Blue-Chips Leave Light On for Jobs Data but Techs Flicker and Fade

All eyes now are on tomorrow's jobs report, which one strategist sees sparking a near-certain rally in stocks.

Author:
Robert Mann
Publish date:
Jun 3, 1999 6:50 PM EDT

SAN FRANCISCO --

There's a long, long night of waiting, until my dreams all come true. 'Til the day when I'll be going down that long, long trail with you.

Be it extended trading hours or tomorrow's May

employment report

, Wall Street tried to put a pleasant spin on the waiting game today. Big box retailers were inspired by solid same-store sales figures and a robust report from

Bank of Tokyo-Mitsubishi

, while oil service stocks were enlivened by a host of favorable brokerage comments. However, tech proxies ended on a sour note as Internet leaders continue to struggle and traditional tech bellwethers slouched.

Meanwhile, with bond traders expecting the worst (as is their wont) from the jobs data tomorrow, the price of the 30-year Treasury bond fell 6/32 to 90 12/32, its yield rising to 5.94%.

The

Dow Jones Industrial Average

was the best performer among major averages throughout the session, rising as high as 10,667.18 and closing up 85.80, or 0.8%, to 10,663.69.

Wal-Mart

(WMT)

was among the best Dow performers and led a improving retail sector, rising 2.5% after posting a 7.7% rise in May same-store sales. The

S&P Retail Index

rose 2.1%.

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American Express

(AXP)

was the index's top gainer, rising 2.7%.

Caterpillar

(CAT)

also aided the Dow but fellow cyclical component

International Paper

(IP)

proved a great restraint.

Smartly dressed retailers and energy stocks -- particularly oil service -- helped lift the

S&P 500

as high as 1304.12 before the index closed up 4.73, or 0.4%, to 1299.54. The

Philadelphia Stock Exchange Oil Service Index

rose 3.7% after analysts at several firms -- including

Morgan Stanley Dean Witter

and

Goldman Sachs

-- made constructive comments on the group. (PS: How come negative comments aren't ever "destructive"?)

The S&P was restrained by tech bellwethers which,

surprise

, kept tech proxies on the defensive. The

Nasdaq Composite Index

slid 29.09, or 1.2%, to 2403.32 while

TheStreet.com Internet Sector

index lost 22.31, or 4%, to 534.30.

Oracle

(ORCL)

rose 5% after announcing some cost-cutting efforts;

Qualcomm

(QCOM)

rose 3.5% after a favorable meeting with analysts; and

Hewlett-Packard

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gained 2% following an upgrade from

BT Alex. Brown

. But the majority of other tech bellwethers remained funk-bound. The

Nasdaq 100

dipped 2.1% while the

Philadelphia Stock Exchange Semiconductor Index

shed 2.2%.

Among Net leaders,

Amazon.com

(AMZN)

shed 6.3% despite an upgrade from

Volpe Brown Whelan

Elsewhere, the

Russell 2000

fell 0.76, or 0.2%, to 435.98 while the

Dow Jones Transportation Average

slid 6.64, or 0.2%, to 3420.96 despite a 15.7% rise for

Airborne Freight

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. The company announced a delivery partnership with the

Postal Service

Evincing the lack of significance of today's trade, most traders asked about the action were already looking ahead to tomorrow.

"It does seem to be what everybody is focusing on," Ken Ducey, director of trading at

BT Brokerage

, said of the economic data. "You had a housing starts number that was inflationary but not as bad as it looked. Now people get a look at tomorrow's numbers. Two in a row and people will say that's going to make the

Fed

tighten."

Regarding today's trade, "tech stocks are taking a bath and it looks like they'll continue to," Ducey said. "As traders start to unwind at the end of the day nobody wants to be long in case tomorrow's numbers are a disaster, especially stocks with high volatility. I don't see anyone rushing in to buy stock."

In contrast to some who foresee a rally tomorrow if the jobs figures are tame, the trader said: "I think the market is in a process where it's rolling over a little and I don't think its through. Obviously we'll get some reaction if numbers are positive, but whether they can hold that going into the weekend is another story. Everyone's got a cautious hat on."

New York Stock Exchange

trading, 733.3 million shares were traded while advancers led declining issues 1,595 to 1,309. In

Nasdaq Stock Market

activity, 822.6 million shares were exchanged while losers led 1,913 to 1,895. New 52-week highs led news lows 47 to 43 in NYSE trading and by 68 to 44 in over-the-counter trading.

Look Ma: There's a Rally A-Comin'

Just about everyone on Wall Street is holding their breath, gnashing their teeth and pulling their hair out while simultaneously twiddling their thumbs (try it, it ain't easy) ahead of the employment report tomorrow. But Tony Dwyer, chief market strategist at

Ladenburg Thalmann

, said the short-term picture is nothing to worry about (for those long).

