A Nasdaq Pullback Finally Holds, Cracking Winning Streak

The Microsoft settlement chatter couldn't counter heavy selling pressure in the overheated tech sector.
Author:
Publish date:

The

Nasdaq Composite Index

did its own version of

Metallica's

Bleeding Me

today, as the nuclear-fueled index tumbled sharply.

Major stock proxies -- led on the downside by the Nasdaq Comp -- slumped along with the Treasury market, which got hammered after stronger-than-expected November

retail sales

sparked fears of more

Federal Reserve

interest-rate hikes down the road. While the market doesn't expect the Fed to hike at its meeting next week because of Y2K liquidity concerns, there are increasing worries that the Fed will raise rates in February.

Meanwhile,

Microsoft

(MSFT) - Get Report

went against the general downtrend in tech stocks and advanced on market chatter it might be close to a settlement with the government regarding the federal antitrust case against it. Microsoft gained 2 1/8 to 98 11/16.

Join the discussion on

TSC

Message Boards.

The Nasdaq Comp -- which did manage to rise to an all-time intraday high to 4127.38 early in the session -- ended the day deep in the red, tumbling 86.51, or 2.4%, to 3571.66. Putting big pressure on the Comp were Internet stocks, which suffered significant losses. Semiconductor stocks were absolutely crushed as the

Philadelphia Stock Exchange Semiconductor Index

crumbled 6.8%. Stocks of computer makers and networking and telecommunications stocks also weighed on the Comp. Also, some large sellers of

Nasdaq 100 Trust

(QQQ) - Get Report

index shares were said to pressure tech stocks.

TheStreet.com Internet Sector

index swooned 56.58, or 4.8%, to 1097.43. Before slumping, the DOT hit an intraday all-time high when it peaked at 1171.35. Prominent losers among the DOT's components included:

CMGI

(CMGI)

,

Yahoo!

(YHOO)

and

Inktomi

(INKT)

.

As for blue-chips, the

Dow Jones Industrial Average

gave up 32.42, or 0.3%, to 11,160.17. Weighing on the Dow the most was

American Express

(AXP) - Get Report

. Also playing drag on the Dow were

J.P. Morgan

(JPM) - Get Report

and

Hewlett-Packard

(HWP)

. Helping stem the losses were gains in Microsoft,

DuPont

(DD) - Get Report

, and

Johnson & Johnson

(JNJ) - Get Report

.

The

S&P 500

fell 12.05, or 0.9%, to 1403.17. The small-cap

Russell 2000

said goodbye to 7.63, or 1.6%, to 462.75.

TheStreet.com

Red Hots index slumped 14.39, or 3.8%, to 360.38. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.

The 30-year Treasury bond tumbled 1 8/32 to 97 20/32 on the retail sales news, putting its yield at 6.30%.

Overall retail sales in November were up 0.9%, well above economists' expectations of a rise of 0.5%, according to a

Reuters

poll. Retail sales excluding autos rose 0.4%, matching the estimate in the

Reuters

survey.

Elsewhere in economic news, the overall

Consumer Price Index

rose 0.1%, while the core CPI, which excludes food and energy prices, rose 0.2%. Economists were expecting both the overall and the core CPI to rise 0.2%, according to the

Reuters

poll.

Scott Curtis, senior equity trader at

Brown Brothers Harriman

, noted that the CPI data wasn't a problem for the market, however the fact that retail sales were stronger than expected, but "not a disaster," however, he pointed out that bonds are just having a difficult time getting out of their own way.

While most areas of the market fell, a couple of sectors stood out on the upside, including paper and oil service stocks. The

Philadelphia Stock Exchange Forest & Paper Products Index

soared 4.9%, while the

Philadelphia Stock Exchange Oil Service Index

hopped 2.4%.

Merrill Meets the Press

Merrill Lynch's

top strategists met the press today at the firm's headquarters in New York and gave scribes their outlooks for the economy and financial markets for 2000.

Bruce Steinberg, Merrill's chief economist, sees strong economic growth, muted inflation and double-digit earnings growth in the coming year. The economist sees U.S. gross domestic product rising 3.8% in 2000, vs. this year's estimated 4% or so, and S&P 500 operating earnings increasing 12%, vs. this year's estimated 15%.

