SAN FRANCISCO -- A peculiar session on Wall Street ended with major stock proxies higher, completing the market's best week since the one ended Aug. 20. Today's performance left traders optimistic, despite the bond market's tepid response to a benign employment report.
| Major Indices | | INDEX | CHANGE | % | VALUE | YR TO DATE | | Dow |  
112.71 | +1.1% | 10,649.76 | +16% | | S&P 500 |
18.38 | +1.4% | 1336.02 | +8.7% | | Nasdaq |
25.89 | +0.9% | 2886.59 | +31.6% | | Russell 2000 | 
0.40 | -0.1% | 427.71 | +1.4% | | TSC Internet |
9.57 | +1.3% | 732.79 | +80.4% | | BOND | CHANGE | PRICE | YIELD | | 30-Year Treasury |
7/32 | 99 1/32 | 6.198% |
|
The
Labor Department reported payrolls declined by 8,000 in September vs. estimates for a gain of 218,000. Excluding the effects of Hurricane Floyd, the department said, new jobs would have risen only 50,000. However, the 0.5% gain in hourly wages was 0.2% higher than expected. The unemployment rate was unchanged at 4.2%.
The report fueled hopes the
Federal Reserve will not raise interest rates at its Nov. 16 meeting (much less before). Nonetheless, the price of the 30-year Treasury bond fell 7/32 to 99 1/32, its yield rising to 6.20%. (Bond trading closed at 2 p.m. EDT today in anticipation of Monday's Columbus Day holiday, during which bonds are shuttered but stocks will trade.)
Today's peculiarities extended to equities, where rising proxies were accompanied by high-profile earning warnings from companies such as
Xerox (XRX Quote), which fell 10 1/4, or 24%.
"It's not perfect, but sometimes the market doesn't let you create a perfect story," said Robert Harrington, co-head of block trading at
PaineWebber. "It's very stock-specific, news-oriented trading as opposed to a complete bull market where it rolls from one group to the next. I thought the employment number was kind of a wash because of the wage number, and bonds handled it that way."
The
Dow Jones Industrial Average rose as high as 10,655.78 before closing up 112.71, or 1.1%, to 10,649.76.
Dow gainers included
Johnson & Johnson (JNJ Quote) and
Merck (MRK Quote) as drug stocks were strong overall. The
American Stock Exchange Pharmaceutical Index jumped 4% to 382.10.
The drug index's break above 370 was technically significant and sparked "good momentum," Harrington said, noting that
American Home Products' (AHP Quote) settlement in the fen-phen lawsuit was "psychologically helping"; AHP rose 3.7%. Finally, drugs are "a safe place to be" amid "select profit-taking" in technology, he said.
Indeed,
IBM (IBM Quote) was the Dow's biggest negative influence, falling 2.5% after
Goldman Sachs cut its earning estimates. Concern about IBM's profitability followed recent profit warnings by several companies with which IBM has distribution deals. Today,
BMC Software (BMCS Quote) warned and fell 5.9%. BMC, like IBM, is a vendor of systems management software. The worry spread to
Unisys (UIS Quote), which fell 4.6%.
The tech sector also got hit by weakness in chip equipment stocks.
Hi/fn (HIFN Quote) stumbled 49.4% after warning of a first-quarter slowdown. Rival
PMC Sierra (PMCS Quote) shed 10.4%. The
Philadelphia Stock Exchange Semiconductor Index lost 2.4%.
Rattled by the aforementioned, the
Nasdaq Composite Index fell as low as 2825.86 in early trading. But the tech-before-dishonor index rebounded smartly to close up 25.89, or 0.9%, to 2886.59, less than a point below its all-time high.
TheStreet.com Internet Sector index followed a similar path, closing up 9.57, or 1.3%, to 732.79 after trading as low as 708.75.
The
S&P 500 rose 18.38, or 1.4%, to 1336.02 as strength in drug makers, retailers and airlines, overshadowed weakness in select techs and energy.
The
American Stock Exchange Airline Index rose 1.9% thanks to a $1.65 decline in crude prices to $20.80 a barrel and positive comments from
Donaldson Lufkin & Jenrette. The
American Stock Exchange Oil & Gas Index and
Philadelphia Stock Exchange Oil Service Index each fell more than 1.6%. Meanwhile, the
Morgan Stanley Cyclical Index rose 1%.
The
American Stock Exchange Retailing Index rose 4.3% following strong same-store sales reports from industry leaders such as
Dayton Hudson (DH Quote), which rose 5.7%. However,
Abercrombie & Fitch (ANF Quote) tumbled 14% amid concerns about its future growth.
