As Fed Threat Fades, Wall Street Gets Into a Buying Groove
SAN FRANCISCO -- If these are the dog days, they're packing a mighty big bark.
With bellwether tech names out in front and some hysteria in secondary names unseen since way back in the go-go days of early summer, major stock proxies pushed higher today. A robust advance in the bond market, despite a stronger-than-expected durable goods report, fueled gains for stocks.
The price of the 30-year Treasury bond rose 1 4/32 to 103 25/32, its yielding declining to 5.86%.
Blue-chips were initially restrained by some high-profile profit warnings and downgrades, but the
Dow Jones Industrial Average
managed to establish its second record of the week. The proxy gained 42.74, or 0.4%, to an all-time high of 11,326.04 after trading as low as 11,198.45.
Dow gainers included
General Electric
(GE) - Get Free Report
,
AT&T
(T) - Get Free Report
and
Procter & Gamble
(PG) - Get Free Report
.
The
rose 18.29, or 1.3%, to 1381.79 and is now 2.6% below its
July 16 record of 1418.78.
The
Nasdaq Composite Index
, which to some people accurately represents the growing dominance of technology and to others symbolizes the folly and mania of the "new era" thinking, provided fodder for both arguments today. The tech-if-you-do-tech-if-you-don't index rallied 53.23, or 1.9%, to 2805.60, helping pull reluctant blue-chip gauges higher in the process. The index is 2.1% below is July 16 record of 2864.48.
The Comp got a big lift from tech giants such as
Microsoft
(MSFT) - Get Free Report
,
Cisco
(CSCO) - Get Free Report
and
Dell
(DELL) - Get Free Report
, which helped send the
Nasdaq 100
up 2.3%.
Simultaneously, the Comp got a boost from second-tier tech plays such as
Tellabs
(TLAB)
and
Qualcomm
(QCOM) - Get Free Report
, which gained 6.6% and 6.1%, respectively, the latter establishing a 52-week high of 190.
Furthermore, smaller market-cap names rallied as well, such as
Net2Phone
undefined
, up 31.8% after announcing
Sprint
undefined
will test its network for use on international phone calls to Asia.
TheStreet.com Internet Sector
index rose 27.35, or 4.9%, to 591.14 as Internet bellwethers such as
Amazon.com
(AMZN) - Get Free Report
and
America Online
(AOL)
also rallied smartly. Meanwhile, the
Russell 2000
gained 0.74, or 0.2%, to 437.86.
"The whole hysteria aspect to the market is back," said Charles Payne, president and chief analyst at
Wall Street Strategies
. "People will go home tonight and see the Dow was up
42 and not know the type of stuff that went on. It's amazing. It's mind-boggling."
In addition to the aforementioned, Payne noted huge gains for Internet "backbone" stocks such as
Efficient Networks
undefined
, which jumped 45.7% after a Chinese government telecommunications agency selected the firm's ADSL network.
Asked about the lack of confirming market breadth, the bullish strategist replied it "has been ugly for a long time. This has been a selective market for a year and a half. The key is, winners are up huge and losers just aren't down that much."
In
trading, 864.7 million shares were exchanged while advancers led declining stocks 1,611 to 1,382. In
Nasdaq Stock Market
action 1.04 billion shares traded while losers led 1,957 to 1,906. New 52-week lows bested new highs 64 to 59 on the Big Board but new highs led 139 to 55 in over-the-counter trading.
No Fed, No Worries
"What you saw today was a collective sight of relief after a couple of false starts yesterday and early this morning," said Tony Cecin, manager of Nasdaq trading at
U.S. Bancorp Piper Jaffray
. "Money inflow are a positive vote that the
Fed
is through raising rates for the rest of the year. That's the conventional wisdom after the events of yesterday."
Both Payne and Cecin agree further Fed tightening is off the table for the remainder of 1999, a sentiment which fueled today's advance.
"There's no urgency for Fed to try to derail this market," Payne said "I think they've done enough, as long as productivity is strong I can't imagine the Fed
tightening again -- certainly not at the next meeting."
Cecin was less ebullient but said "it's going to take some kind of bad inflationary number to deter people from the path we're on."
As long as bond yields stay down "it's going to bring a flood of cash into the equity market," the trader said, noting the long bond's yield has declined "about" 40 basis points in the past two weeks.
There were some notable losers today, however, specifically
Bank One
undefined
, which tumbled 22.6% after forecasting an earnings shortfall. Bank stocks were further damaged by
Credit Suisse First Boston
analyst Michael Mayo, who reiterated a sell recommendation on Bank One,
Citigroup
(C) - Get Free Report
, and
Chase Manhattan
undefined
. The
Philadelphia Stock Exchange/KBW Bank Index
fell 2.3%.