Steinberg also is expecting the Fed to tighten in the first quarter, possibly as soon as February.

As for stocks, a couple of Merrill analysts made it a point to highlight how poorly the average stock has done this year.

Richard McCabe, Merrill's chief market analyst, said that as of last night's close, the cumulative

New York Stock Exchange

daily advance/decline line was at its lowest level in more than three years. Also as of last night, the analyst said, only 39% of stocks on the Big Board were up for the year, while 61% of

Nasdaq Stock Market

stocks are up on the year.

Looking ahead, the market could run into a correction in the early months of the new year, said McCabe. That correction, according to a report from McCabe, could send the Dow and the S&P 500 10% to 15% or more off their highs and the Nasdaq Comp 20% or more from its peak. That would then set the stage for a broader advance in the market.

In NYSE trading, 1.024 billion shares were exchanged while declining stocks thumped advancers 2,035 to 1,070. In

Nasdaq Stock Market

action 1.56 billion shares traded while losers beat gainers 2,709 to 1,493. New 52-week lows crushed new highs 539 to 54 on the Big Board while new highs led 199 to 147 in over-the-counter trading.

Among other indices, the

Dow Jones Utility Average

fell 0.39, or 0.1%, to 269.20. Elsewhere, the

Dow Jones Transportation Average

gained 12.90, or 0.5%, to 2908.88; the

American Stock Exchange Composite Index

slipped 2.43, or 0.3%, to 827.78.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 59.59, or 0.8%, to 7930.32 and the

Mexican Stock Exchange IPC Index

lost 71.33, or 1.1%, to 6654.22.

Tuesday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Nasdaq highfliers got a dose of gravity today as the Comp took a well-deserved nap. Online business-to-business auctioneer

FreeMarkets

(FMKT)

, was one of the biggest losers, shedding 34 7/8, or 13%, to 234 7/16. Of course, this is the Nasdaq, so what would be extreme pain for most stocks looks more like a flesh wound (as

Monty Python would say) for this recent IPO, which rocketed to 270 from its $48-a-share pricing in its debut last Friday.

Mergers, acquisitions and joint ventures

Consolidated Edison

(ED) - Get Report

slipped a notch to 33 15/16 after it said it was considering the sale of its Indian Point 2 nuclear power plant.

General Motors

(GM) - Get Report

fell about 1, or 1.4%, to 70 3/8, after it said it is well-positioned to acquire the financially floundering

Daewoo Motor

, citing past relations between the two companies, said a GM spokesperson Kay Lee. Lee said that Executive Vice President Louis Hughes and GM Korea President Alan Perriton launched a proposal, headed by

Korea Development Bank

, to Daewoo Motor's local creditors. According to Lee, the proposals indicate GM's assessment of Daewoo's assets and debt but do not offer a price.

Separately, the

United Auto Workers

union said it reached a tentative agreement with General Motors, covering about 6,700 workers in Tennessee and Michigan. The agreement, which must be ratified, covers workers at GM's Saturn plants in Spring Hills, Tenn., and Troy, Mich.

Emerson Electric

(EMR) - Get Report

climbed 1 1/4 to 54 13/16 after saying it has entered a $980 million cash and debt agreement to acquire the telecom products division of

Jordan Industries

. For more on this

story, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

Excite@Home

(ATHM) - Get Report

fell 2 7/16 to 48 15/16 after it said it has agreed to provide content for

Sega Dreamcast

Internet users.

Kmart

(KM)

climbed 3/8 to 11 7/8 after it said CEO Floyd Hall will make an e-commerce announcement tomorrow. The pre-announcement follows a report in

The Wall Street Journal

that Kmart and Yahoo! are expected to unveil a broad alliance to offer co-branded Internet access. Shares of Yahoo! dropped 17 7/8, or 5.1%, to 333 1/8.

For more on this

story, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

The

Justice Department

has brought antitrust lawyer Stephen Axinn on board to examine

MCI WorldCom's

(WCOM)

planned $115 billion acquisition of

Sprint

(FON)

, indicating that the acquisition will be scrutinized by federal regulators,

The Wall Street Journal

reported. Shares of MCI dropped 2 13/16 to 76 5/16, while Sprint lost 1 3/4 to 66 1/4.

