Markets Will Have to Work to Sustain Rebound Amid Buzz of Chase-H&Q Deal

It's too early to tell if Chase Manhattan's announced purchase of Hambrecht & Quist will impact the flagging financial sector.
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Stocks will have their work cut out for them this morning to build on yesterday's rebound.

At 9:05 a.m. EDT, the

S&P 500

futures were down 4.4, a couple of points below fair value and indicating a negative bias to the open. The 30-year Treasury was up 7/32 to 101 23/32, putting its yield at 6%.

"The market's a little tired," said Jim Volk, co-director of institutional trading at

D.A. Davidson

, who characterized yesterday's bounce as "pretty mediocre."

In the absence of any clear trend, stocks will be moving on company-specific news this morning. And leading the morning's corporate news headlines is

Chase Manhattan

(CMB)

, which is buying West Coast brokerage

Hambrecht & Quist

(HQ)

for $50 a share. While it's not easy to say how the report will impact the endemically flagging financial sector, arbitrage has already wrought its work on H&Q, which closed yesterday at 41 1/16 but was lately indicated at 49 in premarket trading.

Meanwhile,

CMGI's

(CMGI)

upside fourth-quarter report last night may give some support to the Internet sector this morning.

The market will have to find its way without the help of any major economic data. The key numbers for September start trickling in later this week with Thursday's

Chicago Purchasing Managers'

index and Friday's

National Association of Purchasing Management

index.

"The market's kind of on hold," Volk said. "People are waiting to see what happens next week with the

Federal Open Market Committee

," which meets next Tuesday.

You wouldn't know that there's a Fed meeting next week from looking at the papers lately, however. The financial world's preoccupation with the rising yen has kept the Fed watch relatively muted this time around.

That should start to change soon. This morning, there are two stories gearing up for next week's meeting: one, a

Wall Street Journal

report boldly headlined "Fed Reserve Is Unlikely to Raise Interest Rates at Policy Meeting," which bases that conclusion nearly entirely on the dollar/yen trade; the other, a more tentative

study by

The Washington Post's

John Berry

of inflationary pressure and relative tightness of U.S. labor markets.

But, for now, it's back to the yen. In Tokyo, its relative weakness following the weekend

G7

meeting, along with yesterday's strength on Wall Street, helped stocks put together a solid rebound from their late funk. The

Nikkei

advanced 504.64, or 3%, to 17,325.70 as the dollar moved above the 106-yen level.

The dollar was lately quoted at 106.53 yen.

The greenback's strength is coming despite waning hopes that the

Bank of Japan

will relax its monetary policy. The central bank again left the usual 1 trillion-yen surplus in the money market today. And no matter how eagerly

some may have seized upon his weekend comments about "improving money-market operations," BOJ Governor

Masuru Hayami

told the

Yomiuri Shimbun

today that "nothing has changed from what was announced last Tuesday," when the BOJ's policy committee rejected a quantitative policy easing.

The range-bound Hong Kong stock market went higher along with Tokyo. The benchmark

Hang Seng

gained 84.47, or 0.7%, to 12,844.93.

The big European indices were trending lower at midsession. London's

FTSE

was off 54.9, or 0.9%, to 6023.7, while the Paris

CAC

was down 47.17, or 1%, to 4549.43. Frankfurt's

Xetra Dax

was 97.87 lower, or 1.9%, to 5141.77.

Tuesday's Wake-Up Watchlist

By

Eileen Kinsella

Staff Reporter

Chase Manhattan Bank said it would buy Hambrecht & Quist for about $50 a share in cash, or more than $1.2 billion, confirming a report in

The Wall Street Journal

. Chase said it will set a $200 million fund to keep key members of Hambrecht & Quist staff.

Mergers, Acquisitions and Joint Ventures

America Online

(AOL)

said it entered a content agreement with

MarketWatch.com

(MKTW)

.

Separately,

Future Network

said it sold 182,492 shares in AOL, realizing $18.3 million.

Anadarko Petroleum

(APC) - Get Report

signed a $770 million deal with Algerian state-owned oil and gas firm

Sonatrach

to quadruple production from an Algerian oilfield.

Asarco

(AR) - Get Report

and

Cyprus Amax

(CYM)

amended their merger agreement to permit each company to explore all strategic alternatives.

AT&T

(T) - Get Report

is expected to announce an equipment purchase from merger partners

General Instrument

(GIC)

and

Motorola

(MOT)

that could be valued at up to $1 billion, the

Journal

said. The paper said AT&T plans to buy up to 2 million more cable TV set-top boxes from General Instrument and 1 million cable modems from Motorola.

El Paso Energy

(EPG)

said it plans to divest some assets following its acquisition of

Sonat

(SNT)

once it signs a consent decree with the

Federal Trade Commission

.

Offerings and Stock Actions

Suiza Foods

(SZA)

said it approved an additional $100 million for its share-buyback plan.

Analyst Actions

Warburg Dillon Read

cut

Aetna

(AET)

to buy from strong buy.

PaineWebber

started coverage of

InfoSpace.com

(INSP) - Get Report

with a buy rating.

PaineWebber cut

Micron Electronics

(MUEI)

to attractive from buy.

Miscellany

Alpharma

(ALO) - Get Report

said its president and CEO, Gert Munthe, will resign by the end of the year, primarily for personal reasons.

NEC

(NIPNY)

said it would embark on a $939 million restructuring program to transform itself into an Internet-based firm.

Nortel Networks

(NT)

unveiled a new network technology for the Internet which it said will avoid information traffic jams.

The Heard on the Street column in the

Journal

takes a bullish look at some wallflower stocks "so neglected they sell for irrational prices." Citing a few unusual parent-subsidiary pricings, the story points out, for instance, that

IPC Communications

(IPI) - Get Report

owns an 85% stake, worth about $720 million, in

IXnet

(EXNT)

. Still, IPC's stock market value is $483 million. Similar relationships mentioned in the story include,

Cordant Technologies'

(CDD)

85% stake in

Howmet

(HWM)

and

Limited's

(LTD)

84% stake in

Intimate Brands

(IBI)

.