Greenspan Relief Turns to Meyer Agita as Market Watches Fed

"Over the past quarter-century I have appeared on many platforms with President Ford. He never seems to change, but I keep losing my hair." Thus did Fed boss Alan Greenspan begin his speech on the economic impact of technology at an event today honoring former President Gerald Ford in Grand Rapids, Mich.

All things considered, an isolated case of baldness is more palatable to this market than hints of unsustainable asset valuations. Or it was, anyway.

Major Indices INDEX CHANGE % VALUE Dow 50.97 0.46% 11,085.10 S&P 500 0.01 0.00% 1350.46 Nasdaq -5.61 -0.20% 2831.65 Russell 2000 -1.26 -0.29% 436.98 TSC Internet -2.36 -0.40% 599.25 BOND CHANGE PRICE YIELD 30-Year Treasury 12/32 101 6.052% Market data as of: 1:17 PM EDT, Wed Sep 8 1999

Unfortunately for the longs, Greenspan isn't the only Fed official speaking today. Hawkish vibes sent out by Fed Gov. Laurence Meyer in a Philadelphia speech to the National Association for Business Economics were lately helping to knock stocks off their midday highs. Salient among Meyer's comments was his reiteration of Greenspan's recent acknowledgement that the Fed must consider stock valuations when it forms monetary policy.

The Dow Jones Industrial Average remained up 51 to 11,085, despite the considerable drag of Kodak (EK Quote), down 2 1/8, or 2.9%, to 71 15/16. The Nasdaq Composite Index was down 6 to 2832, while the S&P 500 was unchanged at 1350. The TheStreet.com Internet Sector index was down 2 to 599, and the small-cap Russell 2000 was off 1 to 437.

Things started off a bit rockier than that, however. At 7 a.m. EDT today, the Bank of England caught the markets by surprise when it announced that it was raising its key short term interest rate to 5.25%. The move, predicted by none of the 26 economists polled by Reuters last week, sent U.S. stock futures -- and, consequently, U.S. stocks themselves -- tumbling, along with the big European indices.

The early selloff was testimony to the market's extreme sensitivity to interest-rate concerns. "The Fed, the bond market and the equity market are all walking a high wire at this time," said Alan Ackerman, market strategist at Fahnestock. "Events overseas could affect what the Fed does. This is not a time to be adventuresome in the market."

The major proxies' subsequent improvement suggested that, for the moment at least, interest-rate fears were subsiding a bit. Despite Meyer's hawkishness, the 30-year Treasury remained up 12/32 to 101, its yield falling to 6.05%. And yesterday's whipping sector, the Philadelphia Stock Exchange/KBW Bank Index, was still up 0.2% in today's recovery.

"I'm a little surprised," confessed Bob Basel, director of listed trading at Salomon Smith Barney, "because there's really no reason to bring [the market] back. The market just lacks direction. It's a coin flip -- 'Which way do you want to go today?'"

"I don't see a lot of players or a lot of liquidity even though vacations are over," Basel added. Volume was indeed moderate. The New York Stock Exchange had seen 464 million shares traded, while 614 million shares had changed hands on the Nasdaq Stock Market.

A lot of the morning's moderate upside momentum, then, could be described as a tepid snapback from a short-term oversold condition. News that Goldman Sachs' (GS Quote) Uber-bullish strategist Abby Joseph Cohen has raised her 1999 S&P 500 target to 1380 from 1350 may also be helping sentiment a bit today, although it's hard to say exactly where sentiment in general stands in this Church-of-What's-Happening-Now.

Traders aren't taking anything for granted. "Even though the market was up 230 points on Friday -- and you've got to respect that -- there's a lot of indecisiveness out there," said Basel. If the Producer Price Index comes in too hot on Friday, he said, "they'll sell it off 150 points again. It's a daily event."

Strange days indeed. "We've had a surprisingly strange summer in the market," said Ackerman, noting the Dow's vicissitudes since May 31, during which period that blue-chip index has buzzed in a intraday range between 10,400 and 11,350. "Stocks have been all over the lot," he said. "In the meantime, we've had two rate hikes, and now we have the possibility of a third."