Separately, Sprint said it set a 2-for-1 stock split for its tracking stock,

Sprint PCS

(PCS)

, payable Feb. 4 to shareholders of record Jan. 14. Shares of PCS popped 2 5/16 to 110 on the news.

Red Hat

(RHAT)

dropped 29 1/4, or 11.9%, to 217 and Hewlett-Packard lost about 4, or 4.4%, to 103 after the companies announced an alliance to increase product sales by making H-P's software available from Red Hat online.

Time Warner

(TWX)

climbed 1 1/2 to 66 1/2 after its

Book of the Month Club

unit said it is in a partnership with

Bertelsmann

to form a direct bookselling joint venture to compete with the discount book chains and the growing online market.

Unocal

(UCL)

slipped 1.9% to 33 1/4 and

Titan Exploration

(TEXP)

slipped 5/16, or 8.1%, to 3 5/8 after the companies said they will merge their oil and gas assets in the Permian and San Juan basins to form a new publicly traded exploration and production company called

Pure Energy Resources

.

Unocal will control 65% of the new company upon completion of the merger, which is expected in the first quarter. The new company will have 50 million common shares outstanding, and should result in cost savings of at least $5 million a year, the companies said in a statement.

On a pro-forma basis, the new company will have reserves of 175 million barrels of oil equivalent, and will produce about 40,000 barrels of oil equivalent a day, 60% of which is natural gas.

--

Mavis Scanlon

ValueVision International

(VVTV)

slipped 7/16 to 44 after saying it has purchased a 14% interest in

BigStar

(BGST)

for $10 million. BigStar gained 1 11/16, or 30.3%, to 7 5/16.

Earnings/revenue reports and previews

AutoNation

(AN) - Get Report

climbed 5/16 to 8 13/16 despite

warning investors after yesterday's close that it expects to post fourth-quarter earnings of 10 cents a share, missing the five-analyst estimate of 19 cents a share. AutoNation said it would shut down 23 of its used-car megastores and combine six other stores with new vehicle businesses. The closings, which will cut the companies' work force by 1,800 jobs, along with previously announced restructuring changes, will have the company assuming a fourth-quarter pretax charge of $430 million to $490 million.

In addition, the company said it has added $500 million worth of common stock to its current share repurchasing plan.

Morgan Stanley Dean Witter

sliced its rating on the stock to a neutral from outperform.

Best Buy

(BBY) - Get Report

dropped 4 5/8, or 8.4%, to 47 1/4 after it reported third-quarter earnings of 37 cents a share, missing the 16-analyst estimate of 38 cents but up from the year-ago 25 cents. For more on Best Buy's earnings, check out the

story by

TheStreet.com/NYTimes.com

joint newsroom.

Commercial Metals

(CMC) - Get Report

climbed 13/16 to 31 1/4 after it posted first-quarter earnings of 70 cents a share, beating the five-analyst estimate of 65 cents, but down from the year-ago 75 cents a share.

Chiquita

(CQB)

slipped 5/8, or 15.4%, to 3 7/16 after it warned investors that fourth-quarter results would miss the two-analyst estimate of a 45-cent loss. The company expects to post a fourth-quarter loss of $1.15 to $1.30 a share, down from the year-ago $1.62 loss. The company blamed tough operating conditions for the disappointing results.

FMC

(FMC) - Get Report

popped 5 1/4, or 11.1%, to 52 3/4 after saying it sees fourth-quarter operating earnings of $1.60 to $1.65 a share, above the current eight-analyst estimate of $1.48. FMC said it sees 1999 operating net at $5.95 to $6.00 a share, also above the eight-analyst estimate of $5.81 a share.

General Electric

(GE) - Get Report

climbed 1 1/16 to 149 7/8 after Chairman and CEO Jack Welch said the company is comfortable with the 13-analyst consensus estimate of $3.22 a share and expects to post fiscal 2000 earnings of $3.70 a share. GE's fiscal 2000 estimate is a penny better than the 13-analyst consensus number. Welch said the company is set to make $20 billion to $25 billion in acquisitions in 1999 and said that it has "no intention" of selling its

NBC

television network.

Handleman

(HDL)

was unchanged at 12 7/16 after its board authorized the buyback of up to $20 million of its stock.