Meanwhile,
Merrill Lynch
issued separate industry downgrades on biotech stocks and retailers.
"Merrill went nuts," said one market player. "They've always been a Scrooge of the bull market but I thought they were trying to change that."
A Merrill spokeswoman said the timing of downgrades was "just coincidental."
More importantly, while the downgrades sent individual names in those groups reeling early, most recovered as the broader market rallied. For example, after its near-term rating cut to accumulate from buy,
Kohl's
(KSS) - Get Free Report
traded as low as 74 7/8, but closed up 0.2% at 77 1/4. The
S&P Retail Index
, once as low as 857.48, closed up 1.3% to 884.72.
Biotech stocks also bounced from session lows after the Merrill downgrade, notably
Amgen
(AMGN) - Get Free Report
, which closed up fractionally to 81 7/16 after trading as low as 78 3/8. But the group posted a mixed performance; the
Nasdaq Biotech Index
rose 0.7% while the
American Stock Exchange Biotechnology Index
slid 0.8%.
Among other indices, the
Dow Jones Transportation Average
rose 74.35, or 2.3%, to 3309.25; the
Dow Jones Utility Average
rose 3.95, or 1.2%, to 325.20; and the
American Stock Exchange Composite Index
fell 3.54, or 0.5%, to 785.88.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
gained 53.83, or 0.7%, to 7222.63 and the
Mexican Stock Exchange IPC Index
rocketed 135.74, or 2.6%, to 5379.85.
Wednesday's Company Report
By
Tara Murphy
Staff Reporter
(
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.
)
Mergers, acquisitions and joint ventures
Borg Warner Automotive
(BWA) - Get Free Report
was up 13/16 to 49 1/2 after it said it inked a deal with a group of investors, including management to sell its
Coleman Cable
division for estimated $144 million less debt of about $4 million. Borg Warner bought the utility wire and cable subsidiary in March 1999, along with its acquisition of
Kulman
. Borg Warner said, at the time of the purchase, that Kulman's cable and wireless and electronic transformer businesses were not in line with its strategic plans and would be sold.
GE Capital
said despite rumors, it would not launch an offer to buy Italy's
Piaggio
. Piaggio is in ongoing talks with U.S. buyout firm
Texas Pacific Group
for an acquisition estimated at $650 million. The General Electric subsidiary was rumored in Italian newspapers to be planning a rival bid for the
Vespa
motor scooter maker. GE Capital said, although it considers Piaggio appealing, it would not interfere with the Texas Pacific transaction.
Earnings/revenue reports and previews
Bank One was plummeted 12 5/8, or 22.7%, to 43 after yesterday's postclose warning that it expects to report 1999 operating earnings of $3.60 to $3.65 a share, below the 25-analyst estimate of $3.92. Bank One blamed the shortfall on reduced growth and margin prospects at its credit card unit,
First USA
. Bank One said today that it would not lower its credit standards in order to give a short-term lift to its credit card business.
PaineWebber
,
Warburg Dillon Read
and
Morgan Stanley Dean Witter
all downgraded the stock.
Credit Suisse First Boston
put a sell recommendation on the stock.
Commercial Intertech
(TEC)
advanced 1/8 to 12 15/16 after it reported third-quarter earnings of 40 cents, beating the two-analyst estimate of 39 cents but down from the year-ago 48 cents.
(CPY)
fell 3/16 to 33 after it reported a second-quarter loss of 10 cents, greatly missing the single-analyst estimate of an 18-cent gain and down from the year-ago 13-cent gain.
Fleetwood
undefined
hopped 1 11/16, or 7.8%, to 23 1/4 after it posted first-quarter earnings of 72 cents a share, 6 cents ahead of the five-analyst estimate, but down from the year-ago 86 cents. Fleetwood blamed the slump in earnings on a slowdown in manufactured housing sales and the effect of eliminating intercompany profits on retail inventory.
Fluor
(FLR) - Get Free Report
declined 1/16 to 41 3/4 after it posted third-quarter earnings of 66 cents a share, a penny shy of the seven-analyst estimate and down from the year-ago 81 cents.
Michael Stores
undefined
slipped 5/8 to 28 15/16 after it posted break-even results for its second quarter. The results were inline with the 14-analyst break-even estimate but down from the year-ago 2-cent gain.
Southdown
undefined
slumped 8 1/4, or 14.2%, to 49 1/2 after it said it would post disappointing results for the rest of the year, citing a higher tax rate and an oversupply in California. The company said the higher tax rate would reduce its third-quarter earnings by 7 cents to 9 cents a share, while the oversupply would slash several cents off of the quarter.
Take-Two Interactive Software
(TTWO) - Get Free Report
was down 1/16 to 9 after it posted third-quarter earnings of 12 cents a share, 3 cents ahead of the three-analyst estimate.
