SAN FRANCISCO -- In the days before the Federal Open Market Committee meeting, the common thinking was that almost any decision would be a "win-win" for stocks. Indeed, those long were able to secure a definitive "win" (with flavor) yesterday after the Fed's rate hike, overcoming a downturn by bonds.
But a repeat "victory" was not in the offing today. Bonds continued to fade amid renewed signs inflationary forces may not be dead, dragging stocks modestly lower in the process.
| Major Indices | | INDEX | CHANGE | % | VALUE | YR TO DATE | | Dow |  
49.24 | -0.5% | 10,883.09 | +18.5% | | S&P 500 |
9.36 | -0.7% | 1410.71 | +14.8% | | Nasdaq |
26.13 | -0.8% | 3269.39 | +49.1% | | Russell 2000 | 
0.19 | +0.04% | 457.07 | +8.3% | | TSC Internet |
4.80 | +0.5% | 902.37 | +122% | | BOND | CHANGE | PRICE | YIELD | | TSC Red Hots |
9.8 | -3.1% | 305.60 | N/A | | 30-Year Treasury |
-31/32 | 99 27/32 | 6.136% |
|
TheStreet.com Internet Sector index sidestepped the selling, however, rising 4.80, or 0.5%, to an all-time high of 902.37, largely behind strength in
CMGI (CMGI Quote). The Internet incubator rose 21.1% after
Prudential Securities reiterated its strong buy recommendation and upped its price target to 186.
TheStreet.com Red Hots index fell 9.8 to 305.60. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.
The price of the 30-year Treasury bond fell 23/32 to 99 29/32, its yield rising to 6.13%. The
Consumer Price Index report for October was in line with expectations and thus not believed to be responsible for the fixed-income market's setback. The culprit was an old nemesis of inflation-averse bond traders -- oil, which rose 3.4% to $26.58, its first climb above $26 since January 1997. The
American Petroleum Institute's report late yesterday showing declining inventories was cited as the catalyst for today's move.
The market: Join the discussion on TSC Message Boards. In reaction, the
American Stock Exchange Oil & Gas Index rose 1.8% while the
Philadelphia Stock Exchange Oil Service Index jumped 4.4%. But while energy stocks rallied, most other groups seized on the bond market's retreat as an excuse to take a respite from recent gains.
Not surprisingly, the
Dow Jones Transportation Average fell hardest on the spike in crude prices, down 95.54, or 3.1%, to 3004.13.
"I don't think it's really a big deal on the inflation front," but oil's rise "doesn't help," said Jim Benning, a trader at
BT Brokerage, noting the market was due for a setback after its "real strong run in the last week or so."
Benning described the Fed's decision to raise rates yesterday as "the most bullish scenario anyone could have expected," evoking the kind of optimism that has become widespread on Wall Street. "The market is going to do well through the end of the year," he forecast. "We're just taking a little break here."
Among blue-chip averages, the
Dow Jones Industrial Average fell 49.24, or 0.5%, to 10,883.09 while the
S&P 500 dipped 9.36, or 0.7%, to 1410.71 after trading as high as 1423.55, a new intraday high for the index.
Offsetting the rising oil names were losses for financials such as
American Express (AXP Quote) and
J.P. Morgan (JP Quote); the
Philadelphia Stock Exchange/KBW Bank Index fell 2.8%.
The
Nasdaq Composite Index, which has been producing outsized gains of late, led major indices lower on this day. The tech-imbued index slid 26.13, or 0.8%, to 3269.39 as the majority of bellwether tech names declined; the
Nasdaq 100 shed 1% while the
Philadelphia Stock Exchange Semiconductor Index declined 1.9%.
Recent favorites rescinded some gains, including
Qualcomm (QCOM Quote), down 5.6% after announcing it may pursue acquisitions to expand its product mix.
Oracle (ORCL Quote) was a notable exception to the downdraft, rising 10.2% after several brokerages issued positive comments. As
reported, Oracle executives were optimistic in a meeting with analysts yesterday.
