Wall Street Musters a Mixed Finish After Swooning on Fed Worries

While major stock proxies managed to turn around from their early-afternoon tumble and climb into the green, in a move that would make Regan from The Exorcist proud, she wouldn't have liked so much the way it turned out in the end. The major averages finished mixed and market breadth stayed negative.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow -84.85 -0.78% 10,829.28 +18 S&P 500 -3.61 -0.27% 1320.41 +7.4 Nasdaq 26.66 0.98% 2739.35 +24.9 Russell 2000 0.47 0.11% 427.83 +1.4 TSC Internet 14.02 2.54% 565.82 +39.2 BOND CHANGE PRICE YIELD 30-Year Treasury -4/32 100 25/32 6.068%

Stocks opened higher but quickly retreated under siege by sellers. Major market barometers hit their session lows around 12:15 p.m. EDT under pressure from the slumping bond market. The stock market bottomed after the surprise release of the National Association of Purchasing Management's August Purchasing Managers' Index, which was scheduled to hit the market tomorrow at 10 a.m. before climbing off their nadirs, hitting the green, but they couldn't all stay there and ended mixed. Bonds slumped slightly on the day.

While major stock proxies ended the session mixed, breadth -- here's something shocking -- was negative. On the plus side, volume was decent.

The Nasdaq Composite Index paced the market on the upside, gaining a solid 26.66, or 1%, to 2739.35. The Nasdaq Comp had traded as low as 2671.67 and as high as 2739.90. The Nasdaq 100 surged 1.3%. Tech titans Microsoft (MSFT), Cisco (CSCO) and Dell (DELL) all gained on the day.

Among tech sector gauges, the Philadelphia Stock Exchange Computer Box Maker Index soared 3.2%. Among the stocks providing a helping hand to its upside cause were Apple (AAPL), Dell, IBM (IBM) and Sun Microsystems (SUNW).

As for blue-chips, the Dow Jones Industrial Average slumped 84.85, or 0.8%, to 10,829.28. The Dow traded as high as 10,982.20 and as low as 10,782.11. Losses by International Paper (IP) and DuPont (DD), to name a couple, helped trump solid gains by Hewlett-Packard (HWP) and Goodyear (GT), among others.

The S&P 500 slumped 3.61, or 0.3%, to 1320.41. The small-cap Russell 2000 inched up 0.47, or 0.1%, to 427.83.

TheStreet.com Internet Sector index surged 14.02, or 2.5%, to 565.82, led by Amazon.com (AMZN), RealNetworks (RNWK) and Inktomi (INKT).

While a couple of the market's widely watched averages managed to close in the green, it didn't always look so pretty for the market, notably after the NAPM's premature unveiling. A NAPM spokeswoman said the report was first released on the organization's fax service by mistake and because of that, NAPM posted the report on the Web.

The August Purchasing Managers' Index rose to 54.2 in August from 53.4 in July. Economists projected the index for August would come in at 54.5, according to a Reuters poll.

While the index came in below economists' expectations, the price gauge in the report hit four-year highs, sparking increased fears the Federal Open Market Committee will raise short-term interest rates Oct. 5 in another pre-emptive strike against inflation. The price index rose 5.1 points to 59.8, its highest level since June 1995.

Chris Low, chief economist at First Tennessee Capital Markets, said his sense was that the Fed doesn't want to hike again, but if "we don't see some evidence of a slowdown" the bond market, with a backup in interest rates "will force the Fed's hand" and that the Fed will have to hike rates by a quarter of a point.

There were two scheduled major economic reports released today. The Chicago Purchasing Managers' Index fell to a seasonally adjusted 56.1 in August, down from the July figure of 60.5. The price index in the Chicago index rose to 63.8 in August from 59.8 in July. Meanwhile, the Conference Board reported that its Consumer Confidence Index slipped to 135.8 in August from a revised reading of 136.2 in July.

And the big economic news isn't over for the week. On Friday, the market will get a look at the August employment report. According to a Reuters poll, economists' consensus estimates project August nonfarm payrolls to increase 220,000 and the unemployment rate to fall to 4.2% in August from 4.3% in July.

As for Friday's jobs report, Low said he's looking for nonfarm payrolls to grow by about 200,000, which would be a little less than the average posted this year. Low said if we don't see 200,000 or less, "the pressure on the Fed will be enormous" to raise rates.

As for market internals, on the New York Stock Exchange, decliners beat advancers 1,661 to 1,304 on 843.2 million shares. On the Nasdaq Stock Market, losers edged winners 1,967 to 1,861 on 966.2 million shares.

On the NYSE, 100 issues set new 52-week lows while only 20 touched new highs. On the Nasdaq, 82 issues set new 52-week lows while new highs totaled 61.