Among financials, the
Philadelphia Stock Exchange/BKW Bank Index rose 2.1%. However, the
American Stock Exchange Broker/Dealer Index shed 1% after
Morgan Stanley Dean Witter cut its ratings on
Merrill Lynch (MER Quote), down 2%;
Charles Schwab (SCH Quote), lower by 7.3%; and
TD Waterhouse (TWE Quote), which fell 4.6%.
Meanwhile, the
Russell 2000 declined 0.40, or 0.1%, to 427.71.
In
New York Stock Exchange trading, 897.4 million shares were exchanged while declining stocks led advancers 1,513 to 1,446. In
Nasdaq Stock Market action 1.04 billion shares traded while gainers led 1,999 to 1,824. New 52-week lows bested new highs 131 to 43 on the Big Board and by 101 to 92 in over-the-counter trading.
Differing Takeaways
Harrington's "takeaway" from today is there were a lot of market players "fearful" that Dow 10,550 and S&P 1330 would prove to be short-term tops. The close above those levels "could get some momentum back in the market," he said. "I don't think anything will happen with rates. It seems to me the market is OK. November to April is historically when the market performs best. Maybe we're gearing up for that."
But a contrasting view comes from Richard Williams, vice president and analyst at
Jefferies.
"Today shows we're trying to complete a short five-day pattern that suggests we have a little more upside before it reverses down," Williams said. "We're not quite to point where the downside begins, but it could begin anytime."
Williams sees the major averages "in a terminating wedge pattern, suggesting the "sideways action of the market" is set to expire, leading to "a new trend down."
The decline could potentially take the S&P as low as 1000 and the Dow as low as 9000 in the coming weeks, he said. The Nasdaq is the "least bearish" of the major averages, "but if it does turn it will be pretty nasty."
Most likely, the declines will be similar to those experienced from the July 16 high to the low on Aug. 10, or roughly 10% to 12%, Williams said.
"My best take is that this correction will be slightly larger than last year's, but once it's done, it sets up potentially another run up that could take us to new highs," he said.
Among other indices, the
Dow Jones Transportation Average gained 34.79, or 1.1%, to 3081.71; the
Dow Jones Utility Average rose 1.31, or 0.4%, to 299.67; and the
American Stock Exchange Composite Index dipped 2.87, or 0.4%, to 781.49.
For the week, the Dow gained 3.7%, the S&P rose 4.1%, the Nasdaq leapt 5.5%, the Russell rose 1%, the DOT soared 13.2%, the Dow transports jumped 7.4%, the Dow utilities dipped 0.6% and the Amex Composite shed 0.6%.
Elsewhere in North American equities today, the
Toronto Stock Exchange 300 gained 41.94 to 7105.40 and the
Mexican Stock Exchange IPC Index slid 69.40 to 5253.08. For the week, the TSE rose 5.1% and the IPC jumped 5.5%.
Friday's Company Report
By Tara Murphy
Staff Reporter (
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.)
Mergers, acquisitions and joint ventures
DuPont's (DD Quote) DuPont Pharmaceuticals division said it bought the global marketing rights and patent for a chemical compound called
Definity through its purchase of
ImaRx Pharmaceuticals' outstanding shares. DuPont plans to sell Definity as the first ultrasound contrast agent for heart, liver and kidney imaging in the U.S. Shares of DuPont climbed 1 7/8 to 67 1/4.
Separately, DuPont announced plans to spend $51 million to boost its operations in Kinston, Ontario.
Warburg Dillon Read initiated coverage of DuPont with a hold rating.
EMC (EMC Quote) said its merger with
Data General (DGN Quote) should close shortly since it received regulatory and shareholder approval. EMC slipped 1/2 to 73 1/8, while Data General mounted 7/16 to 22 13/16.
KPN Telecom announced its plans to team up with
Oracle (ORCL Quote) to sell business software packages on the Internet to small or mid-sized businesses in the Benelux. Oracle shares fell 9/16 to 45 1/4.
Phelps Dodge (PD Quote) said it would not up its $1.13 billion cash and stock bid for
Asarco (AR Quote), after
Grupo Mexico raised its original offer to $1.17 billion in cash. Shares of Phelps Dodge popped 1 5/8 to 56 1/16, while Asarco stumbled 7/16 to 29 5/16.
Separately, Asarco said it plans to meet with Grupo Mexico to talk about the new offer.