Also,
Applied Materials (AMAT Quote) rose 4.3% thanks to positive comments from
Lehman Brothers. After the close, the chip-equipment giant posted fourth-quarter profits of 77 cents a share vs. the 29-analyst consensus of 64 cents.
Notable Net gainers included
priceline.com (PCLN Quote), up 12% on news the operating units of
UAL (UAL Quote),
AMR (AMR Quote), and
US Airways (U Quote) will each offer seats on priceline.com's site. Elsewhere, Net IPOs had another stellar session as
Terra Networks (TRRA:Nasdaq) gained 183% and
iManage (IMAN:Nasdaq) rose 124% from their respective offering prices.
Manageable, Warranted and Not a Problem
"Psychology equals momentum on the Nasdaq and it gets absurd once in a while and becomes problematic short-term -- that's what's happened," said Barry Hyman, chief market strategist at
Ehrenkrantz King Nussbaum. "Any correction is certainly manageable and will be contained to 3% to 5%. I don't look at it as a problem."
Hyman's blase view of today's setback is due first to a belief that "tech leads the way in terms of growth," and will continue to do so. Second, the Nasdaq's recent string of new highs came without much assistance (if any) from three "top-weighted" stocks,
Microsoft (MSFT Quote),
Dell (DELL Quote) and
Intel (INTC Quote), which all fell today by at least 2.5%.
"Take that into consideration the only answer is the market is much broader than in previous rallies," the strategist said. "That bodes well. Certainly, parts of technology moves beyond reasonable levels and [today's setback] is certainly warranted."
Also reflecting that broadening, the
Russell 2000 outperformed blue-chip averages, eking out a gain of 0.19 to 457.07.
In
New York Stock Exchange trading, 960.1 million shares were exchanged while declining stocks led advancers 1,855 to 1,205. In
Nasdaq Stock Market action, 1.634 billion shares traded -- yet another all-time high -- while losers led 2,141 to 1,911. New 52-week lows outpaced new highs 131 to 100 on the Big Board while new highs led 238 to 81 in over-the-counter trading.
Among other indices, the
Dow Jones Utility Average slid 1.73, or 0.6%, to 296.24 and the
American Stock Exchange Composite Index shed 3.61, or 0.4%, to 823.40.
Elsewhere in North American equities, the
Toronto Stock Exchange 300 gained 11.57 to 7591.30 and the
Mexican Stock Exchange IPC Index added 1.76 to 6103.62.
Wednesday's Company Report
By Tara Murphy
and
Eileen Kinsella
Staff Reporters Though most of the net sector ended the day on a down note, CMGI was a big winner, jumping 21 3/4, or 21.1%, to 124 5/8, heaving TheStreet.com Internet Sector index into positive territory despite a slump in other net heavyweights. Prudential Securities upped its price target on CMGI to 186 and reiterated a strong buy rating.
(
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.)
