A fairly large sucking sound emanated from Wall Street today as some of the market's confidence and bluster evaporated, especially in technology stocks. The IPO of
, the firm headed by the former presidential candidate, rose 171.8% but was one of the few success stories. However, losses for major proxies were relatively tame compared with intraday indications.
As stocks sustained their first significant setback since
Jan. 27, the bond market suffered a second consecutive beating. The
Federal Open Market Committee
began a two-day meeting from which no action is expected; meanwhile, expectations for a rate cut anytime soon continue to diminish. The dollar's continued weakness vs. the yen (it fell below 112 yen for the first time since Jan. 13) and more evidence of U.S. economic strength exacerbated the bond market's woes. The price of the 30-year Treasury bond fell 28/32 to 100 3/32, its yield rising to 5.24%.
Nasdaq Composite Index
fell as low as 2442.93 before lifting a bit in the afternoon to close off 46.67, or 1.9%, to 2463.42. The decline snaps a string of three-consecutive record closes.
Technology's juggernauts got throttled in near-unanimity today, with
suffering notable losses.
, meanwhile, dipped 2.3% ahead of its fourth-quarter earnings report; after the close of trading, Cisco reported earnings of 36 cents a share, up from 29 cents a year ago and a penny ahead of the 29-analyst estimate.
New York Stock Exchange
-traded tech stalwarts such as
fared no better, leading the
Morgan Stanley High-Tech 35
down 2%. The
shed 2.5% while the
Philadelphia Stock Exchange Semiconductor Index
Among secondary names,
shed 35.8% after warning its fourth-quarter earnings will not meet estimates.
Internet stocks also tumbled;
TheStreet.com Internet Sector
index lost 14.45, or 2.6%, to 533.44.
was the biggest percentage loser among index components, down 6.4%.
fell 3.8% to 322 15/16 but rose off its nadir of 308 5/8.
'They're just looking for excuses to sell stocks,' D.A. Davidson's Jim Volk. 'With these valuations, people are afraid to be the last to move. It's a herd mentality.'
Even at the day's low, however, Internet stocks were not suffering mania-like declines. Furthermore, that has been the case in recent days, no matter what the direction of trading. Perhaps increased margin-maintenance requirements on Net stocks by brokers such as
, which raised them for a second time yesterday, are having an impact on speculation. That, or all the dire predictions about bursting bubbles in the financial press.
Dow Jones Industrial Average
fell as low as 9198.17 before closing off 71.58, or 0.8%, to 9274.12. Hewlett-Packard was the biggest negative influence on the index, followed by fellow tech component
and auto giant
was the best performing Dow member, rising 2.3% after receiving an upgrade from
slid 11.02, or 0.9%, to 1261.98. Beaten down groups like energy and gold were the only sectors to show much life today. Meanwhile, the
slid 4.35, or 1%, to 421.73 and is now down a bit for the year.
Traders said there was no single catalyst for the downturn.
"They're just looking for excuses to sell stocks," said Jim Volk, co-director of institutional trading at
in Portland, Ore. "With these valuations, people are afraid to be the last to move. It's a herd mentality."
Davidson's trading desk was "quieter than normal," Volk said, describing the market as "weird" and lacking major news developments. The trader noted the Brazilian real jumped 9% to 1.75 to the dollar, its highest level since Jan. 22, although the
Brazil's president nominated
as president of the nation's central bank. Lopes resigned just three weeks after taking the post. Fraga was most recently managing director at
Soros Fund Management
yesterday, the famed speculator
said the real is undervalued. How wonderfully coincidental.
In NYSE action, 845.5 million shares traded while declining stocks led advancers 1,904 to 1,104. In
Nasdaq Stock Market
activity, losers led 2,546 to 1,520 while 970.2 million shares traded. That extends the Nasdaq's streak of sub-billion-share days to two. New 52-week lows led new highs 81 to 30 on the Big Board while new highs led 83 to 54 in over-the-counter trading.
Valuation Won't Get in the Way
"This is just normal market volatility," said Thomas McManus, equity portfolio strategist at
NationsBanc Montgomery Securities
. "To a bull, when the market goes up, it's justifiable. When it goes down, it's just noise. I disagree with the widely held view the market is overvalued. I think valuation won't get in the way of further, significant appreciation this year."