Que sera, sera, perhaps. Ackerman said he's looking for the market to stay in a tight trading range through the beginning of October, when the Fed next meets. "That range is likely to be an overlay of the market's performance since May 31," with lows near 10,330 and highs near the 11,300 level.

Breadth was not inspiring. Decliners were leading advancers 1,620 to 1,160 on the NYSE, where there were 52 new 52-week highs against 61 new lows. In Nasdaq action, decliners were beating advancers 2,082 to 1,530, with 119 new highs and 58 new lows.

In sector news, the Dow Jones Transportation Average was extending yesterday's 1.5% drubbing, lately off 22.73, to 0.7%, to 3086.76, though up from a session low of 3061.51. Meanwhile, oil stocks were romping higher, with the American Stock Exchange Oil & Gas Index up about 1%.

Wednesday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Global Crossing (GBLX Quote) ascended 3 7/8, or 19.1%, to 24 1/8, and Microsoft (MSFT Quote) slipped 5/8 to 93 5/8 after the companies announced a joint venture with Softbank called Asia Global Crossing, which will provide network-based telecommunications services throughout Asia. Responsibility for the management and operation of the network will fall on Global Crossing. Global Crossing will initially own 93% of the joint venture with Softbank and Microsoft each owning 3.5%.

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Ingram Micro (IM Quote) plunged 5 13/16, or 30.1%, to 13 1/2 after it said it expects to post earnings of 10 cents to 14 cents a share for the third quarter, falling short of the 13-analyst estimate of 41 cents. The company also said it has started a search for its next CEO to succeed Jerre L. Stead. Stead will remain chairman and CEO until a successor is in place and will then continue to serve as chairman.

Mergers, acquisitions and joint ventures

America Online (AOL Quote) added 1 9/16 to 94 7/8 after it said TV Guide (TVGIA Quote) will supply television program listings to the Internet service provider. TV Guide rose 4 11/16, or 16.6%, to 33.

Lycos (LCOS Quote) added 1/8 to 43 3/4 after saying it is acquiring privately held Quote.com for $78.3 million in stock plus the assumption of the company's stock option plan.

Medeva (MDV Quote), a U.K. pharmaceuticals concern rose 2 1/16,or 24.4%, to 10 1/2 after saying it is in talks, which could lead to a recommended cash offer for the company, Reuters reported.

Prodigy (PRGY Quote) lost 1/4 to 16 3/4 after saying it would buy BizOnThe.Net from VarTec Telecom for $100 million in cash and stock.

Yahoo! (YHOO Quote) slipped 7/8 to 154 1/16 after it announced it has struck a bill payment service deal with CheckFree (CKFR Quote). CheckFree fell 3/16 to 37 9/16.

Earnings/revenue reports and previews

Carbide Graphite (CGGI Quote) inched up 1/16 to 12 15/16 after posting fourth-quarter earnings of 32 cents a share, beating the two-analyst estimate of 30 cents but down from the year-ago 54 cents.

Esterline Technologies (ESL Quote) lost 1 1/16, or 6.6%, to 14 15/16 after reporting third-quarter earnings of 34 cents a share, missing the two-analyst estimate of 39 cents and coming in below the year-ago 45 cents.

H.J. Heinz (HNZ Quote) lost 3/16 to 45 1/4 after reporting first-quarter earnings of 65 cents a share, missing the 14-analyst estimate of 66 cents but beating the year-ago 60 cents.

Korn/Ferry International (KFY Quote) added 5/8 to 17 5/8 after it posted first-quarter earnings of 15 cents a share, beating both the two-analyst estimate of 11 cents and the year-ago 5 cents.

Movado (MOVA Quote) slipped 15/16 to 26 1/2 after it posted second-quarter earnings of 34 cents a share, ahead of the two-analyst estimate of 31 cents and up from the year-ago 25 cents.

Salton (SFP Quote) lost 1/16 to 32 1/2 after posting fourth-quarter earnings of 48 cents a share, beating the two-analyst estimate of 30 cents and up from the year-ago 16 cents.

Serologicals (SERO Quote) slipped 1 1/32, or 16.8%, to 5 1/8 after saying it expects to post a third-quarter loss due to shipping delays and other problems.