Mergers, acquisitions and joint ventures
BB&T (BBT Quote) fell 1 1/8 to 35 9/16 after saying it is buying Hardwick Holding in a stock swap valued at $138.7 million. Dime Bancorp (DME Quote) rose 5/16 to 18 9/16 after saying its stockholders would get a larger share in a new mid-Atlantic regional bank that would be created under its planned $3.6 billion merger with Hudson United Bancorp (HU Quote). Shares of Hudson United rose 1/2 to 32 9/16. The banks said the change was necessary due to a 3% stock dividend that was set by Hudson yesterday. According to the new terms, Dime shareholders will now receive 0.60255 shares in Dime United Bancorp for each share held, up from the initial 0.585 shares. Disney (DIS Quote) lost 3/16 to 25 15/16 after shareholders approved the company's spinoff of its Internet assets to form a separately traded company Go.com. Disney also said that Infoseek (SEEK Quote)shareholders, who voted at a different meeting, favored Disney's planned purchase of the company, giving the green light to form Go.com. In July, Disney and Infoseek forged a deal regarding Disney's purchase of the remaining 58% interest in Infoseek that it did not already own. Infoseek gained 3 1/16, or 8.8%, to 37 7/8. Equifax (EFX Quote) slipped and Lycos (LCOS Quote) lost 1 15/16 to 56 after the companies launched a co-branded Web site that allows consumers to review their credit history and ratings. The site lets consumers know if credit rating agencies have added new information to their files each quarter. IBM(IBM Quote) fell 1 1/2 to 93 1/8 and SBC Communications (SBC Quote) added 15/16 to 51 5/8 after the companies forged a pact to offer DSL Internet Consumer Service. ImageX.com (IMGX Quote) climbed 13/16 to 17 5/8 after it agreed to acquire Internet auction sites PrintBid.com and PaperDeals.com for about $18.5 million in stock. Network Solutions (NSOL Quote) shot up 9 1/2, or 6.1%, to 145 9/16 after it forged a pact for Yahoo! (YHOO Quote) to advertise Network Solutions' services internationally. Pegasus (PEGS Quote) fell 13/16 to 46 3/4 after saying it is buying hotel-reservation technology designer REZsolutions in a deal valued at $250 million. The transaction calls for Pegasus to issue 2.66 million shares in common stock and pay $115 million in cash and a $20 million note payable to Reed Elsevierdivision Utell International. priceline.com jumped 8 1/4, or 12%, to 76 7/8 after announcing it will sell tickets for the three major airlines it does not already serve, United Airlines, American Airlines and US Airways, and will take a one-time $1.1 billion charge related to the move. United is a unit of UAL which fell 1 5/8 to 66 3/16, while American is a unit of AMR which lost 2 7/16. US Airways fell 1 7/8, or 6.3%, to 28 1/16. SatCon Technology (SATC Quote) rose 1/2, or 6%, to 8 27/ 32 after it purchased Northrop Grumman's (NOC Quote) power electronics products division, in a stock-warrant deal valued at $4.9 million. Northrop gained 1 7/8 to 55 3/8. Bank of Scotland talked to investment banks about how it can raise an extra $4.1 billion so it can increase its hostile takeover bid for National Westminster Bank to 15 pounds a share. Southern Cal Edison (EIX Quote) lost 1/4 to 27 11/16 after it started auctioning a 56% stake in its Mohave power plant. Ticketmaster Online-CitySearch (TMCS Quote) tacked on 5 5/8, or 19.2%, to 35 1/8 after saying it has taken a "significant minority stake" in ActiveUSA.com, an online sports ticketing company. Volt Information Sciences (VOL Quote) added 13/16 to 23 5/8 and Lucent Technologies (LU Quote) lost 3/4 to 76 3/4 after saying jointly that Volt would acquire two divisions from Lucent, for an undisclosed amount of cash. According to the deal's terms, Volt will buy the Technologies Technical Services and Technologies Services divisions from Lucent. Vodafone AirTouch (VOD Quote) was unchanged at 44 after The Wall Street Journal reported it would increase its bid for Germany's Mannesmann (MNNSY Quote) in what could be the biggest takeover ever. The newspaper, citing people familiar with the situation, reported that Vodafone is pondering a bid valued at between 220 euros and 230 euros a share, which would value Mannesmann at as much as 116.7 billion euros, or $120.59 billion. Earlier this week, Vodafone offered to buy Mannesmann; however, Mannesmann said no thanks. Earnings/revenue reports and previews