Chance for a 'Temporary Rally'

Some analysts think the market is due for a bit of a rally, but that doesn't mean a big leg up is coming. In fact, they say, trouble might be on the way.

"We think there's a good chance for a temporary rally" lasting three to five days, said Stephen Shobin, chief technical analyst at Lehman Brothers. But he said the overall trading picture isn't constructive.

In fact, he's expecting a test of the 1270 level on the S&P 500 around late September-early October. During an interview this afternoon, the S&P was trading around 1330.

One thing that would change his mind and suggest a change in outlook would be tremendous momentum. The first part of an enduring rally is usually characterized by extremely dynamic, charismatic momentum, Shobin pointed out. That would be characterized by advancers beating decliners by wide margins and considerably more volume on rising stocks than falling stocks on consecutive days.

Shobin said one thing that made him queasy about the rally from mid-August through last week was that "momentum was insipid," and the "force of the advance was tepid at best."

On the Big Board, Office Depot (ODP) was most active with 28.9 million shares changing hands. It rose 1/8 to 10 5/8 (having yesterday slid in late composite trading from a New York close of 13 3/4) after issuing an earnings warning yesterday after the close.

On the Nasdaq, Dell was most active with 39.2 million shares changing hands. It jumped 2 9/16, or 5.5%, to 48 13/16.

Among other indices, the Dow Jones Transportation Average slumped 44.05, or 1.4%, to 3076.10; the Dow Jones Utility Average gave up 1.25, or 0.4%, to 315.86; and the American Stock Exchange Composite Index rose 0.20, or 0.3%, to 775.41.

Elsewhere in North American equities, the Toronto Stock Exchange 300 slid 68.94 to 6970.80 and the Mexican Stock Exchange IPC Index fell 87.93 to 5086.87.

Tuesday's Company Report

By Tara Murphy
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.)

Apple Computer (AAPL) popped up 3 3/16, or 5.1%, to 65 1/4 after it debuted its new super-powered desktop personal computer. CEO Steven Jobs unveiled the Power Mac G4 at the Seybold Publishing Conference, boasting its high-speed functioning of more than one billion operations per second. Jobs noted that the PC's speed doubles that of the fastest Intel Pentium III-based PCs.

Mergers, acquisitions and joint ventures

American Bottling, which is 40% owned by Cadbury Schweppes (CSG), is close to buying Dr. Pepper Bottling for $300 million, The Wall Street Journal reported. Shares of Cadbury were off 1/4 to 25 3/8.

AT&T (T) slipped 1 to 45 after it forged a five-year deal with Net2Phone (NTOP), supplying the online telephone service company with networking services. AT&T said the transaction would add more than $100 million in revenue over the next five years, increasing Net2Phone's business to 17 countries. Shares of Net2Phone soared 12 1/2, or 17.2%, to 85.

British Sky Broadcasting (BSY) advanced 1/2 to 56 1/2 after it said it was paying $21.9 million for a 9% stake in Leeds Sporting, parent company of England's premier league soccer club, Leeds United.

eBay (EBAY) and America Online (AOL) introduced their co-branded Web site today. In a joint statement, the companies said the joint site gives AOL members a door to access eBay's page, which is presented in AOL format. Shares of eBay jumped 6 1/8, or 5.1%, to 125 9/16, while AOL stumbled 1 7/8 to 91 3/8.

Exodus (EXDS) leaped 4 3/16, or 5.5%, to 80 3/8 after it said it would purchase network capacity from Global Crossing (GBLX) unit Global Crossing USA for $105 million. The transaction also calls for Global Crossing to offer additional network capacity support in the future, connecting Exodus Internet data centers in Europe, Japan and the U.S. Shares of Global Crossing declined 1 1/16 to 25 7/8.

HSBC Holdings pulled the plug on its $900 million bid to acquire SeoulBank following disagreements over debt. The setback hampers efforts to reform Korea's troubled financial industry and also leaves HSBC looking for another way to expand in Korea, where it operates four branches.

IBM (IBM) popped 1 3/8 to 124 9/16 after it agreed to supply Cisco (CSCO) with network technology, components and computer services in a five-year deal valued at $2 billion. IBM will sell Cisco its patents and intellectual property for network equipment and expand the sale of custom computer chips for Cisco equipment. Shares of Cisco increased 1 to 67 13/16.

Nokia (NOK) climbed 2 to 83 5/8 after it unveiled plans to team up with Deutsche Bank to develop a mobile banking service based on the Wireless Application Protocol technology. Nokia will provide a WAP server and its 7110 media phone as well as consultancy services.

Reader's Digest (RDA) fumbled 3/4 to 31 after it agreed to buy privately held Books Are Fun for $380 million.