Stewart Enterprises (STEI Quote) climbed 1/4 to 6 1/4 after it reported third-quarter earnings of 26 cents a share, beating both the 10-analyst estimate of 25 cents and the year-ago 25 cents.

Value City (VCD Quote) lost 3/16 to 12 3/8 after posting second-quarter earnings of 12 cents a share, in line with the five-analyst estimate of 12 cents and beating the year-ago 9 cents.

Offerings and stock actions

AnnTaylor Stores (ANN Quote) rose 2 3/4, or 7.1%, to 41 3/4 after its board authorized a buy back of $40 million common shares or convertible debt and an $85 million capital spending plan for fiscal 2000. The clothing retailer said the spending plan would subsidize a 90-store real estate expansion.

Ditech Communications (DITC Quote) has filed a 2.5 million share offering with the Securities and Exchange Commission.

Analyst actions

Alcatel (ALA Quote) lost 3/4 to 28 15/16 after Donaldson Lufkin & Jenrette initiated coverage of the stock with a market perform rating.

Alltel (AT Quote) lost 2 1/16 to 69 after Banc of America Securities rolled out coverage with a buy rating and set a price target of 90.

Amresco (AMMB Quote) slipped 5/16, or 5.6%, to 5 5/16 after ABN Amro dropped its rating to hold from outperform.

Apple (AAPL Quote) peeled off 3/8 to 75 3/4 despite a lift from Warburg Dillon Read, which raised its price target to 90 from 75 while maintaining a buy rating.

Ariba (ARBA Quote) partied 6 1/16 to 153 after SG Cowen began coverage with a buy rating and a price target of 165.

Covance (CVD Quote) shed 5 1/16, or 32.7%, to 10 7/16 after Lehman Brothers sliced its price target to 20 from 32. Late yesterday, the company said it expects to report third-quarter earnings of 21 cents a share, missing the analyst estimate of 26 cents.

Dal-Tile (DTL Quote) slipped 1/8 to 8 7/8 after Goldman Sachs upped its rating to market outperform from market perform.

Hilton Hotels (HLT Quote) fell 3/8 to 10 13/16 after Merrill Lynch sliced its rating to long-term accumulate from a buy.

HomeStore.com (HOMS Quote) moved up 1/4 to 48 3/16 after Morgan Stanley Dean Witter rolled out coverage with an outperform rating. Merrill Lynch stamped the stock with near-term accumulate, long-term buy ratings.

IMRglobal (IMRS Quote) tumbled 5 1/2, or 33.6%, to 10 15/16 after Lehman Brothers chopped its price target to 20 from 28 and its fiscal 1999 estimates to 69 cents a share from 94 cents. The company late yesterday warned of a profit shortfall.

Mead (MEA Quote) was unchanged at 39 3/8 after Warburg Dillon Read initiated coverage with a buy rating and a price target of 50.

Mortgage.com (MDCM Quote) rose 1 13/16, or 11.7%, to 17 5/16 after U.S. Bancorp started coverage of the stock with a strong buy rating and set a price target of 28.

Nokia (NOK Quote) tacked on 1 7/8 to 88 3/4 after DLJ initiated coverage with a top pick rating.

Nova (NIS Quote) lost 1/8 to 26 3/8 despite a hand from Goldman Sachs, which initiated coverage by placing the stock on its recommended list.

Provant (POVT Quote) inched up 1/8 to 12 3/4 after Warburg rolled out coverage with a buy rating and set a 12-month price target of 23.

Viacom (VIA.B Quote) climbed 11/16 to 47 5/8 after Merrill Lynch upgraded it to near-term buy from near-term accumulate.

Miscellany

Procter & Gamble (PG Quote) rose 1/4 to 103 1/8 after The Wall Street Journal reported that the company is preparing to launch an upscale hair-care brand called Physique.

Quixote (QUIX Quote) was unchanged at 14 15/16 after it said Phillip Rollhaus would retire from his role as CEO on Sept. 30 but remain as the company's chairman. The highway safety products maker said Leslie Jezuit would replace Rollhaus as chief executive and will continue to act as president and COO.