Commerce One (CMRC Quote) dropped 12 1/8 to 310 after it kicked off the U.S. Bancorp Piper Jaffray Internet Conference with a word of caution. "We expect a modest increase in revenues in the fourth quarter (from the third quarter)," Peter Pervere, the company CFO, told a packed group of investors this morning. "We are a relatively young company. We have a significant pipeline right now, but we want to set expectations conservatively." By comparison, sequential revenue from the second quarter to the third quarter ended Sept. 30 grew 147% to $10.4 million. Commerce One is a provider of business-to-business software and services. -- Suzanne Galante
Brookstone (BKST Quote) gained 1/8 to 16 7/8 after it posted a third-quarter loss of 55 cents a share, narrower than the three-analyst estimate of a 57-cent loss and the year-ago 56-cent loss. CBRL Group (CBRL Quote) fell 5/8 to 12 7/8 after it posted first-quarter earnings of 25 cents a share, in line with the 12-analyst estimate but down from the year-ago 42 cents. Consolidated Stores (CNS Quote) gained 1/8 to 20 1/4 after it posted a third-quarter loss of 14 cents a share, narrower than the 14-analyst estimate of a 17-cent loss and the year-ago 15-cent loss. Dillard's (DDS Quote) climbed 9/16 to 19 5/16 after it posted third-quarter earnings of 33 cents a share, missing the 13-analyst estimate of 38 cents, but up from the year-ago 47-cent loss. Ericsson (ERICY Quote) lost 5/16 to 47 after President Kurt Hellstrom warned that problems in increasing handset output made it difficult for the company to meet its forecasted operating margins for 1999. According to Reuters, Hellstrom said during a briefing in London that the output is probably in the low end of its projected range but "within what we consider normal." Goody's Family Clothing (GDYS Quote) was unchanged at 6 25/32 after it reported third-quarter earnings of 5 cents a share, in line with the four-analyst estimate but down from the year-ago 10 cents. Talbots (TLB Quote) lost 1 3/16 to 46 9/16 after it posted third-quarter earnings of 63 cents a share, beating the 13-analyst estimate by a penny and the year-ago 40 cents. TheStreet.com/nytimes.com joint newsroom wrote about Talbots in a separate story. Offerings and stock actions
Gemstar (GMST Quote) fell 3 1/16 to 102 7/8 after it said it set a 2-for-1 stock split. Hewlett-Packard's (HWP Quote) planned spinoff of Aglient Technologies is now set for 65 million shares, up from the initial IPO figure of 57 million. The offering's expected price range has been adjusted to $26 to $28 from $19 to $22. Morgan Stanley Dean Witter is serving as the deal's lead underwriter. Shares of H-P popped 1 5/16 to 77 7/16. Robertson Stephens priced a 3.6 million-share IPO for iManage(IMAN Quote) above its expected price range at $11. Shares of iManage leaped 13 5/8, or 123.8%, to 24 5/8. Phone.com (PHCM Quote) plummeted 8 1/4, or 5.7%, to 135 1/16 after it announced that it is selling 6.6 million shares at a price of $135 per share in a public offering. Rainmaker Systems (RMKR Quote) rose 10 1/2 , or 131.2%, to 18 1/2 on the first day of trading. Suiza Foods (SZA Quote) added 5/16 to 36 5/8 after it said it has added $100 million to its existing share buyback program. Goldman Sachs priced Terra Networks' (TRRA Quote) 22.3 million-share IPO above-range at $13.41 a share. Shares of Terra jumped 24, or 182.5%, to 38 1/4. Virata (VRTA Quote) popped 12 1/2 , or 89.3%, to 26 9/16 after being priced at $14 a share by Credit Suisse First Boston. Analysts actions
