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Bond-Market Reprieve Sends Stocks to the Upside

Overseas, however, heightened tensions between North and South Korea plagued Asian markets.

With the bond market gaining for a second day, stocks are cued for a better open this morning.

"It looks a little to the upside, at least in the big-cap stuff, but I'm thinking the

Nasdaqs

may continue their weakness," said Doug Myers, vice president of equity trading at

Wachovia Securities

. "Internet stocks are up in electronic trade, but I think they'll probably roll back again."

At 9 a.m. EDT, the September

S&P 500

futures were up 3.1 to 1312.6, putting them about 5 above fair value and indicating a positive open. Traders will be watching to see if they can break through 1316.5, the level where they turned tail yesterday.

The notion that the Treasuries may be discounting too many

Fed

tightenings has taken hold in the bond market. The 30-year was up 13/32 to 88 25/32, dropping the yield to 6.07%. Treasuries were also helped by the dollar, which continues to hold the gains it made on yesterday's intervention by the

Bank of Japan

. The dollar was down fractionally at 120.35 yen.

Heightened tensions between the two Koreas did some damage to Asian bourses.

South Korea sank one North Korean ship and damaged another in an area midway between the North Korean mainland and five South Korean islands in the Yellow Sea, just as talks to end the confrontation were about to begin. For a week, North Korea has been sending ships into the rich crab-fishing grounds that lie in both Koreas' territorial waters. Crab-fishing provides the famine-strapped North with one of its few sources of income.

Seoul shares fell sharply following reports of the clash. The

Kospi

dropped 18.19, or 2.2%, to 803.72.

Japanese stocks, too, fell on word of the conflict, but buyers came into the market as soon as the

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Nikkei

dropped below 17,000. The index added 93.18 to 17,282.

Already shaky on interest-rate worries, Hong Kong stocks fell on the Korean news. The

Hang Seng

dropped 72.16 to 12,935.41.

European markets were gaining, helped by both the prospect of a better open in New York and relief that the Kosovo crisis appears to be under control. In Frankfurt, the

Dax

was up 51.24 to 5320.11. In Paris, the

CAC

was up 17.91 to 4390.3.

Despite weaker-than-expected inflation data and what looks like a stronger New York open, British stocks hugged the flat line. Not a huge surprise -- U.K. stocks have been performing well for the last few weeks, and if they move much higher, they'll be reaching toward the early May high. And that seems unlikely until the U.S. interest-rate picture gets a little less murky. The

FTSE

was lately up 1.7 to 6431.8.

Gilts (British word for bonds) were rising, however, on the 1.3% increase in the May

retail prices index

, its slowest gain since June 1993.

Tuesday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • Best Buy (BBY) - Get Best Buy Co., Inc. Report posted first-quarter earnings of 22 cents a share, beating the First Call 16-analyst estimate of 20 cents and up from the year-ago 8 cents.
  • Energy East (NEG) agreed to acquire CMP Group (CTP) for $29.50 a share in cash, or roughly $957 million. CMP closed yesterday at 20 1/16. Energy East will also assume about $271 million of CMP Group preferred stock and long-term debt.
  • HealthSouth (HRC) - Get Hill-Rom Holdings, Inc. Report plans to split its operations into two separate publicly traded companies -- one for inpatients and patients needing hospitalization (to be called HealthSouth Hospital), and the other for the company's larger outpatient group.
  • Heinz (HNZ) posted fiscal fourth-quarter operating earnings of 60 cents a share, beating the First Call 17-analyst estimate by a penny and up from the year-ago 53 cents.
  • Online brokers could be underestimating the importance of Merrill Lynch's (MER) move into online trading, according to some analysts, the Heard on the Street article in The Wall Street Journal reported.
  • Northeast Utilities (NU) is buying Yankee Energy (YES) for $45 a share in cash and stock. Yankee closed Monday at 32 1/2.
  • Oracle (ORCL) - Get Oracle Corporation Report is scheduled to report its fiscal fourth-quarter earnings today. The First Call 30-analyst estimate sees the company earning 32 cents a share.
  • S3 (SIII) said that it has been told by United Microelectronics that S3 should receive about 252 million shares of UMC stock by the end of 1999. TheStreet.com'sHerb Greenberg wrote about S3 yesterday.