PPI Gets Out of the Market's Way

The core rate is unchanged for November, and traders are taking that as reason enough to bid the futures higher.
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The first big economic data since last week's

jobs report are out, and they're not standing in the way of another equity rally.

The

Labor Department

said that the

Producer Price Index

gained 0.2% overall, matching the consensus estimate of economists polled by

Reuters

. The core rate, which excludes food and energy prices, was unchanged, as opposed to the expected 0.1% increase.

Focusing on the flat core rate, stock futures took off. At 9:05 a.m. EST, the

S&P 500

futures were up 9.9, about 10 points above fair value and indicating a strong open.

The bond market was also reacting positively, though more coolly. The 30-year Treasury was up 13/32 to 99 5/32, putting the yield at 6.187%.

"With the bonds rallying on this ex-energy PPI number, the market will do a little better here," said Jim Volk, co-director of institutional trading at

D.A. Davidson

. "Of course, it was set up to do better anyway, with this euphoria we have."

You've probably heard by now that there are a wide range of overbought signals in the market. Complacency remains relatively high, with the

Chicago Board Options Exchange's

volatility index closing yesterday at 22.38 and the equity put/call ratio at 0.34. And some technicians are taking yesterday's outside day in the

Nasdaq Composite Index

-- meaning, a day featuring both a higher high and a lower low than the previous session -- as a sign that sellers may be ready to enter the market.

Yet technology has continued to add points, and the Comp's ability to close higher yesterday after its violent midday swing lower will likely keep traders pretty much in the same position they've been in for a while: long, but defensive.

"Who knows when this stuff is over?" Volk said. "The market is definitely extended, and you're likely to have some kind of selloff here. But so far, all the selloffs have been relatively short and compressed."

U.S. corporations are going global in today's big deals.

General Motors

(GM) - Get Report

has set plans to buy 20% of Japan's

Fuji Heavy Industries

for $1.4 billion, while

BellSouth

(BLS)

is joining forces with Dutch phone company

KPN Telecom

(KPN)

to buy Germany's

E-Plus Mobilfunk

.

The large European bourses were coming off their lows in early afternoon trading. Frankfurt's

Xetra Dax

was up 0.98 to 6119.04, while the Paris

CAC

was 48.66 lower, or 0.9%, to 5499.96. London's

FTSE

was up 15.6 to 6696.4.

The hapless euro continues to shed Monday's gains, falling early this morning from $1.0219 to as low as $1.0133 and lately trading at $1.0110.

In Tokyo, the

Nikkei

managed to close slightly higher, adding 11.13 to 18,271.85. The index had been up by as much as 155 points, but investors sold into that rally as the session wore on.

The market got a temporary shock when traders saw headlines flashing across their trading screens to the effect that

Bank of Japan

board member Kazuo Ueda said that the BOJ might abandon its zero-interest-rate policy before the Japanese economy had entered a self-sustaining recovery.

Not so fast. Ueda had actually said that "if we set 10 as a fully self-sustaining recovery ... I think we would end the zero-interest-rate policy if we were clearly confident that the economy could reach nine."

Tokyo's foreign-exchange market was relatively quiet, with the looming

tankan

survey of business sentiment, which the BOJ will release Monday, keeping traders from taking aggressive positions. The dollar/yen ranged between 102.2 and 102.6 overnight, and was lately sitting back at 102.49.

In Hong Kong, the

Hang Seng

inched up 9.26 to 16,380.21, confounding players looking for a pullback after yesterday's 380-point advance.

Friday's Wake-Up Watchlist

By

Brian Louis

and

Eileen Kinsella

Staff Reporters

Mergers, acquisitions and joint ventures

BellSouth

(BLS)

said it will join forces with Dutch

KPN Telecom

(KPN)

and buy a 100% stake in German mobile-phone operator

E-Plus

. The deal struck between BellSouth and KPN frustrates a $9.3 billion bid by

France Telecom

(FTE)

for E-Plus. BellSouth, which already owns a 22.5% stake in E-Plus, said it is taking a $9.4 billion loan from KPN to buy shares in E-Plus owned by

Vodafone AirTouch

(VOD) - Get Report

and

VEBA

.

