SAN FRANCISCO -- "Ding, dong, the Wicked Witch, the Wicked Witch of Inflation is dead," was the rallying cry yesterday. Today, traders were singing the "classic" opus: "Don't worry, be happy." The chorus was muted somewhat in the final hour of trading, but stocks and bonds closed solidly higher once again.
The session featured a record-setting close for the
Nasdaq Composite Index, which traded as high as 2978.63 before closing up 91.21, or 3.2%, to 2966.43. The point gain is the average's sixth-best ever and its close eclipsed the previous high of 2915.95, set
Oct. 11. Moreover, 1.44 billion shares traded in
Nasdaq Stock Market action, the exchange's busiest day ever.
| Major Indices | | INDEX | CHANGE | % | VALUE | YR TO DATE | | Dow |  
109.23 | +1% | 10,731.76 | +16.9% | | S&P 500 |
20.49 | +1.5% | 1362.93 | +10.9% | | Nasdaq |
91.21 | +3.2% | 2966.43 | +35.3% | | Russell 2000 |
5.84 | +1.4% | 428.65 | +1.6% | | TSC Internet |
30.97 | +4.3% | 750.79 | +84.8% | | BOND | CHANGE | PRICE | YIELD | | 30-Year Treasury |
1 9/32 | 99 18/32 | 6.156% |
|
"The psychology of the market has changed," said one ebullient (and long)
New York equity trader. "A lot of people made a lot of money the last two days. Once in a while you get it right and you've got to press your position until [the trend] changes. This is awesome."
The market: Join the discussion on TSC Message Boards. Tech stocks were inspired by positive comments from
Intel (INTC Quote), which gained 7.3%. Additionally, strong gains by chip and chip-equipment makers such as
Texas Instruments (TXN Quote) and
Novellus Systems (NVLS Quote) helped the
Philadelphia Stock Exchange Semiconductor Index jump 6.3%.
The vast majority of tech bellwethers gains amid another steep decline in bond yields; the
Nasdaq 100 rose 3.8% while the
Morgan Stanley High-Tech 35 gained 4.6%.
The price of the 30-year Treasury bond rose 1 9/32 to 99 18/32, its yield falling to 6.16% as traders continued to absorb the non-inflationary implications of
yesterday's economic data. Additionally, a
speech by
Federal Reserve Chairman
Alan Greenspan last night -- in which he crowed again about technology-driven productivity gains -- was generally viewed with favor.
Bonds were further aided by a weak
new home sales report this morning and some players still scrambling to cover short positions. (For more, see today's late
Bond Focus.)
With the fixed-income markets blazing a trail toward greener pastures, stock proxies raced ahead.
After trading as high as 10,790.02, the
Dow Jones Industrial Average closed up 109.23, or 1%, to 10,731.76, its highest finish since Sept. 20.
The Dow was led by cyclicals
International Paper (IP Quote),
Alcoa (AA Quote) and
United Technologies (UTX Quote), as well as tech giants
IBM (IBM Quote) and
Hewlett-Packard (HWP Quote). Also,
General Electric (GE Quote) rose 1.9% to an all-time high.
American Express (AXP Quote) was by far the Dow's biggest restraint, falling 4.4% after
Morgan Stanley Dean Witter cut its recommendation. Financials in general retreated after stellar gains of late; the
Philadelphia Stock Exchange/KBW Bank Index slid 0.5%.
Meanwhile, the
S&P 500 gained 20.49, or 1.5%, to 1362.93 and the
Russell 2000 leapt 5.84, or 1.4%, to 428.65.
Net favorites followed a similar path:
TheStreet.com Internet Sector index gained 30.97, or 4.3%, to 750.79.
Additionally,
TheStreet.com Red Hots index jumped 8.56, or 3.7%, to 239.02. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.
Demonstrating (again) that the lust for Internet IPOs has not abated,
Akamai Technologies (AKAM Quote) soared 458% from its $26-a-share offering price.
Notwithstanding high-profile
blowups like
Lockheed Martin (LMT Quote), down 12.8%, market internals were solidly positive.
In
New York Stock Exchange trading, 1.14 billion shares were exchanged while advancers led declining stocks 2,170 to 974. In Nasdaq action gainers led 2,306 to 1,720. New 52-week highs outpaced new lows 113 to 84 on the Big Board and 204 to 101 in over-the-counter trading.
Despite a near-overwhelmingly positive mood on Wall Street, some players expressed doubts.
"I am still skeptical," said Jim Volk, co-director of institutional trading at
D.A. Davidson in Portland, Ore. "A lot of big hedge funds are taking money off the table. There's still good buying and it's not like the market is going to go down 500 points in a week, but I just think they've had enough of a play that they're ready to rest."
Volk believes the strong-than-expected
GDP report yesterday was overshadowed by the weak
Employment Cost Index report.
"Everyone is now saying '25 basis points in November and that's it,'" the trader said. "But if the economy is still really hot in the fourth quarter they're going to talk about them raising it again. That's why I'm cautious."