Polaroid (PRD Quote) said it would sell its graphic business to
Andlinger and assume a third-quarter charge of $40 million. Polaroid said the division has been losing roughly $10 million a year, for the last several years. After the deal's completion in the fourth quarter of this year, the division will be known as
PGI Graphics Imaging LLC. Shares of Polaroid declined 1/18 to 27 3/8.
Providian Financial (PVN Quote) shot up quickly and remained strong all day, at one point up as much as 17 before closing up 9, or 10.2%, to 97. Analysts were befuddled to explain the surge, leading some to wonder whether the credit card giant was about to announce a settlement with the
San Francisco District Attorney's office, which has been investigating Providian for allegations it overcharged thousands of clients for late fees. But the rumor of a settlement apparently was just that.
Volvo (VOLVY Quote) is buying a 5% stake in
Mitsubishi Motors of Japan and forming a strategic truck and bus alliance. Volvo stumbled 3/16 to 28 1/16.
Earnings/revenue reports and previews
Analogic (ALOG Quote) posted fourth-quarter EPS of 30 cents, greatly missing the single-analyst estimate of 45 cents and the year-ago 56 cents. Shares of Analogic slumped 2 1/2, or 8.6%, to 26 5/8.
Clark/Bardes (CLKB Quote) said it expects to post third-quarter earnings of 8 cents to 10 cents a share, missing the five-analyst estimate of 15 cents and the year-ago 11 cents. Clark/Bardes was halted just after 3 p.m. EDT, last trading at 17 11/16.
Consolidated Papers (CDP Quote) mounted 1 15/16, or 6.9%, to 29 7/8 after it posted third-quarter earnings of 21 cents a share, well ahead of the 10-analyst estimate of 15 cents and above the year-ago 19 cents.
Ericsson's (ERICY Quote) new handset models could lead to stronger fourth-quarter results compared with those in the second quarter and boost earnings in 2000, according to a
Reuters report. Ericsson shares bounced 1 7/8, or 5.9%, to 34.
First Virginia Banks (FVB Quote) hopped 5/16 to 45 7/16 posted third-quarter earnings of 69 cents a share, in line with the 11-analyst estimate of 69 cents and up from the year-ago 62 cents.
HA-LO Industries (HMK Quote) tumbled 13/16, or 13.6%, to 5 1/8 after it said that it expects to post a third-quarter loss of 3 cents to 5 cents, greatly below the nine-analyst estimate of a 9-cent profit, and the year-ago 17-cent gain.
Hi/fn, whose stock got crushed yesterday, said it expects to report fourth-quarter earnings above the five-analyst estimate of 37 cents. Hi/fn said, after its shares were halted on the
Nasdaq Stock Market, that after a 30% price decline, two major customers had sliced their specialty semiconductor orders for the fourth quarter.
SG Cowen and
BancBoston Robertson Stephens cut their ratings on the shares to neutral from buy and long-term attractive from buy, respectively. Shares of Hi/fn plummeted 36 9/16, or 49.4%, to 37 3/4.
Idec Pharmaceuticals (IDPH Quote) fell 1 1/4 to 104 1/2 after it said it anticipates posting third-quarter earnings of 42 cents a share, beating the 11-analyst estimate of 41 cents a share and the year-ago 8 cents.
Landmark Systems (LDMK Quote) slid 2, or 22.5%, to 6 7/8 after it said it expects to post third-quarter earnings of 1 cent to 2 cents per share, greatly below the two-analyst estimate of 16 cents a share.
M&T Bank (MTB Quote) skidded 4 1/16 to 465 after it reported third-quarter earnings of $8.29 a share, beating the three-analyst estimate of $8.25 and the year-ago $6.81.
RPM (RPM Quote) stumbled 1/16 to 12 13/16 after it posted first-quarter earnings of 31 cents a share, in line with the six-analyst estimate and up from the year-ago 29 cents.
SLI (SLI Quote) declined 7/16 to 11 after it warned it expects third-quarter earnings to come in at 20 cents to 25 cents a share, below the seven-analyst estimate of 35 cents. For the full year, before restructuring and other charges, the company expects to post earnings of $1.36 to $1.46 a share, below the seven-analyst estimate of $1.72.
Retailers' September same-store sales were up, with discount chains in the lead, according to
The Wall Street Journal. The newspaper reported that some analysts plan to up their earnings estimates for
Wal-Mart (WMT Quote),
Dayton Hudson (DH Quote) and
Costco (COST Quote) as a result of the strong sales. Shares of Dayton Hudson hopped 3 11/16, or 5.6%, to 68 11/16 and Wal-Mart advanced 1/4 to 16 1/8, while Costco jumped 4 9/16, or 5.8%, to 82.