Donaldson Lufkin & Jenrette upped its rating on Anheuser-Busch (BUD Quote) to buy from market perform. Shares of Anheuser-Busch hopped 2 13/16 to 75 1/16. Lehman Brothers upped its price target on Applied Materials (AMAT Quote) to 125 from 100. Shares of Applied Materials leaped 4 1/2 to 110. Credit Suisse First Boston analyst Mark Wolfenberger resumed coverage of AppNet (APNT Quote) with a strong buy rating and a 12-month target price of 75. AppNet lost 5/8 to 50 5/8. Lehman Brothers raised its price target on BEA Systems (BEAS Quote) to 110 from 75. Shares of BEA bounced 9 1/4, or 12.75, to 81 3/4. Merrill Lynch raised its intermediate rating on Fuji Photo (FUJIY Quote) to an accumulate from neutral and its long-term rating to buy from accumulate. Shares of Fuji gained 1 1/2 to 40 5/8. Credit Suisse First Boston raised its fiscal 2000 estimates on Home Depot (HD Quote) to $1.48 from $1.45 a share and its fiscal 2001 estimates to $1.85 from $1.80 a share and upped its price target to 100 from 75. Home Depot shares declined 7/16 to 79 15/16. Deutsche Banc Alex. Brown initiated coverage of Inhale (INHL Quote) with a strong buy rating and a price target of 47. Shares of Inhale climbed 1/8 to 31 3/8. Merrill upped its rating on Lyondell Chemical (LYO Quote) to near-term accumulate from neutral. Lyondell Chemical edged up 3/8 to 15 5/8. DLJ raised its rating on Oracle (ORCL Quote) to buy from market perform, while Merrill Lynch upped its price target to 80. Lehman Brothers raised the stock's price target to 82 from 53 and J.P. Morgan upgraded the stock to buy from market performer. Oracle shares advanced 6 9/16, or 10.1%, to 71. PaineWebber sliced its fourth-quarter estimates on Pacific Gateway (PGEX Quote) to 5 cents from 21 cents a share. Pacific Gateway added 15/16, or 5.5%, to 17 15/16. Robertson Stephens started coverage of NaviSite(NAVI Quote) with a buy rating. Shares of NaviSite slid 3 3/4, or 6.5%, to 52 3/4. PaineWebber raised its fiscal 2000 estimate on Network Appliance (NTAP Quote) to 79 cents a share from 74 cents and its fiscal 2001 estimate to $1.10 from $1.05 a share. Shares of Network Appliance shares shot up 20 7/16, or 19.7%, to 124. First Boston analyst Harry DeMott III, reinstated coverage of Radio One (ROIA Quote) with a buy rating and a 12-month target price of 77. Radio One shares were unchanged at 64 7/8. Deutsche Banc Alex. Brown rolled out coverage of Sepracor (SEPR Quote) with a buy rating and a price target of 114. Shares of Sepracor jumped 7 3/8, or 8.1%, to 97. Wachovia Securities upped its rating on Tropical Sportswear (TSIC Quote) to strong buy from neutral. Tropical Sportswear added 2 1/8, or 11%, to 21 1/2. Banc of America upgraded Whole Foods(WFMI Quote) to strong buy from buy. Shares of Whole Foods bounced 4, or 12.1%, to 37 1/16. Miscellany
British Telecommunications (BTY Quote) slipped 12 1/2, or 5.5%, to 197 1/2 after it announced that it has selected N2H2 (NTWO Quote) as its preferred Internet filtering provider. Shares of N2H2 climbed 4 3/16, or 37.8%, to 15 1/4. Ford (F Quote) and DaimlerChrysler (DCX Quote) are ratcheting up consumer rebates on some of their most profitable light trucks, the Journal reported. Shares of Ford fell 2 to 52 5/8, while DaimlerChrysler declined 1/16 to 73 1/16. Kennametal (KMT Quote) said it has hired Goldman Sachs to explore "strategic alternatives" regarding its JLK Direct Distribution unit, including selling it. Also, the company said it will incur special charges of about $25 million to $30 million in the quarter ended Dec. 31. The company plans to close, consolidate or downsize several warehouses, offices and plants and cut 400 to 500 jobs. Kennametal skidded 5/8 to 28 9/16. Kimberly-Clark (KMB Quote) said Thomas J. Falk has been named president and chief operating officer and will join the company's board of directors. Shares of Kimberly Clark hopped 1 to 68 1/16 Stewart Enterprises (STEI Quote) said that it has tapped President and COO William Rowe to become its new CEO after vice chairman and CEO Joseph Henican III resigned. Shares of Stewart added 1/4, or 5.2%, to 5. Zygo (ZIGO Quote) lost 1/2 to 17 1/4 after it said it selected J. Bruce Robinson to replace Gary Willis as CEO.