Pier 1 Imports

(PIR) - Get Report

reported third-quarter earnings of 16 cents a share, beating the 16-analyst estimate of 14 cents a share, but down from the year-ago 19 cents a share.

Offerings and stock actions

3Com

(COMS)

climbed 5 13/16, or 13%, to 50 5/8 after its

Palm

division, maker of the Palm Pilot, filed with the

Securities and Exchange Commission

to raise up to $100 million in an initial public offering.

Goldman Sachs

,

Morgan Stanley Dean Witter

, Merrill Lynch and

Robertson Stephens

are serving as the deal's underwriters.

According to the prospectus,

America Online

(AOL)

,

Motorola

(MOT)

and

Nokia

(NOK) - Get Report

said they will buy shares through private placement equal to up to 4.5% of Palm stock. AOL lost 5 1/2, or 5.9%, to 88 1/2, Motorola dropped 9 11/16, or 7.5%, to 118 7/8 and Nokia fell 7 9/16 to 159 1/2.

For more on this

story, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

Shares of

American Airlines

parent

AMR

(AMR)

jumped about 4, or 7.6%, to 68 1/2, after the company said it will spin off its 83% interest in computer services company

Sabre Holdings

(TSG) - Get Report

. AMR will distribute 107 million shares of Sabre common stock to AMR shareholders, who will receive 0.7 of a share of Sabre for each common stock of AMR. Sabre also named William Hannigan as its new president and CEO, effective immediately. Hannigan was formerly president of SBC Global Markets at

SBC Communications

(SBC)

.

For more on this

story, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

Thomas Industries

(TII)

rose 1/4 to 18 3/8 after it said it set a share-repurchasing program for 15% of its common stock.

Viacom

(VIA) - Get Report

fell 5/8 to 55 1/4 after it filed with the SEC to split off the rest its

Blockbuster

(BBI) - Get Report

unit once the stock price hits 20. Blockbuster inched up 1/4 to 16. In August, Viacom held an IPO for 20% of the movie rental chain, with plans to split off the business. However, Blockbuster's stagnant stock price has analysts wondering if Viacom will follow through with its intentions.

Analyst actions

Morgan Stanley Dean Witter downgraded shares of

Ahold

(AHO)

to neutral from outperform. Shares of Ahold slid 1 5/8, or 5.5%, to 27 5/8.

Salomon Smith Barney

said it initiated coverage of

Barnes & Noble

(BKS) - Get Report

and

Borders Group

(BGP)

with outperform ratings. Analyst David Strasser pegged Barnes & Noble's 12-month price target at 26, and Borders' at 19. Shares of Barnes & Noble slipped 1/16 to 21 3/16, while Borders Group edged up 1/2 to 15 5/8.

Goldman Sachs rolled out coverage of

Classic Communications

(CLSC)

, placing the stock on its recommended list. Merrill Lynch also began coverage with an intermediate, long-term buy rating. Classic Communications bounced 1 11/16, or 5.8%, to 30 9/16.

Salomon Smith Barney upped its rating on

Exodus Communications

(EXDS)

to buy and set a 215 price target. Shares of Exodus soared 15 13/16, or 9.4%, to 182 13/16.

Morgan Stanley Dean Witter sliced its rating on

Flextronics

(FLEX) - Get Report

to an outperform from a strong buy. Shares of Flextronics lost 7 3/8, or 7.9%, to 85.

Banc of America Securities

upped its rating on several retail stocks, including

Dayton Hudson

(DH)

,

Kohl's

(KSS) - Get Report

,

Ames Department Stores

(AMES)

,

Fred's

(FRED)

and

Whitehall Jewellers

(WHJI)

, to strong buys from buys.

Shares of Dayton Hudson added 2 5/8 to 71 1/8 and Kohl's skidded 1 3/8 to 64 1/8, while Ames popped 3 1/4, or 11.7%, to 30 13/16. Fred's climbed 2 1/4, or 16.2%, to 16 1/2. Whitehall gained 1 3/8 to 35 7/8.

Morgan Stanley Dean Witter downgraded shares of

Hughes Electronics

(GMH)

to outperform from strong buy. Shares of Hughes shed 2 1/16 to 90 1/16.