"The market is setting up for a rally unless the employment report is horrendous," Dwyer said. "A negative report is already priced in. A benign or even in-line number could spark a rally. The basic message is: We're going to get an oversold bounce, but I would use it to raise cash rather than try to trade it."

The strategist, who predicted a reversal was coming when last interviewed by

TheStreet.com

May 10, said any bounce will likely be short-lived in nature, due mainly to the Dow's being extended above its 200-day moving average and to fears of a

Fed

rate hike.

Expect the Dow to fall "maybe another 10%" from current levels "whether it rallies or not," Dwyer said.

However, "I don't think they're going to move" at the end of the month, he said, expressing a minority viewpoint. "I don't think they'll move because it will affect international currencies too much and

because of concerns they've expressed about Y2K issues. Why tighten and then add liquidity?"

The strategist acknowledged no tightening at the June meeting "could be construed as a negative" by a market suddenly paranoid about inflation's re-emergence. Still, "what they do isn't as important as the anticipation of what they do," he said. "The market is oversold deeply on a short-term basis and with pessimism about interest rates and inflation running high, it creates an environment for an oversold rally."

Among other indices, the

Dow Utility Average

rose 2.07, or 0.6%, to 326.47; and the

American Stock Exchange Composite Index

gained 4.71, or 0.6%, to 775.94.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 36.30 to 6887.05 and the

Mexican Stock Exchange IPC Index

fell 36.58 to 5363.62.

Thursday's Company Report

By Heather Moore
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.

)

Oil service stocks continued this week's spurt higher with today's momentum coming from Goldman Sachs analyst Terry Darling, who started the sector as overweight. The analyst, citing improving commodity prices and lower operating costs, expects to see a 10% increase in upstream spending in 2000 for industry companies.

Schlumberger

(SLB)

, which rose 7/16 to 60 7/16,

Halliburton

(HAL)

, which gained 1 3/8 to 42 7/8, and

Hanover Compressor

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, which climbed 1 11/16, or 6.3%, to 28 9/16, were added to the firm's recommended list.

Additionally, Goldman began coverage of the following names with market outperformer ratings:

Baker Hughes

(BHI)

, which moved up 13/16 to 32 3/4;

BJ Services

(BJS)

, up 7/8 to 29 1/2;

Cooper Cameron

(CAM)

, up 1 13/16, 5%, to 38 3/16;

Nabors Industries

(NBR)

, up 1 3/4, or 8.2%, to 23;

National-Oilwell

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, up 1/4 to 12 1/8; and

Veritas DGC

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, up 1 1/2, or 8.7%, to 18 11/16. Finally,

Smith

(SII)

climbed 1 1/2 to 43 15/16 after Goldman initiated coverage with a market performer and Morgan Stanley Dean Witter upgraded it to outperform from neutral.

Many retailers glided higher following strong May same-store sales reports.

Ames Department Stores

undefined

AnnTaylor Stores

(ANN)

Dayton Hudson

(DH)

Dillard's

(DDS)

Dollar General

(DG)

Federated Department Stores

undefined

Gap

(GPS)

J.C. Penney

(JCP)

Kmart

undefined

May Department Stores

(MAY)

Pier 1 Imports

(PIR)

Saks

(SKS)

Sears

(S)

ShopKo

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Spiegel

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Eddie Bauer

Mergers, acquisitions and joint ventures

Genentech

(GNE)

sank 4 1/2, or 5.2%, to 82 after

Roche Holding

said it intends to exercise a call option to acquire all the shares of the company it doesn't already own for $4.2 billion. After redeeming the shares, Roche said it intends to sell up to 19% of Genentech to the public, maintaining the biotech's status as a publicly traded, independent legal entity.

United Wisconsin Services

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shot up 1 5/8, or 22.6%, to 8 13/16 after authorizing the creation of a special committee to explore a possible merger or other business combination with

Blue Cross & Blue Shield United of Wisconsin

Earnings/revenue reports and previews

Ashworth

(ASHW)

closed unchanged at 5 3/16 after recording second-quarter earnings of 17 cents a share, in line with the four-analyst estimate but below the year-ago 30 cents.

Best Buy

(BBY)

advanced 7 7/16, or 15.5%, to 55 5/16 after saying it sees first-quarter earnings of 20 cents a share, above the current 18-analyst estimate of 13 cents. The company, which made 8 cents in the year-ago period, is scheduled to release quarter earnings June 15.

Blue Rhino

(RINO)

surged 11/16, or 6.4%, to 11 1/2 after late yesterday announcing a third-quarter loss of 3 cents a share, on target with the three-analyst view and narrower than the year-ago loss of 14 cents.

