Blue-Chips Jump to Forefront as Techs Cool Down

The S&P 500 leapt to a record, the Nasdaq crept to one and the Dow set up a week-ending assault on its highs.

Author:: Robert Mann
Publish date:: Dec 29, 1998 7:47 PM EST

Mania, revolution or both? Whatever it is that's going on in Internet stocks, it subsided today, save for a few secondary names. The decline was all the more glaring because it came amid a solid rally for blue-chip stocks that sent the

S&P 500

sailing to a new all-time high.

The S&P 500 rose 16.28, or 1.3% to a new record of 1241.77, eclipsing its previous best of 1228.54, set Dec. 23.

With technology stocks mixed, the oft-unmatchable bogey of fund managers took its cues from telecom giants such as

AT&T

(T) - Get Report

and

MCI WorldCom

(WCOM)

as well as retailers such as

Gap

(GPS) - Get Report

and

Wal-Mart

(WMT) - Get Report

; each set a new 52-week high today.

Drug makers and consumer firms also aided the advance; the

American Stock Exchange Pharmaceutical Index

climbed 3.1% and the

Morgan Stanley Consumer Index

rose 1.9%. Mining stocks also enjoyed a rise as the

Philadelphia Stock Exchange Gold & Silver Index

jumped 4.2%.

The

Dow Jones Industrial Average

failed to surpass its all-time best of 9374.27 but enjoyed a solid rise and its eighth consecutive gain. The index rose as high as 9334.62 before closing up 94.23, or 1%, to 9320.98.

In addition to AT&T and Wal-Mart, the blue-chip proxy was fueled by gains for several components, including

General Electric

(GE) - Get Report

, which set a new 52-week highs, as well as

Merck

(MRK) - Get Report

and

Johnson & Johnson

(JNJ) - Get Report

Like the S&P 500, the

Nasdaq Composite Index

secured another record close, but in far less impressive fashion. After being in negative territory late in the session, the index closed up 1.47, or 0.1%, to 2181.77. Traditional tech bellwethers such as

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

stumbled, while Internet names suffered wider losses; the

Nasdaq 100

slid 0.7% and the

Philadelphia Stock Exchange Semiconductor Index

lost 1.5%.

Big Internet names such as

America Online

(AOL)

Yahoo!

(YHOO)

and

Amazon.com

(AMZN) - Get Report

notably lagged broad market's rally;

TheStreet.com Internet Sector

index shed 14.13, or 3.1%, to 435.69.

Still, the speculative nature of online (and faux online) names was alive and well in secondary issues such as

G-III Apparel

(GIII) - Get Report

, which rose 318% on nothing more than speculation it will follow the lead of

Active Apparel Group

(AAGP)

and launch an online site. Active Apparel, meanwhile, rose a further 65%.

The

Russell 2000

closed up 2.14, or 0.5%, to 410.41 although market internals were far from effusive.

New York Stock Exchange

trading, 586.5 million shares were traded while advancing issues bested declining stocks 1,752 to 1,233. In

Nasdaq Stock Market

activity, 920.8 million shares were traded while gainers led 2,171 to 2,007. New 52-week highs bested new lows 123 to 71 on the Big Board and by 121 to 119 in over-the-counter trading.

"People are going to call this an end-of-year mark-up on no volume but I'm sure this momentum is going to carry through," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "Still, it's not like people are dancing in the streets."

Basel said the Dow could set a new high tomorrow -- as many expect -- but could also suffer from some profit-taking next week.

As for today, the trader said the action was sparse save for the retailers. "Some of these stocks are in outer space," he said, noting gains for

May Department Stores

(MAY)

and

Dayton Hudson

(DH)

in addition to the aforementioned Wal-Mart and Gap. The

American Stock Exchange Retailing Index

rose 3%.

Beyond that "we finally got some profit-taking in Internet stocks which is news in itself," Basel said. "But the people playing those aren't necessarily traditional investors. I don't think the money was coming out of Amazon.com and into

Saks

(SKS)

Don't Believe the Hype

"I don't buy what's going on today is real market activity," said Jack Ablin, managing director at

Colonial Asset Management

. "My take is it's pretty much just light volume and a lot of flipping around. I don't take the trend too seriously -- it's just a lot of year-end window dressing."

Ablin, who manages about $170 million mainly for high-net-worth individuals, confessed to "not doing a heck of a lot" today but said other fund managers are under the gun as the year comes to a close.

"It's more or less hide the embarrassment time. The retail mutual fund investor is probably looking more at what you got than how you did," he said. "I would say a retail investor would be happy to see an AOL or

Dell

(DELL) - Get Report

in there even if the fund did mediocre."

Ablin did far from mediocre this year, beating the S&P 500 heading into the final days of 1998. A big factor in the performance was a "sector call" on technology in the third quarter. Focusing on "the largest, most liquid names," Ablin invested cash reserves in Intel while putting new money to work in

Compaq

(CPQ)

. The portfolio also has holdings in AOL and Dell.

Still, the money manager is getting a little more cautious as the new year approaches.

"P/Es are stretched and there's going to be some general slowing" in the economy, he said. "We're not going to see the same level of gains we've seen this year. Still, there's a lot of liquidity out there -- all the money

invested in emerging markets has filtered back into safer havens."