Sun Microsystems (SUNW) bounced up 3 7/8, or 5.1%, to 79 1/2 after it said it is buying Star Division, which makes an office application that competes with Microsoft (MSFT), as Sun seeks to move office applications beyond the personal computer. Also, Merrill Lynch analyst Steve Milunovich placed the stock on its Focus One list, raising its price target to 95 from 90.

Tyco (TYC) lifted 1 3/8 to 101 5/16 after it unmasked itself as the rival buyer of AFC Cable (AFCX). Tyco agreed to pay $575 million in stock, handing AFC shareholders its stock worth $45 for each AFC share. Tyco's offer surpassed Thomas & Betts (TNB) initial bid, valuing AFC's stock at $37.19 a share. Thomas & Betts walked anyway from its planned merger with AFC, after the company asked Thomas & Betts to raise its offer. Shares of AFC were advancing 2 1/16 to 43, while Thomas & Betts was up 3/16 to 45.

Union Planters (UPC) climbed 5/8 to 42 3/16 after it said it would buy a wholesale mortgage origination franchise from Colonial BancGroup (CNB) to bolster its presence in the Southeastern U.S. Colonial Bancorp advanced 1/16 to 12 3/8.

Earnings/revenue reports and previews

CompUSA (CPU) slid 5/8 to 6 1/16 after it said yesterday it was cutting half of its 3,600-member commercial sales force as part of an effort to cut costs in the face of competition and price pressure. The company also said its fourth-quarter loss widened to 70 cents a share, from 57 cents a share in the year-ago period.

Fruit of the Loom (FTL) declined 1/8 to 7 after it said it expects results for the remainder of 1999 to fall significantly below analysts' expectations due to continued production and customer service difficulties. The company also said CEO William Farley stepped down.

Neiman Marcus (NMG) mounted 11/16 to 22 1/4 after it posted fourth-quarter earnings of 6 cents a share, beating the five-analyst estimate by a penny, but down from the year-ago 33-cent gain.

Office Depot (ODP) recovered 1/8 to 10 5/8 (having yesterday skidded in late composite trading from a New York close of 13 3/4) after it said it would miss earnings estimates for the rest of the year due to lower sales and tighter profit margins. The company also said it would take third-quarter charges and buy back $500 million of its stock. The retailer expects second-half earnings of 30 to 40 cents a share, well below the analyst estimate of 50 to 52 cents a share. Estimates do not include a $28.3 million third-quarter restructuring charge. PaineWebber downgraded the stock to neutral from attractive and cut its earnings per share estimates.

Republic Services (RSG) tumbled 1/4 to 10 7/8 after it warned 1999 earnings would miss analysts' estimates due to a delay in integrating the assets of Waste Management (WMI). Waste Management rose 1/8 to 21 7/8.

US Liquids (USL) plummeted 10 1/4, or 57.7%, to 7 1/2 after it said it anticipates disappointing third and fourth quarter results as the FBI investigates allegations that the company illegally disposed hazardous material at its Detroit facility. US Liquids expects to post third-quarter earnings of 21 cents to 23 cents a share, lower than the analyst estimate of 33 cents a share, and 19 cents to 21 cents a share in the fourth quarter, below the estimated 36 cents. Today, the company announced a $3 million share-repurchasing program.

Offerings and stock actions

Email services company EGain has filed with the Securities and Exchange Commission for an initial public offering of 5 million common shares, pricing in an estimates range of $9 to $11. The deal will be underwritten by BancBoston Robertson Stephens, Donaldson Lufkin & Jenrette and Volpe Brown Whelan.

The copper manufacturer Wolverine Tube (WLV) fell 5/16 to 15 3/8 after it said it would implement a cost cutting program that would result a third -quarter charge, slicing its workforce by 15%. Wolverine said its plan includes product rationalization and domestic production rearrangement. The company plans to announce further product and domestic manufacturing changes in the upcoming weeks.

Analyst actions

Acxiom (ACXM) dwindled 13/16 to 17 9/16 after U.S. Bancorp Piper Jaffray cut its rating to a buy from a strong buy and lowered its price target to $21 from $33.

Salomon Smith Barney grounded earnings estimates for three airliners today. US Airways (U) and Delta's (DAL) third-quarter estimates went to 90 cents from $1.15 and to $1.85 from $1.95 respectively, while Southwest (LUV) was cut to 25 cents from 27 cents, based on higher fuel prices. Shares of Delta skidded 2 3/16 to 50 13/16, while US Airways faltered 3/4 to 30 13/16. Southwest shares were also down 5/16 to 16 11/16.

Cadence Design Systems (CDN) rose 1 1/2, or 12.3%, to 13 5/8 after BancBoston Robertson Stephens upped its rating to a buy from a long-term attractive.