Toro
(TTC) - Get Free Report
slid 1/16 to 37 3/16 after it posted third-quarter earnings of 78 cents a share, 2 cents ahead of the one-analyst estimate of 76 cents. The company said today that it would shut down its Murray Bridge, Australia, facility in its fourth quarter, assuming a restructuring charge of $900,000.
Offerings and stock actions
Internet retailer
Ashford.com
announced plans to raise $68.5 million in an initial public offering. According to a
Securities and Exchange Commission
filing, the company will offer 6.25 million common shares in an expected range of $11 to $13 a share.
Goldman Sachs
,
BancBoston Robertson Stephens
,
Deutsche Banc Alex. Brown
and
E *Offering
are serving as lead underwriters.
ImmuLogic
undefined
increased 1/8, or 6.4%, to 2 despite a shareholder vote to liquidate and dissolve the company. The company's board of directors voted for an initial distribution of $1.94 around Sept. 9, payable to shareholders of record Aug. 25.
Medtronic
(MDT) - Get Free Report
climbed 2 7/16 to 75 5/8 after it announced a 2-for-1 stock split through a 100% stock dividend to shareholders of record Sept. 10 and payable Sept. 24.
Analyst actions
Allergan
(AGN) - Get Free Report
jumped 5 11/16, or 5.6%, to 107 5/16 after Warburg Dillion Read upped its price target on the shares to 105 from 95. Yesterday, U.S. regulators issued an approvable letter for the drug maker's dry eye remedy, Restasis.
Amgen
(AMGN) - Get Free Report
was up 9/16 to 81 7/16, while
Biogen
undefined
shares were Up 1/8 to 78 7/8 after
Merrill Lynch
downgraded a host of biotech stocks.
Genzyme General
(GENZ)
,
Idec Pharmaceuticals
undefined
and
MedImmune
undefined
were also included in the firm's rating cut. Shares of Genzyme General fell 2 7/8, or 4.6%, to 59 1/8, while Idec slipped 3 7/16 to 132. MedImmune shares tumbled 4 1/2, or 3.8%, to 115.
AutoZone
(AZO) - Get Free Report
was up 3/8 to 24 7/16 after Merrill Lynch cut its rating on the shares to accumulate from buy.
Champion International
(CHA) - Get Free Report
fell 5 3/8, or 8.7%, to 56 1/4 after J.P. Morgan analyst Mark Connelly cut his rating on the company to market perform from buy.
Cooper Industries
(CBE)
dropped 1 3/16 to 54 1/16 after Goldman Sachs lowered its rating to market performer from market outperformer.
Credit Suisse First Boston analyst Michael Mayo put a sell recommendation on
Citigroup
(C) - Get Free Report
and
Chase Manhattan
undefined
Shares of Citigroup were unchanged at 49, while Chase was off 1 1/16 to 85 1/2.
Freemont General
undefined
was stumbling 8 1/16, or 48% to 8 3/4 after Credit Suisse First Boston analyst Charles Gates cut his rating on the stock to a hold from a buy and reduced 1999 earnings estimates to 95 cents from $2 and $1.50 from $2.30 for the year 2000. Merrill Lynch also downgraded the shares to a near-term neutral from a buy.
Liberate Technologies
(LBRT) - Get Free Report
was up 3/8 to 20 after Credit Suisse First Boston rolled out coverage on the shares with a buy rating.
Micron Technology
(MU) - Get Free Report
bumped up 9/16 to 69 1/2 after
Gruntal
upped its price target on the stock to $150 from $70.
Office Depot
(ODP) - Get Free Report
was off 1/16 to 14 9/16 after Merrill Lynch lowered its rating to accumulate from buy.
O'Reilly Automotive
(ORLY) - Get Free Report
was down 2 5/8, or 6.7%, to 36 7/8 after Merrill Lynch downgraded the stock to accumulate from buy.
Merrill Lynch retail analysts took a hammer to their sector today, cutting its ratings on nine stocks.
Barnes & Noble
(BKS) - Get Free Report
,
Dayton Hudson
(DH)
,
Kohl's
(KSS) - Get Free Report
,
Kmart
undefined
,
Nordstrom
(JWN) - Get Free Report
,
J.C. Penney
(JCP) - Get Free Report
,
Wal-Mart
(WMT) - Get Free Report
,
Borders
(BGP)
and
Sears
(S) - Get Free Report
were all included in the ratings cut.
Shares of Barnes & Noble were down 1/4 to 25 7/16, while Dayton Hudson fell 1 13/16, or 2.8%, to 63 1/2. Kohl's shares were up 1/8 to 77 1/4 and Kmart was down 5/16 to 13 11/16, while Nordstrom shares were off 1/2 to 31. Shares of J.C. Penney were even at 41 9/16 and Wal-Mart declined 13/16 to 48 3/8. Sears slid 1/4 to 40 9/16, while Borders was off 3/8 to 13 5/8.
