journal Register (JRC)	2Q	36c	32c	30c	5
K2 (KTO)	2Q	43c	40c	45c	3
Phone.com (PHCM)	4Q	-62c	-84c	-53c	4
Saint Paul Bancorp (SPBC)	2Q	39c	38c	32c	9
Sepracor (SEPR)	2Q	-$1.11	-$1.20	-63c	8
SkyWest (SKYW)	1Q	55c	50c	40c	7
Sportsline USA (SPLN)	2Q	-55c	-56c	-41c	8
U.S. West (USW)	2Q	83c	81c	76c	19
Varian Semiconductor (VSEA)	3Q	-11c	-17c	3c	5
Viant (VIAN)	2Q	-10c	-11c	-7c	3

Downside Surprises
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Amresco Capital Trust (AMCT)	2Q	27c	37c	8c	6
Banco Santander Ads (BSB)	2Q	24c	27c	22c	4
Coast Dental Services (CDEN)	2Q	7c	8c	13c	7
Concentra Managed Care (CCMC)	2Q	24c	25c	30c	4
First Alliance (FACO)	2Q	3c	11c	4c	3
Fruit of the Loom (FTL)	2Q	-3c	3c	90c	7
LTV (LTV)	2Q	-19c	-17c	3c	12

In-Line Reports
Company	Qtr	EPS	First Call View	Yr. Ago EPS	Number of Analysts
Air Products & Chemicals (APD)	3Q	48c	48c	56c	9
Albany International (AIN)	2Q	30c	30c	34c	4
Calgon Carbon (CCC)	2Q	7c	7c	13c	7
Catalyst International (CLYS)	2Q	1c	1c	6c	5
First Washington Bancorp (FWWB)	1Q	37c	37c	32c	5
Ivex Packaging (IXX)	2Q	39c	39c	32c	4
MySoftware (MYSW)	2Q	6c	6c	2c	3
Unova (UNA)	2Q	6c	6c	17c	5
U.S. Bioscience (UBS)	2Q	-7c	-7c	-13c	3

Offerings and stock actions

BioMarin Pharmaceutical (BMRN) heads the list of today's new issues, lately up 2 1/2, or 19.2%, to 15 1/2 after Piper Jaffray priced it last night top-range at $13 a share.

Internet insurance quote provider InsWeb (INSW) was rocketing up 21 13/16, or 129%, to 38 13/16. Goldman Sachs priced the offering at $17 a share yesterday, at the top of its pricing range.

Tanning Technology (TANN) was advancing 3 1/16, or 20.4%, to 18 1/16 after being priced last night above-range at $15 a share by lead underwriter Credit Suisse First Boston.

Analyst actions

Electronic Arts (ERTS) was up 3 9/16, or 6.7%, to 56 7/16 after Deutsche Banc Alex. Brown raised it to strong buy from buy following the company's strong first-quarter earnings report last night. EA earned 4 cents for the quarter, surpassing the 13-analyst estimate of break-even results but off from last year's 6 cents.

Miscellany

Compaq (CPQ) was relatively unmoved -- off 3/8 to 24 9/16 -- after it yesterday named COO Michael Capellas its president and CEO, replacing Eckhard Pfeiffer. Morgan Stanley Dean Witter upgraded Compaq to outperform from neutral on the move, Which TheStreet.com wrote about in last night.

Coulter Pharmaceutical (CLTR) was rising 2, or 7.7%, to 28 1/2 on yesterday's news that its Bexxar lymphoma treatment, which the company jointly developed with SmithKline Beecham (SBH), was given fast-track status by the Food & Drug Administration.

Saving the most pain for last: Sunrise Technologies (SNRS) was plummeting 10 5/8, or 70.8%, to 4 3/8 after an FDA advisory panel last night rejected its laser device for treatment of farsightedness. TSC covered the news in a story this morning. Sunrise was trading at 19 1/2 last week when TSC first raised questions about the company's prospects.

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