CSK Auto

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revved up 1 5/8, or 5.8%, to 29 3/4 after last night posting first-quarter earnings of 34 cents a share, beating the six-analyst estimate of 30 cents and moving ahead of the year-ago 12 cents.

Hayes Lemmerz

(HAZ)

lowered 13/16 to 30 1/8 after reporting first-quarter earnings of 51 cents a share, topping both the four-analyst forecast for 46 cents and the year-ago 45 cents.

Litton Industries

(LIT)

tacked on 2 1/8 to an all-time high of 69 1/16 after reporting third-quarter earnings of $1.10 a share, matching the eight-analyst estimate and moving ahead of the year-ago 98 cents. Meanwhile,

Avondale Industries

(AVDL)

accepted Litton's $529 million takeover offer after

Newport News Shipbuilding

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dropped out of the chase for Avondale. Avondale slipped 3/16 to 38 3/16; Newport News slipped 5/8 to 28 1/4.

U.S. Xpress Enterprises

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skidded 2 1/2, or 20.8%, to 9 19/32 after last night saying it will record a second-quarter charge of $1.3 million related to a settlement of a dispute with

Employee Solutions

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. Today, BT Alex. Brown cut its recommendation to market perform from strong buy.

Volt Information Sciences

(VOL)

excelled 2 3/16, or 12.4%, to 19 7/8 after posting second-quarter earnings of 38 cents a share, a dime above the year-ago 28 cents. First Call didn't have an estimate for the company.

Analyst actions

Biomatrix

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slugged down 4, or 14.4%, to 23 13/16 after

Dain Rauscher Wessels

initiated coverage with an aggressive buy, but listed a 2000 earnings estimate for the company lower than the Street's consensus. There also are concerns floating around about sales of the company's key product,

Synvisc

, slipping in April.

Cendant

(CD)

advanced 1 1/16, or 5.9%, to 19 1/8 after

Salomon Smith Barney

started coverage of the stock with a buy and a price target of 30.

Fannie Mae

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added 1/8 to 67 3/16 after Morgan Stanley Dean Witter increased its 2000 earnings forecast for the company to $4.25 from $4.20 a share.

Hewlett-Packard grew 1 11/16 to 91 7/16 after BT Alex. Brown upped the stock to buy from market perform following yesterday's analysts meeting with the company. Among its comments, H-P said it expected its sharper focus on Internet businesses to boost revenue over time. H-P also cautioned that it faced steep costs in completing its split into two companies.

SDL

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vaulted 4 7/8, or 10.7%, to 50 5/16 after

U.S. Bancorp Piper Jaffray

upped it to strong buy from buy.

Weatherford

(WFT)

flew 2 1/16, or 6%, to 36 9/16 after Morgan Stanley Dean Witter lifted it to strong buy from neutral.

Miscellany

A potential peace settlement in Kosovo was good news for

Carnival

(CCL)

, which sailed up 4 3/8, or 10.7%, to 45 1/4, and

Caribbean Cruises

(RCL)

, which sailed up 3 5/16, or 8.6%, to 41 15/16. Both companies have suffered a decline in bookings for European cruises.

Elan

(ELN)

slid 3 3/8, or 6.4%, to 49 5/8 even after receiving tentative approval from the

Food and Drug Administration

to make and sell a generic equivalent of

Bayer's

Adalat

hypertension treatment.

Good Guys

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soared 1 3/8, or 36.1%, to 5 1/4 after saying its founder and former chairman and CEO, Ronald Unkefer, will rejoin the company July 1 as chairman and chief executive. He will replace Robert Gunst, who is resigning.

Lockheed Martin

(LMT)

lowered 1 to 40 1/2 after its

Lockheed Martin Aeronautical Systems

unit announced plans to shed up to 2,000 jobs over the next year. About 40% of the reductions will come from retirements, attrition or transfers.

Nucor

(NUE)

slouched 4 1/4, or 8.3%, to 47 after saying John Correnti resigned as director, vice chairman, president and CEO. Chairman David Aycock will take over as president and chief executive.

Office Depot

(ODP)

jumped 1 to 21 7/8 on last night's news that it will replace

American Stores

(ASC)

in the S&P 500 on a date to be announced. American Stores is being acquired by

Albertson's

(ABS)

Tricon Global Restaurants

(YUM)

dropped 4 1/4, or 7.5%, to 52 3/4 on last night's news that the company's CFO resigned.

Winstar Communications

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rallied 2 5/8 to an all-time high of 57 after announcing plans to offer 18 months of free Web hosting and free long-distance telephone service for one year to new customers.