Calpine (CPN) increased 1 1/4 to 90 5/8 after PaineWebber upped its 2000 price target to $110 to $106 and took estimates to $3.55 a share from $3.35.

Com21 (CMTO) hopped 1/8 to 18 after Warburg Dillion Read initiated coverage of the shares with a buy rating and a $25 price target.

Coulter (CLTR) slipped 3 3/8, or 14.4%, to 19 15/16 after Lehman Brothers sliced its rating to a neutral from a buy, cutting it price target to $24 from $40.

Dycom (DY) fell 8 11/16, or 21.8%, to 31 1/16 despite Banc of America Securities raising its fiscal 2000 estimate to $1.85 a share from $1.75. The company said its stock price decline could be attributed to false allegations surrounding its financial statements and accounting.

Eclipse Surgical Technologies (ESTI) jumped 1 1/16, or 7.9%, to 14 3/8 after Warburg Dillion Read rolled out coverage of the shares with a strong buy rating.

Fatbrain (FATB) jumped 8 15/16, or 59.5%, to 24 1/16 after Banc of America Securities analyst Tom Courtney upped his rating to strong buy from buy.

Gateway (GTW) advanced 1 9/16 to 96 15/16 after Salomon Smith Barney analyst Richard Gardner raised its price target to $120 from $85, maintaining his buy rating.

Idec Pharmaceuticals (IDPH) slipped 1/2 to 127 1/16 despite Lehman Brothers raising its 2001 estimates to $3.54 a share from $3.33 and its price target to 155 to 103.

Internet Capital Group (ICGE) leaped 16 5/16, or 27.8%, to 75 after Banc of America Securities rolled out coverage of the stock with a market perform rating. Yesterday, Merrill Lynch started coverage with a near-term accumulate and long-term buy, while Deutsche Banc Alex. Brown stamped it as a buy.

JDS Uniphase (JDSU) climbed 3/8 to 106 1/16 after SG Cowen started coverage of the shares with a strong buy rating and a 130 price target, reflecting on powerful optical trends in telecommunications.

National Computer Systems (NLCS) was up 1/16 to 39 after Warburg Dillon Read rolled out coverage with a buy rating and a $43 price target.

Nextel Communications (NXTL) increased 1 9/16 to 57 13/16 after PaineWebber raised its price target to $83 from $73.

Pinnacle West (PNW) stumbled 5/8 to 38 after Credit Suisse First Boston sliced its rating to a hold from a buy and lowered its price target to 43 to 44 from 45 to 46.

Staples (SPLS) skidded 1/4 to 21 3/4 after PaineWebber cut its rating to attractive from buy.

Terayon Communication Systems (TERN) fell 1 1/8 to 36 after Warburg Dillon Read started coverage with a hold rating, believing that the cable modem maker should be acquired by a large communications equipment infrastructure player to increase profitability.

Telefonos de Mexico (TMX) decreased 1 3/16 to 74 3/8 even though J.P. Morgan initiated coverage of the stock with a long-term buy and a price target of 90.

United Airlines (UAL) dwindled 1/4 to 64 13/16 despite Salomon Smith Barney boosting its third-quarter EPS estimates to $3.85 from $3.70, citing higher assumed revenues.

Miscellany

American Home Products (AHP) was off 1/2 to 41 1/2 after it said that its Wyeth-Ayerst Laboratories division is set to recall a heart stimulant found in insect sting and food allergy kits, discovering some batches of the drug subpotent, and possibly harmful to users. AHP said quality control tests found some doses of the stimulant Epinepherine to be discolored, while some were subpotent.

The product can be found within Derm/Buro's "Insect-Sting Treatment Kit" and Bayer's Anaphylaxis Emergency Treatment Kit, Hollister Stier, Ana-Kit and Ana Guard kits. The recall will cover hospitals, pharmacies, physicians and consumers.

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Paper manufacturer Fibermark (FMK) slipped 7/16 to 13 after it said it would shut down a Hughsville, New Jersey production facility in an attempt to boost EPS by 30 to 35 cents in the 2001. As a result of the closing, the company would assume a $4.5 million third-quarter charge in 1999. Consensus analysts estimate that Fibermark will earn $2.03 in 1999 and $2.23 for the year 2000.

Intel (INTC) fell 1/16 to 82 3/16 after it said it has started distributing engineering samples of its next generation processor, code-named Merced, to computer manufacturers for testing. Developed with Hewlett Packard (HWP), the chip is the first in its family created to process data in chucks of 64 bits, compared to the current 32-bit processor. CEO Craig Barrett said Intel is on scheduled to manufacture Merced by mid-2000. Shares of H-P were climbing 2 9/16 to 105 3/8.

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