Banc of America Securities initiated coverage of five newspaper publishers that it said have growing advertising revenue and a good opportunity to benefit from the value of their Web-based assets. Four companies were rated a buy, including

Knight Ridder

(KRI)

,

Gannett

(GCI) - Get Report

,

New York Times

(NYT) - Get Report

and

Tribune

(TRB)

.

Times Mirror

(TMC)

was started as a market performer.

Shares of Knight Ridder gained 3/8 to 57 11/16, while Gannett fell 7/8 to 75 1/18, and New York Times tacked on 2, or 6%, to 48 3/4. Shares of Tribune slipped 1 to 56 7/16 and Times Mirror edged up 1/16 to 66 3/8.

Merrill Lynch sliced its rating on

Orbital Sciences

(ORB)

to an intermediate-term neutral from accumulate. Shares of Orbital Sciences stumbled 2, or 15.3%, to 11.

J.P. Morgan

began coverage of

Quaker Oats

(OAT)

as a market performer. Quaker Oats slid 1 to 62 5/8.

Goldman Sachs added

Rohm & Haas

(ROH)

to its recommended list. Shares of Rohm & Haas hopped 2 3/8, or 6.4%, to 39 5/16.

ING Barings

began coverage of

Scient

(SCNT)

with a buy rating. Shares of Scient declined 8 3/8, or 8.3%, to 93.

Morgan Stanley sliced its rating on

SCI Systems

(SCI) - Get Report

to neutral from outperform. Shares of SCI Systems lost 4 1/8 to 81 3/8.

Lehman Brothers

upped its fiscal 2000 estimates on

Solectron

(SLR)

to $1.70 a share from $1.60 and its fiscal 2001 estimates to $2.20 a share from $2.05. After yesterday's close, Solectron posted first-quarter earnings of 36 cents a share, in line with the four-analyst estimate and up from the year-ago 26 cents. Shares of Solectron shed 8 3/8, or 9.2%, to 82 5/8.

Credit Suisse First Boston

rolled out coverage of

Symyx Technologies

(SMMX)

with a buy rating and a price target of 40. Shares of Symyx Technologies retreated 15/16 to 26 15/16.

SG Cowen initiated coverage of

Triad Hospitals

(TRIH)

with a buy rating and a 12-month price target of 18. Shares of Triad gained 13/16 to 14 1/4.

Merrill Lynch rolled out coverage of

VeriSign

(VRSN) - Get Report

with an intermediate-term accumulate, long-term buy ratings. Shares of VeriSign declined 3 5/8 to 115 1/2.

First Boston reinstated coverage of

Viant

(VIAN)

with a strong buy rating. Shares of Viant plummeted 13 1/2, or 11.5%, to 103 1/2.

First Boston started coverage of

Xircom

(XIRC)

with a buy rating and a price target of 85. Shares of Xircom gained 4 13/16, or 7.7%, to 67.

Miscellany

Boeing

(BA) - Get Report

bounced 5/16 to 38 1/2 after it said that Irish aircraft financing group

Pembroke

has added 15 Boeing 717-200s and 15 options to its order, bringing the total to 25 aircraft and 25 options. The agreement's terms were undisclosed.

Metacreations

(MCRE)

retreated 1 7/8, or 21.2%, to 7 after it said CEO Gary Lauer is departing the company to join another firm.

Reebok

(RBK)

slipped 1/16 to 8 after it said it would pay

Supracor

$18.75 million to settle a suit brought on by the sneaker cushion supplier. The lawsuit claimed that Reebok violated its agreement with Supracor when it bought material from one of the material supplier's competitors. Reebok said it plans to assume a fourth-quarter charge as a result of the settlement and legal fees.

Silicon Valley Group

(SVGI)

tacked on 7/8, or 6.5%, to 14 1/14 after it said it received a $100 million order for its Micrascan 193 lithography system from an unnamed chipmaker.

Transportation Tech

(TTII)

mounted 2 9/16, or 16.6%, to 17 15/16 after it said an investor group led by its senior managers has made an offer to acquire the truck-parts maker's outstanding common shares at 20 a share in cash, for an indicated value of $212 million. A special committee of independent members of the board will consider the proposal and make a recommendation.