Gannett

(GCI) - Get Report

, owner of

USA Today

, said it had approached British publisher

News Communications & Media

about making a cash offer for the group. Newscom is currently valued at about $284 million.

Japan's

Fuji Heavy Industries

said

General Motors

(GM) - Get Report

is buying a 20% stake in Fuji for approximately $1.4 billion. Fuji Heavy makes

Subaru

brand cars.

Hollywood Park

(HPK)

said it will sell two properties to

Penn National

(PENN) - Get Report

for $195 million in cash.

Monsanto's

(MTC) - Get Report

board is expected to formally discuss today ways of splitting its

Searle

pharmaceutical business from its agricultural business, which is struggling,

The Wall Street Journal

reported.

Earnings/revenue reports and previews

Ciena

(CIEN) - Get Report

posted fourth-quarter earnings of 3 cents a share, a penny ahead of the 17-analyst estimate and up from the year-earlier loss of 5 cents a share, which excludes merger-related charges.

Hussmann

(HSM)

warned its fourth-quarter results will not be as strong as expected. The company said it still sees record results for 1999, with earnings-per-share up 5% to 7%.

Offerings and stock actions

Allegheny Technologies

(ATI) - Get Report

said it approved a 10 million-share increase for its buyback plan.

Robertson Stephens

priced 5 million shares of

eBenX

(EBNX)

at $20 each, above the expected $15 to $17 range.

Credit Suisse First Boston

priced an 8.2 million-share offering of

El Sitio

(LCTO)

above its expected price of $16 a share.

Goldman Sachs

and

Morgan Stanley Dean Witter

priced a 3.6 million-share IPO for

FreeMarkets

(FMKT)

, a business-to-business online auctioneer, at an above-range price of $48 per share. The anticipated range for the offering had been $40 to $42. Initially, this IPO was slated to come in the $14 to $16 range. Columnist

Ben Holmes

weighed in on

the offering earlier this week.

Globix

(GBIX)

said its board approved a 2-for-1 stock split.

Leap Wireless

(LWIN)

plans an offering of 3 million common shares in the first quarter.

Donaldson Lufkin & Jenrette

priced

MedicaLogic's

(MDLI)

5.9 million-share IPO above-range at $17 per share. The expected price range was raised yesterday to $14 to $16 a share, up from $12 to $14 a share. MedicaLogic is a provider of enterprise and Internet-based electronic medical-record products and services for integrated health care delivery systems and doctors.

Lehman Brothers

priced 6.95 million shares of

Tularik

(TLRK)

at $14, above the expected $11 to $13 range.

Analyst actions

First Boston upgraded

Apache

(APA) - Get Report

to strong buy from buy.

First Boston late yesterday upgraded

Baker Hughes

(BHI)

to strong buy from buy.

Deutsche Banc Alex. Brown

upgraded

Harcourt General

(H) - Get Report

to strong buy from buy.

Miscellany

The Heard on the Street column in the

Journal

takes a look at

Pixar Animation Studios

(PIXR)

and the stock price's inability to cash in on the success of

Toy Story 2

. Shares have fallen more than 25% since the film's release before Thanksgiving, while marketing and distribution partner

Disney's

(DIS) - Get Report

share price seems to be enjoying a boost.

In the Inside Wall Street column in

Business Week

this week, penned as usual by Gene Marcial,

Adelphia Communications

(ADLAC)

is mentioned as a takeover target. James Boyle of

First Union Securities

said that, with its undervalued assets and great management, the company is attractive, the column reported.

Elsewhere, the column offers a bullish piece on

Radware

(RDWR) - Get Report

, a developer of Internet traffic management systems, and also a positive item on

Gentner Communications

(GTNR)

.