The Funds Among Us
In addition to anticipation that any rate hike by the Fed on Nov. 16 will be its last for the foreseeable future, some market players said the Oct. 31 fiscal year-end for some mutual funds may have also contributed to the explosive advance of the past two days.
The process of
tax-loss selling by fund managers to minimize potential capital gains is generally offset by their penchant for adding winners to their portfolios, a tactic known as window-dressing. But portfolio managers are loath to end the month (much less their fiscal year) with cash on hand, fund watchers said; thus, the enthusiastic buying.
Charles Biderman, publisher of
Liquidity Trim Tabs and
Mutual Fund Trim Tabs, said October is shaping up to be one of the biggest months ever for equity mutual fund inflows, with more than $20 billion as of yesterday.
More than purely putting money to work, a bigger factor in the advance was the end of the maneuvering by many fund groups to set capital gains distributions before their fiscal year-ends, Biderman said.
"I think the selling of losers to minimize capital gains payments was depressing stock prices. That's what was happening through last week," he said. "Now, they have strong liquidity, plus are probably finished with their [tax-loss] selling."
Among other indices, the
Dow Jones Transportation Average rose 45.87, or 1.5%, to 3058.98; the
Dow Jones Utility Average gained 0.32, or 0.1%, to 306.58; and the
American Stock Exchange Composite Index rose 7.25, or 0.9%, to 800.80.
October was uncharacteristically friendly to stocks this year. For the month, the Dow rose 3.5%, the S&P 500 gained 6.3%, the Nasdaq Comp added 8%, the Russell rose 0.3%, the DOT soared 16%, the Dow transports rose 5.1%, the Dow utilities added 2.8% and the Amex Composite rose 1.6%.
For the week, the Dow gained 2.5%, the S&P climbed 4.7%, the Nasdaq added 5.3%, the Russell rose 2.4%, the DOT jumped 4.8%, the Dow transports gained 6.8%, the Dow utilities rose 4%, the Amex Composite climbed 1% and the Red Hots sizzled up 8%.
Elsewhere in North American equities today, the
Toronto Stock Exchange 300 rose 141.78, or 2%, to 7256.22 and the
Mexican Stock Exchange IPC Index gained 121.85, or 2.3%, to 5450.37. For the week, the TSE rose 3.1%, while the IPC gained 5.7%. For the month of October, the TSE was up 4.2%, while the IPC rose 7.8%
Friday's Company Report
By Eileen Kinsella
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.)
Shares of Akamai Technologies rocketed 119 1/8, or 458.1%, to 145 3/16, leaving other IPO's in the dust. Cambridge-based Akamai Technologies monitors Internet traffic and finds the most efficient way to move data through the system. Shares were priced last night at $26 each. (See table below for more IPO results.)
Also hopping in the tech sector was
Go2Net (GNET Quote) which climbed 11 3/8, or 19.3%, to 70 3/8 after saying it forged an agreement to provide
Net2Phone's (NTOP Quote) online telephone and other services through its Web site. Net2Phone rose 1 11/16 54 1/4. The transaction calls for the two companies to develop a joint messaging and communications feature on Go2Net's site that enables users to send and receive voice mail, faxes, e-mail and telephone calls.
U.S. Bancorp Piper Jaffray also stepped in and raised its fourth-quarter earnings estimate for Go2Net to 8 cents from 6 cents a share.
Mergers, acquisitions and joint ventures
Interpublic Group (IPG Quote) rose 1 1/8 to 40 5/8 after it unveiled plans to unite its Ammirati Puris Lintas and Lowe & Partners Worldwide advertising units. Interpublic Group said it has tapped Lowe Group's chairman and CEO Frank Lowe to serve in those posts at the new agency. Starwood Hotels & Resorts (HOT Quote) gained 1 5/16, or 6.1%, to 22 15/16 after its unit Sheraton International launched a $295 million cash takeover offer for the ordinary and savings shares it doesn't already own of Italian hotels operator Ciga. Sheraton already owns 72.91% of Ciga's ordinary shares and 30.85% of its savings shares. Earnings/revenue reports and previews
Gartner Group (IT Quote) lost 3 13/16, or 28.1% to 9 3/4 after the company reported fourth-quarter earnings of 20 cents a share, missing the 11-analyst estimate of 23 cents and the year-ago 23 cents a share. Gartner also warned it sees 2000 earnings estimates below expectations. TheStreet.com wrote about it in a separate story. Lockheed Martin lost 2 15/16, or 12.8%, to 20 after it posted third-quarter earnings of 57 cents a share, which include two gains that contributed 9 cents to the quarter's earnings. The report beating the 15-analyst estimate of 47 cents but fell below the year-ago 83 cents. Niagara Mohawk (NMK Quote) lost 7/16 to 15 3/4 after it posted a third-quarter loss of 10 cents a share, wider than the five-analyst expectation of earnings of 1 cent a share, and down from the year-ago earnings of 5 cents a share. Sunrise Technologies (SNRS Quote) dipped 3/4, or 10.8%, to 6 1/4 after it posted a third-quarter loss of 13 cents a share, a penny narrower than the single-analyst estimate but wider than a year-ago loss of 10 cents a share. Solutia (SOI Quote) fell 3/16 to 17 3/16 after it reported third-quarter earnings of 53 cents a share, in line with the nine-analyst estimate and up from the year-ago 47 cents. Offerings and stock actions