McManus, who joined Montgomery late last month, has a year-end target of 1400 for the S&P 500.
Regarding the ongoing debate about Fed policy, the strategist is expecting "a move toward tightening sometime in 1999" but doesn't think that would be a problem "as long as it is perceived to be soon and aggressive enough so it won't be accompanied by a sharp rise in interest rates."
McManus does not expect any policy change from the FOMC's gathering this week, and is looking forward to Thursday's release of the minutes of the December meeting.
"I'm interested to see what the discussion was like and what they focused on to keep them from moving forward with more easing," he said. At the time, "most people said it was no surprise when the Fed did not ease, but thought that meant the Fed would definitely be easing in February. I'd like to see what kind of things they though they'd be seeing right now."
More than last week's blockbuster
gross domestic product
report, McManus said yesterday's survey by the
National Association of Purchasing Management
is the biggest deterrent to another Fed ease at this juncture.
"We've known the consumer has stayed strong, but the manufacturing sector has been weak," he said. "The NAPM index was in a nine-month decline from February '98 through December. To see that kind of a bounce, I think it's pretty significant."
Among other indices, the
Dow Jones Transportation Average
fell 44.11, or 1.4%, to 3204.58; the
Dow Jones Utility Average
dipped 1.68, or 0.6%, to 294.98; and the
American Stock Exchange Composite Index
fell 3, or 0.4%, to 709.63.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
dropped 81.66, or 1.2%, to 6683.78 and the
Mexican Stock Exchange IPC Index
lost 15.66 to 4014.58.
Two LTCM Partners Retire
Troubled but recovering hedge fund
Long-Term Capital Management
said today that Myron S. Scholes and William Krasker, two of its original partners, plan to retire from the firm.
Scholes and Krasker plan to retire from the Greenwich, Conn.-based partnership but retain their investments in the company as limited partners, according to a press release.
Long-Term Capital was founded in 1994 by former
Vice Chairman John Meriwether, who helped recruit Scholes, a 1997 co-recipient of the Nobel Prize in Economic Sciences, as a marquee name at the firm. Scholes, along with the late Fischer Black, is credited with discovering how to price options and provide a way to manage risk for Wall Street -- the breakthrough for which they won the Nobel.
Scholes plans to return to his personal and professional base in California, while Krasker plans to do consulting work for Long-Term Capital. Scholes "had already deferred his retirement" and was planning to move back to the West Coast, according to a Long-Term Capital spokesman.
Tuesday's Company Report
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.
As noted above, Perot Systems soared 27 1/2, or 171.8%, to 43 1/2 after
Morgan Stanley Dean Witter
priced its 6.5 million-share IPO at $16 a share
last night. The company, led by former presidential candidate
, is the world's sixth-largest provider of outsourced information-technology services.
Mergers, acquisitions and joint ventures
Goodyear Tire & Rubber
picked up 1/8 to 50 3/8 ahead of an analyst meeting tomorrow and on word of an alliance with Japan's
slid 3 11/16, or 6.3%, to 54 11/16 after completing its purchase of
electrophysiology unit for $802 million. Sulzer Medica added 3/16 to 17 5/16.
IBM slipped 3 to 176 3/4 after entering a partnership with
Bell Atlantic Communications and Construction Services
, a unit of
, to deliver
IBM Home Director
home networking systems to homeowners throughout the northeastern U.S. Bell Atlantic rose 1/2 to 60.
took in 3, or 11%, to 30 1/2 after
late in yesterday's session said it was buying the company for $388 million in stock. AOL, which lost 3 11/16 to 167 1/2, plans to integrate the movie listing and ticketing service with its
swelled 1 15/16, or 28.7%, to 8 11/16 after forming a partnership with Microsoft's Sidewalk Internet guide to boost traffic into the company's online fragrance store. Mister Softee dropped 5 5/16 to 167 5/8.