Xerox slumped 10 1/4, or 23.9%, to 32 1/2 after it warned that it expects to post essentially flat revenue for the third quarter and see about a 10% to 12% slump in earnings compared with the year-ago 53 cents a share. The 13-analyst consensus estimate called for the company to earn 58 cents a share in the quarter. Xerox blamed weaker revenue in combination with an unfavorable product mix and heightened competitive pressures.
Prudential Securities lowered its rating on Xerox to accumulate from buy, while cutting its fiscal 1999 and 2000 earnings estimates to $2.42 from $2.57 a share and to $2.70 from $2.85 per share, respectively.
PaineWebber also cut its rating to neutral from buy, while
Goldman Sachsremoved the stock from its recommended list and rated it a market perform.
Separately,
Credit Suisse First Boston upped its rating on the stock to a buy to a hold.
York Research (YORK Quote) slipped 3/16 to 4 after it reported second-quarter earnings of 3 cents a share, beating the single-analyst estimate of 1 cent, but down from the year-ago 14 cents.
Offerings and stock actions
J.P. Morgan, Goldman Sachs and
Salomon Smith Barney priced a 14 million-share offering for
AES (AES Quote) at $57.1875 a share. Shares of AES tumbled 15/16 to 56 1/4.
Aetna (AET Quote) slipped 3/16 to 52 1/2 after it announced it plans to set a $1 billion-share repurchasing plan. Separately, another lawsuit against Aetna was filed yesterday in Mississippi federal court, claiming that the HMO denied participants care.
Donaldson Lufkin & Jenrette ,
Banc of America, and
Deutsche Banc Alex.Brown priced a 7 million-share IPO for
E-Stamp (ESTM Quote) above range at 17. Shares of E-Stamp jumped 5 3/8, or 31.6%, to 22 3/8.
Genentech (DNA Quote) said
Roche Holdings plans to sell 20 million shares of Genentech stock in an underwritten public offering, which will represent 15.6% of the company's outstanding common stock. The company also said its board approved a 2-for-1 stock split. In the wake of the planned offering, Roche's economic and voting ownership of Genentech will be trimmed to about 65%. In conjunction with the offering, Roche also plans to issue U.S. dollar-denominated bonds exchangeable with Roche for up to about 5.5 million shares of Genentech stock owned by Roche. Shares of Genetech plummeted 15 1/16, or 8.7%, to 157 3/4.
Interwoven (IWOV Quote) soared 23 7/8, or 140.4%, to 41 in its trading debut. Credit Suisse First Boston priced the 3.2 million-share IPO above-range at $17 a share.
Jupiter Communications (JPTR Quote) leapt 14 1/2, or 69%, to 35 1/2 on its first day. DLJ priced the 3.1 million-share IPO above-range at $21.
K-Swiss (KSWS Quote) set a $25 million-share repurchasing plan. K-Swiss fell 1/8 to 17.
Bear Stearns priced
TriZetto Group's (TZIX Quote) 4.2 million-share IPO at $9, the low end of the estimated $9 to $10 range. TriZetto shares were unchanged at 9.
Analyst actions
PaineWebber initiated coverage of
Automatic Data Processing (AUD Quote) and
Tanning Technology (TANN Quote) with buy ratings. Automatic Data Processing shares were up 3/4 to 44 15/16, while Tanning shares added 15/16 to 45 1/8.
DLJ raised its ratings on
AMR (AMR Quote) and
Northwest (NWAC Quote) to outperform from market perform. AMR shares gained 1 1/2 to 62 7/8, while Northwest mounted 11/16 to 29 1/16.
Merrill Lynch initiated coverage of
Applied Micro Circuits (AMCC Quote) with near-term accumulate, long-term buy ratings. Shares of Applied Micro cratered 6 5/8, or 8.7%, to 68 15/16.
Credit Suisse First Boston initiated coverage of
CD Radio (CDRD Quote) as a buy. Shares of CD Radio bounced 1 7/16, or 5.6%, to 27.
Warburg Dillon Read rolled out coverage of
Cytec Industries (CYT Quote) with a buy rating. Cytec skidded 3 7/16, or 12.2%, to 24 9/16.
Warburg Dillon Read raised its rating on
Dow Chemical (DOW Quote) to buy from a hold and set a price target of 130. Dow popped 15/16 to 115 3/4.