America Online (AOL Quote) rose 3 to 129 1/2 after it said yesterday it set a 2-for-1 stock split, its seventh such split in seven years. AOL reported that more than two million individual investors will get one share for every share they own on Nov. 8, with the remaining shares up for grabs starting Nov. 22. After the split's effective date, the company will have 2.2 billion outstanding shares. According to AOL, a stockholder who purchased 1,000 shares for $11,500 at its IPO and held his position, would now own 128,000 shares worth roughly $7.8 million. Celestica (CLS Quote) rose 1 9/16 to 55 5/8 after saying it set a public offering of subordinate voting shares. Morgan Stanley Dean Witter and RBC Dominion Securities have been tapped to underwrite the offering. eToys (ETYS Quote) dropped 10 7/8, or 15.4%, to 59 3/4 after it said its lead underwriter, Goldman Sachs, will release the lock-up restrictions on 10% of the company's shares on Nov. 2. That will increase eToys' float by as much as 9.5 million shares. iVillage (IVIL Quote) shed 3 15/16, or 13.4%, to 25 9/16 after it said its 2.7 million-share secondary offering was priced at $28 a share. | Company | Offering Price | Current Price | % Change |
| Allied Riser Communications (ARCC Quote) | $18 | 18 1/16 | -- |
| Chartered Semiconductor Manufacturing (CHRTV Quote) | $20 | 33 3/16 | +65.6% |
 |
Analyst actions
Goldman Sachs initiated coverage on seven retailers. Of the five companies that were started as market outperformers, TJX (TJX Companies Quote) climbed 1/2 to 27 1/8; Ross Stores (ROST Quote)inched up 5/16 to 20 5/8; Limited (LTD Quote) rose 2 1/4, or 5.8%, to 41; Lands' End (LE Quote) gained 1 3/8 to 76 15/16; and Abercrombie & Fitch (ANF Quote) rose 1 15/16, or 7.7%, to 27 1/4. Gap (GPS Quote) tacked on 2 3/8, or 6.8%, to 37 1/8 and Intimate Brands (IBI Quote) gained 2 1/16, or 5.3%, to 41 after they were started on the recommended list.
Aegon (AEG Quote) climbed 1 to 91 15/16 after Commerzbank Global Equities cut its rating to hold from buy. American Express dropped 7 to 154 after Morgan Stanley Dean Witter cut its rating to outperform from strong buy, based on valuation but raised its price target to 179 from 175. Citigroup (C Quote) inched up 1/8 to 54 1/4 after J.P. Morgan started the stock with a buy rating and set a price target of 61. Consol Energy (CNX Quote) added 1/8 to 11 5/8 after Merrill Lynch raised its intermediate rating on to buy from accumulate and upped its second-quarter earnings estimate to 35 cents a share from 18 cents. R.R. Donnelly (DNY Quote) fell 3 3/8, or 12.2%, to 24 1/4 after Credit Suisse First Boston downgraded it to hold from buy. EchoStar Communications (DISH Quote) rose 5/8 to 61 7/8 after Merrill Lynch slashed its rating to intermediate-term accumulate from buy. E-Tek (ETEK Quote) gained 2 3/4 to 66 5/8 after Warburg Dillon Read rolled out coverage with a buy rating. Warburg Dillon Read upped its price target on Manpower (MAN Quote) to 39 from 33. Shares of Manpower lifted 3 3/16, or 10%, to 35 1/8. Methode Electronics (METHA Quote) lost 1 3/4, or 9.9%, to 16 after Merrill Lynch cut its intermediate-term rating to accumulate from buy. Last night, Methode warned investors that it expects to post second-quarter earnings 10% to 20% below the year-ago 26 cents a share. Methode said its second-quarter results would include a 6-cent charge from the bankruptcy of a large automotive customer. The four-analyst estimate has the company pegged to make 27 cents a share in the quarter. Warburg Dillon Read raised its 2000 price target on Powertel (PTEL Quote) to 60 from 40 and reiterated a buy rating on the stock. Powertel lost 3/16 to 58 7/8 despite the news. Warburg Dillon Read started coverage of SDL (SDLI Quote) with a buy rating. SDL lifted 14, or 12.8%, to 123 5/16. Tower Automotive (TWR Quote) edged up 7/16 to 16 5/16 after J.P. Morgan initiated coverage with a buy rating. Miscellany
DaimlerChrysler (DCX Quote) gained 1/4 to 77 3/4 after it announced a reorganization of its North American unit which will give executives there more autonomy. TSC wrote about the changes in a separate story. Intel moved up 5 1/4, or 7.3%, to 77 7/16 after saying last night that Y2K computing issues will have "little to no" impact on its business. The company also said demand is strong for its new Pentium III chips and that PC prices are currently stabilizing. Yahoo! (YHOO Quote) gained 4 1/8 to 179 1/16 after The Wall Street Journal reported it rolled out an ad campaign marketing itself as an online shopping source.