Earnings/revenue reports and previews
brought in 13/16 to 18 15/16 after recording a fourth-quarter loss of 3 cents a share, 4 cents narrower than the 28-analyst outlook but behind the year-ago profit of 48 cents.
rose 3/8 to 58 15/16 after reporting fourth-quarter earnings of 90 cents a share, in line with the 17-analyst view but down from the year-ago $1.01.
tanked 9 3/16, or 13.5%, to 59 1/16 even after last night beating fourth-quarter earnings estimates by 1 cent a share.
skidded 1 3/16, or 17.6%, to 5 9/16 after late yesterday saying it expects to report fourth-quarter earnings of 1 cent a share, a penny below the five-analyst forecast but above the year-ago loss of a dime.
excelled 1 1/4, or 20.4%, to 7 3/8 after saying its January advertising impressions from its two Web sites increased 63% from December to a combined 7.4 million.
Polo Ralph Lauren
sliced off 1 5/16, or 5.3%, to 23 1/4 even after posting third-quarter earnings of 25 cents a share, matching the 13-analyst forecast but falling behind the year-ago 29 cents. The retailer also said it will close nine stores and cut 250 jobs.
took a look at Polo's recent woes in a
fell 2 1/4 to 81 15/16 after posting fourth-quarter earnings of 79 cents a share, missing the 12-analyst estimate by 6 cents but topping the year-earlier 72 cents.
plunged 2 11/16, or 56.6%, to an all-time low of 2 1/16 after last night saying it sees a significant loss in the fourth quarter partly due to changes in the Medicare reimbursement system and a greater decline in demand than expected. The 13-analyst view called for earnings of 19 cents a share vs. the year-ago 36 cents.
Tech Data shrank 11 5/16, or 35.8%, to 20 5/16 after warning it sees fourth-quarter earnings of 61 cents to 64 cents a share, short of the 14-analyst prediction for 69 cents but up from the year-ago 53 cents.
Wild Oats Markets
jumped 3 7/16, or 14.5%, to 27 3/16 after late yesterday posting fourth-quarter earnings of 25 cents a share, in line with estimates.
In other earnings news:
shot up 3 1/4, or 17.6%, to 21 3/4 after
raised the stock to near-term buy from accumulate.
sloughed off 4 1/4 to 157 after
Salomon Smith Barney
lowered the stock to neutral from outperform.
lowered 1 1/8 to 75 7/8 after
downgraded it to hold from accumulate
flew 6 1/4, or 8.4%, to 81 1/8 after Morgan Stanley Dean Witter upped it to outperform from neutral.
plummeted 14 7/8, or 62.6%, to 9 following yesterday's announcement that the company's
drug aimed at preventing colon cancer did not show significant response in Phase III clinical trials. The company said it expects a delay in filing a new drug application for the drug. Cell Pathways had pinned its hopes on getting approval quickly for Prevatac. It wanted to show positive results in this small use of the drug, get it on the market and have it bought for major, blockbuster markets of cancer prevention. That strategy is completely up in the air after this.
climbed 4 to an all-time high of 85 after yesterday receiving the go-ahead from the
Food and Drug Administration
for the next generation in its GEM family, the GEM II DR dual-chamber defibrillator.
tanked 5 3/16, or 30.1%, to 12 3/16 after its anxiety compound, NGD 91-2, was ineffective in significantly reducing anxiety in the single-dose model in tests. The firm also said it will end development of the epilepsy drug, ADCI, following partner
decision to terminate tests after the drug produced toxic effects in long-term studies. Wyeth-Ayerst is a unit of
American Home Products
, which added 5/8 to 58 3/4.
BancBoston Robertson Stephens
dropped Neurogen to a long-term attractive from buy.
cut it to neutral from buy.
vaulted 1 9/16, or 11.1%, to 15 5/8 after last night saying the
Securities and Exchange Commission
ended its probe into the company's revenue recognition practices and its Brazilian imports with no recommended action.
, an Internet service provider, powered up 4 11/16, or 13.3%, to an all-time high of 40 after
The Wall Street Journal
said the company will launch wireless Internet connections in 50 cities by the end of the year.
Investors showered their love on
for a second straight day, pushing the stock up 7, or 36.8%, to an annual high of 26. Online brokers have been locked into rally mode on bullish press and sentiment.
rose 6 5/16, or 6.1%, to 110 5/16.