Because of the liquidity, Ablin remains "pretty fully invested" in stocks, with about 65% to 70% of the portfolio in equities. Coincidentally, some of his favorite groups, such as grocers and drug makers, are defensive in nature. A favorite holding in the former is

Safeway

(SWY)

, which rose 1.2% today. He recommends, but does not own,

Winn-Dixie Stores

(WIN) - Get Report

, calling it a good pick for investors with a shorter time horizon.

Given his reticence about stocks but desire to stay invested, Ablin has been buying preferred shares. "We're doing it for defensive purposes as an alternative to going headlong into stocks," he said. "We can pick up some income and stability and names we like and continue to move forward. We can't afford to be out but can try to cushion" the exposure.

Among other indices, the

Dow Jones Transportation Average

rose 25.56, or 0.8%, to 3066.39; the

Dow Jones Utility Average

gained 0.30, or 0.1%, to 312.57; and the

American Stock Exchange Composite Index

climbed 5.17, or 0.8%, to 670.75.

The price of the 30-year Treasury bond rose 28/32 to 102 7/32, sending its yield down to 5.10%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 6.76 to 6472.16 and the

Mexican Stock Exchange IPC Index

fell 25.87 to 3916.80.

Tuesday's Company Report

John J. Edwards III
Markets Editor

(

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, G-III rocketed 6 11/16, or 334.3%, to a nearly six-year high of 8 7/8. There has been no known news development with the company, which apparently rose on anticipation it will follow the lead set yesterday by Active Apparel and announce the launch of online offerings.

Starter

(STA)

enjoyed a similar surge, thundering up 2 7/8, or 230%, to 4 1/8. The NYSE asked Starter to explain its move; the exchange said Starter cited the common policy of not commenting on market activity.

Proving yesterday's rise was no fluke (?) Active Apparel blasted up a further 7 9/16, or 65.8%, to an all-time high of 19. Another of yesterday's big e-commerce movers,

SkyMall

(SKYM)

, jetted 5 3/16, or 14.6%, to an all-time high of 40 3/4.

Mergers, acquisitions and joint ventures

Compuware

(CPWR)

moved up 2 1/4 to an all-time high of 74 after telling

Reuters

the company hopes to strengthen its services business with an acquisition worth up to $2 billion.

Consolidated-Tomoka Land

(CTO) - Get Report

popped up 1 1/2, or 11.4%, to 14 5/8 after agreeing to sell its citrus business,

Lake Placid Groves

, to two individuals for undisclosed terms.

Earnings/revenue reports and previews

Adac Laboratories

(ADAC)

stumbled 5 5/16, or 19.6%, to 21 7/8 after announcing it will restate financial results for fiscal 1996, 1997 and 1998 amid an extensive ongoing review of accounting principles by the company and

PricewaterhouseCoopers

. Adac said the adjustments will have a material adverse impact on its fiscal 1996 and 1997 financial results.

Conoco

(COC)

moved up 3/16 to 21 after trading down most of the day on its announcement of a fourth-quarter charge. The energy giant said it will take an after-tax charge of $50 million, or 8 cents a share, along with cutting 1999 capital spending by 21% and axing 975 jobs. Conoco cited the low level of crude oil prices. The six-analyst estimate calls for operating earnings of 6 cents a share in the fourth quarter; Conoco went public in October. The company's majority owner,

DuPont

(DD) - Get Report

, dipped 1/8 to 56 1/2.

Halliburton fell 2 9/16, or 7.8%, to 30 3/8 after announcing last night it plans to take a fourth-quarter after-tax charge of $24 million, or 5 cents a share, to cover 2,750 additional job cuts in its energy services group. Halliburton expects to report net fourth-quarter earnings of 14 cents to 16 cents a share, including the charge and costs related to project losses. The 22-analyst First Call estimate calls for operating earnings of 36 cents a share vs. the year-ago 58 cents. The rest of the sector finished mixed, with

Schlumberger

(SLB) - Get Report

down 1/2 to 46 7/8,

Transocean Offshore

(RIG) - Get Report

down 1/4 to 24 5/8 and

Smith International

(SII)

up 5/8 to 24 1/4.

Halter Marine

(HLX) - Get Report

slumped 7/8, or 15.6%, to an all-time low of 4 3/4 after saying it expects to only be "marginally profitable" in its third quarter because of construction cost overruns on six drill barges. The seven-analyst consensus called for profits of 26 cents per share.

National Discount Brokers

(NDB)

bounded 17 1/2, or 125%, to an all-time high of 31 1/2 after reporting second-quarter profits of 42 cents a share, up from a profit of 16 cents a year ago. No estimates were available. Other online brokers rose in concert, notably

E*Trade

(EGRP)

, up 3 1/2, or 6.2%, to 60 1/8; and

Ameritrade

(AMTD) - Get Report

, up 3 1/4, or 9.8%, to 36 3/4.

National Record Mart

(NRMI)

improved 3/8 to 8 5/8 after saying its Christmas-week same-store sales surged 27% year-over-year, mostly due to strong DVD sales.

Network Equipment Technologies

(NWK)

sledded 2 1/16, or 15.6%, to 11 3/16 after forecasting its fiscal third-quarter earnings would not meet the six-analyst consensus forecast of 20 cents a share.

ValueVision

(VVTV)

hopped 5 1/8, or 82.8%, to a nearly five-year high of 11 3/8 after announcing December sales from its television home shopping network rose 70% vs. the same period a year ago.