Market Comes Off Lows, Treads Cautiously Into the Green

Preannouncement woes and a tech giant's price-target downgrade weren't taking the optimistic air out of the stock market, as investors continued to buy in the face of interest-rate uncertainty. But this morning's conflicting economic data left Wall Street insiders feeling puzzled on the direction of the economy and choosing to sit tight, instead of putting their wallets on the line.

Major Indices INDEX CHANGE % VALUE Dow 43.49 +0.4% 10,731.44 S&P 500 4.16 +0.3% 1474.70 Nasdaq 18.32 +0.5% 3815.73 Russell 2000 2.20 -0.4% 507.47 TSC Internet 0.81 +0.1% 899.49 NOTE CHANGE PRICE YIELD 10-Year Treasury 4/32 103 6/32 6.058%

This morning's stronger-than-expected May industrial production report, which indicated a 0.4% increase coupled with a contrary Philadelphia Fed Index for June failed to provide another clue as to what Fed action, if any, will be taken at the Federal Open Market Committee meeting June 27-28.

"We're in a difficult situation," said Ronny Kraft, CEO at Merchant Intercapital. "We had an industrial production report that showed that manufacturing was strong and then the Philly Fed Index indicated a decrease. There are many anomalies in the economic data that are coming out."

Lately, the Dow Jones Industrial Average was lifting 43, or 0.4%, to 10,731, despite weakness from its financial components. J.P. Morgan (JPM) was sliding 3.3%, with Citigroup(C) falling 2.4%.

Preannouncement woes left regional-bank investors running for cover, as one stock proved a spoiler for the sector. Wachovia (WB) warned investors that interest rates would put a dent into its second-quarter and fiscal 2000 earnings, signaling investors that trouble might be on the horizon for the group as a whole. SunTrust (STI) was trading down in sympathy, along with other financials within the broker/dealer sector.

The American Stock Exchange Broker/Dealer Index stumbled 1%, with a 2.1% loss from Lehman Brothers (LEH).

Elsewhere on the Big Board , Corning (GLW) was taking top honors as the biggest gainer, after Donaldson Lufkin & Jenrette upgraded its fiscal 2000 and 2001 earnings estimates. Corning was climbing 3.3%. (TheStreet.com reported on Corning's possible interest in acquiring SDL (SDLI) in a Monday story.)

Oils, which teetered on an intraday all-time high level yesterday, retreated with weakness from Texaco (TX) and ExxonMobil (XOM).

The American Stock Exchange Oil & Gas Index slipped 1.7%.

Lately, the Nasdaq Composite Index was rallying back into positive territory, up 18, or 0.5%, to 3816, with Conexant(CNXT) flying after an upgrade from Morgan Stanley Dean Witter. The chipmaker was lifting 8 1/2, or 20.5%, to 50.

Qualcomm (QCOM) was sinking 8 5/16, or 11.8%, to 62 3/16, after an estimate downgrade from Chase Hambrecht & Quist. Touted with 1000 price targets in 1999, Qualcomm rocketed to a high of 179 5/16 (after a 4-for-1 split) in early January, after closing in the mid-50 range just three months earlier. But as with many tech highfliers, Qualcomm's fast run-up could not be sustained this spring, as investors began to question whether lofty valuations could be justified.

"To see it deteriorate the way it has is alarming," said Kraft. "It was probably the best performing Nasdaq stock in 1999 but it's just an indication of how much froth existed in the market last year," he added, noting that $100 million was removed from its market capitalization as of yesterday's close.

Semiconductors were making a comeback after yesterday's declines. The Philadelphia Stock Exchange Semiconductor Index climbed 1.7%, with gains from Intel (INTC) and Applied Materials (AMAT).

In other tech news, TheStreet.com Internet Sector index was higher by less than a point to 899, helped by America Online(AOL), which inked a deal with Sprint(FON).

Market Internals

Breadth was negative on both the NYSE and the Nasdaq on moderate volume.

New York Stock Exchange: 1,352 advancers, 1,456 decliners, 615 million shares. 39 new 52-week highs, 33 new lows.

Nasdaq Stock Market: 1,596 advancers, 2,145 decliners, 833 million shares. 41 new highs, 45 new lows.

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For a look at stocks in the midsession news, see Stocks to Watch, published separately.

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