Warburg initiated coverage of
Engelhard (EC Quote) with a strong buy rating. Engelhard advanced 3/8 to 18 15/16.
PaineWebber upped its rating on
Ferrellgas (FGP Quote) to buy from attractive. Ferrellgas stumbled 1/16 to 16 3/8.
BancBoston Robertson Stephens upped its rating on
Harbinger (HRBC Quote) to long-term attractive from market performer. Shares of Harbinger added 1 5/8, or 8.1%, to 21 11/16.
Merrill Lynch added
Infinity Broadcasting (INF Quote) to its
Focus One list. Infinity advanced 5/8 to 31 3/4.
PaineWebber started
Keane (KEA Quote) and
Perot Systems (PER Quote) with neutral ratings. Keane slid 7/16 to 21 7/8, while Perot shares bounced 1/8 to 18 1/2.
Morgan Stanley raised its rating on
Kennametal (KMT Quote) to outperform from neutral. Shares of Kennametal climbed 1 15/16, or 7.4%, to 28.
Morgan Stanley Dean Witter sliced its rating on
Merrill Lynch (MER Quote) and
TD Waterhouse (TWE Quote) to neutral from outperform. Morgan Stanley also downgraded
Charles Schwab (SCH Quote) to neutral from outperform. Shares of Merrill Lynch slid 1 7/16 to 68 9/16 and TD Waterhouse fell 5/8 to 12 7/8, while Schwab declined 2 3/16, or 6.1%, to 33 9/16.
ING Barings rolled out coverage of
priceline.com (PCLN Quote) with a strong buy rating. Shares of priceline bounced 1 3/8 to 73 3/4.
Goldman Sachs upgraded shares of
Southern Peru Copper (PCU Quote) to market outperformer from market performer. Southern Peru hopped 1 3/16, or 7%, to 18 1/16.
Merrill Lynch started coverage of
TranSwitch (TXCC Quote) with a near-term and long-term accumulate. TranSwitch shares declined 9 1/8, or 15.7%, to 49.
Goldman Sachs upped its rating of
Tredegar (TG Quote) to market outperformer from market performer. Shares of Tredegar jumped 5/8 to 22 7/8.
Goldman Sachs raised its rating on
Plains All American (PAA Quote) to its recommended list. Shares of Plains were unchanged at 18 1/2.
Lehman Brothers began coverage of
PMC-Sierra (PMCS Quote) with a buy rating. PMC-Sierra was slumped 10 3/8, or 10.3%, to 89 1/2.
DLJ began coverage of
Starwood (HOT Quote) with a market perform rating and sliced its rating on
Marriott (MAR Quote) to market perform. Shares of Starwood were down 1/4 to 20 11/16, while Marriott slipped 5/16 to 31 11/16.
PaineWebber its rating on
Southwest Air (LUV Quote) to attractive from buy. Shares of Southwest fell 5/16 to 17 13/16.
Salomon Smith Barney sliced its rating on
Vitesse Semiconductor (VTSS Quote) to outperform from buy, in the wake of Hi/fn's announcement of fiscal 2000 first-quarter earnings woes. Hi/fn supplies components to Lucent, which gives Vitesse 20% of its business. Vitesse slid 3 13/16 to 82 3/8.
Miscellany
Ford (F Quote) and the
UAW are still in talks to reach an accord before tonight's 11:59 p.m. strike deadline, the
Journal reported. According to the newspaper, negotiations have been hindered by Ford's desire to spin off its
Visteon parts division. Ford shares bounced 3/4 to 52 1/8.
IBM (IBM Quote)declined 2 7/8 to 113 1/2 announced its plans to combine its consumer PC business into its broader PC operation, cutting its workforce by 500 to 1000 jobs.
Mattel (MAT Quote) CEO Jill Barad told the company's board that she did not fully understand what was wrong at the company's
Learning Co. division, but assured the board that she would produce a full accounting in the near future, the
Journal reported. Mattel fell 1/2 to 11 13/16.
An advisory board said it will recommend that the
Food and Drug Administration approve
Pfizer's (PFE Quote) anti-depression remedy
Zoloft to treat post-traumatic stress disorder. Shares of Pfizer mounted 7/8 to 39 1/2.
Wendy's (WEN Quote) said it plans to shut down seven restaurants in the U.K. as a result of high real estate and operating costs. The company said the closures would not have a negative impact on fourth-quarter earnings. Shares of Wendy's were up 1/16 to 26.