Talisman Energy
(TLM)
was down 1/16 to 29 3/4 after Morgan Stanley initiated coverage of the stock with a strong buy rating and a price target of 60.
Tech Data
(TECD) - Get Free Report
hopped 4 1/16, or 12.5%, to 36 15/16 after
Banc of America Securities
raised its rating on the stock to strong buy from buy.
Teradyne
(TER) - Get Free Report
stumbled 1 3/4 to 69 15/16 after Lehman Brothers upped its 1999 earnings estimate to $2.05 a share from $2.
Time Warner
(TWX)
was up 1 1/8 to 62 3/4 on news that
ING Barings
raised the shares' rating to strong buy from buy and set a 2000 price target of 85, reacting to the stock's 7% decline on Tuesday. Yesterday, Merrill Lynch analyst Jessica Reif Cohen sliced her estimates on Time Warner, based on declining U.S. market share for its music business, ongoing
WB Television
network losses and weakness in international markets. ING Barings said the stock overreacted to the news.
U.S. Oncology
undefined
up 3/8 to 10 25/32 after Deutsche Banc Alex. Brown rolled out coverage of the stock with a buy rating and a $14 price target.
Miscellany
U.K. telecom operator stocks were gaining ground today, spending a little while in the top five slots in the
FTSE 100
top-10 gainers chart. According to analysts quoted by
Reuters
, the sector, which has underperformed the FTSE 100 index by 10% this month, was reacting to the Fed's decision to raise U.S. interest rates, removing doubt from skeptical investors who thought its decision could go either way.
Williams de Broe
analyst Nigel Hawkins added, "Telecom stocks tend to be a bit more closely correlated with the overall performance of the market." Although the explanation makes sense, investors' top picks seemed rather unusual, swaying to data transmission telecom operators instead of the traditional telecom voice service providers.
Colt Telecommunications
undefined
jumped 3 3/8 to 84 1/2, while
Vodafone AirTouch
(VOD) - Get Free Report
leapt 7 to 198.
British Telecommunications
undefined
soared 9 3/4, or 6.5%, to 160 1/2.
Separately,
TeleWest Communications
undefined
popped 1 1/4 to 40 1/2 after it claimed victory over
NTL
undefined
, purchasing the remaining 50% interest in
Cable London
for $680 million in cash. NTL said the decision to sell came after the realizing the price at which it could buy out all of Telewest interest in Cable London or sell its own.
Boeing
(BA) - Get Free Report
was down 13/16 to 44 5/16 after a negotiator representing the company's largest union predicted the union would strike on Sept. 2.
Compaq
undefined
was up 1/2 to 24 after it announced price cuts of up to 11% on most of its
Deskpro
commercial desktop PCs.
Computer Associates
(CA) - Get Free Report
advanced 11/16 to 52 7/8 after its shareholders shunned a proposal to limit compensation for the company's top executives. Despite a declining stock price and disappointing results from weakness in Asia, 95.8% of stockholders voted not to limit its top management's stock rewards.
Cordant Technologies
(CDD)
, an aerospace components maker, was off 1/2 to 41 3/8 after it said its
Thiokol Propulsion
division signed a follow-on rocket motors contract with
NASA
worth more than $1.7 billion.
Delco Remy International
undefined
inched up 1/16 to 9 7/8 after it announced that president and COO Thomas Synder would become the company's CEO on Jan. 1, 2000.
MarketXT
, formerly Eclipse Trading, began offering postclose trading hours today, joining other brokerages that are providing similar services to retail investors. MarketXT said that investors will be able to trade 400 widely held stocks, the 200 largest on both the NYSE and the Nasdaq, Monday through Thursday between 6 p.m. and 8 p.m. EDT.
Morgan Stanley Dean Witter's
undefined
Discover Brokerage
and
Mellon Bank's
undefined
Dreyfus Brokerage Services
are among the participating firms. Morgan Stanley was up 1 5/16 to 97 5/8 and Mellon was down 1/4 to 35 1/2.
Disney
(DIS) - Get Free Report
was off 1/16 to 29 7/8 after it said its Internet unit has taken a controlling stake in online educational toy retailer
toysmart.com
. Separately, Disney's marriage of its TV production studio and its
ABC
television network -- which was announced last month -- is proving difficult to pull off,
The Wall Street Journal
reported.
Nordstrom
(JWN) - Get Free Report
was down 1/2 to 31 after late yesterday unveiling plans to establish a separate
Nordstrom.com
division to concentrate on Internet sales, and said it might offer shares in the unit in the future.
As originally published, this story contained an error. Please see
Corrections and Clarifications.
