Lonely are the brave. A few courageous buyers stepped into the breach today, but selling was the dominant theme as another tough session left those long looking more like
Bottom line: Investors see no compelling reason to buy stocks ahead of the Tuesday-Wednesday
Federal Open Market Committee
meeting, especially with a few profit warnings and earning shortfalls stirring about. More especially, the bond market continues to evoke the body language of a hack golfer who knows a shot is going awry but hopes for a miracle bounce off the (insert one: tree, cart path, passing flock of geese). The price of the 30-year Treasury bond fell 4/32 to 87 22/32, its yield rising to 6.16%.
Dow Jones Industrial Average
fell as low as 10,471.20 before closing off 132.03, or 1.2%, to 10,534.83, its lowest close since June 11. The
declined 17.28, or 1.3%, to 1315.78 vs. an intraday low of 1308.47. The
shed 3.86, or 0.9%, to 443.18.
yesterday, tech stocks could not avoid the bond-induced downdraft. The
Nasdaq Composite Index
fell 44.13, or 1.7%, to 2553.99, just off its session low of 2550.14.
TheStreet.com Internet Sector
index lost 12.55, or 2.1%, to 576.06. The
fell 2.4%, the
Morgan Stanley High-Tech 35
Some attributed tech's struggles to a profit warning
last night by
Advanced Micro Devices
, which fell 6.2%. AMD did get people thinking twice about the recent rally in semiconductors; the
Philadelphia Stock Exchange Semiconductor Index
shed 4.3%. But the company has warned so often it is rumored to have filed with the
National Acronym Association
to change its moniker to Another Major Disappointment.
Traders cited the profit shortfall by
, which fell 10.4%, and warning by
, down 9.8%, as more telling influences on tech. Plus the fact the group had a tremendous advance from mid-June through last week.
"SCM Micro and Micron put cold water on tech stocks," said Jim Volk, co-head of institutional trading at
in Portland, Ore. "I don't think AMD was a factor because AMD has been getting kicked around."
Beyond tech, "the fact
said they'll miss the number, plus the bond market
sliding, and the market doesn't look so hot," Volk said. "When you add it all up, the market ran too far, too fast,
and we're coming into the end of the quarter. People are nervous about the
and are policing inventory
and nailing down profits, especially in some cyclicals just to be safe."
Goodyear finished flat but cyclicals such as
were among the Dow's biggest negative influences. The
Morgan Stanley Cyclical Index
also weighed heavily on the Dow, and financials in general continued to suffer. The
Philadelphia Stock Exchange/KBW Bank Index
lost 2.4% while the
American Stock Exchange Broker/Dealer Index
A 25-basis-point ease is "already in this market," Volk said. Other than a brief "sigh-of-relief rally," there may not be much reaction. The problem is, "people are afraid the Fed is going to walk it up twice or even three times," he said. "That's what makes people really nervous."
The trader doesn't foresee "wholesale panic where the market will collapse," but noted the S&P 500 and the Dow each have fallen below respective 10- and 40-day moving averages. So "the technicians will add to the worry about the averages breaking down," he said. "If we continue like this we're going to have a period of adjustment."
NewYork Stock Exchange
trading, 691.8 million shares were traded while declining stocks dominated advancers 1,961 to 951. In
Nasdaq Stock Market
activity, 910.4 million shares were exchanged while losers led 2,204 to 1,626. New 52-week lows bested new highs 73 to 56 in Big Board action although new highs led 72 to 47 in over-the-counter trading.
Nice Bounce Off Bottom Falls Apart
On the brighter side, trading volume declined and market proxies closed off session lows. Additionally, drug makers such as
revived from their recent funk. The
American Stock Exchange Pharmaceutical Index
Meanwhile, the S&P remains squarely in the trading range of 1275 to 1375 in existence since early March.
"It's still in a range," said Bill Meehan, chief market analyst at
. "At the rate we're going in terms of complacency we'll probably get some type of bounce in the bond market before we get to the bottom of the range."
Regarding complacency, the action in bond futures is "a lot more important than the averages would lead one to believe," Meehan said.
The September 1999 bond futures contract closed off session lows of 113 9/32, but down 15/32 to 113 19/32, below what is considered key support at 113 20/32 (the 1997 low).
"We had a nice little bounce
in stocks off the bottom that looked like it might go someplace but it completely fell apart," he said.
The failure of that bounce might have had its genesis in the options world. According to several institutional and retail options desks, the index options trading pits were awash with chatter late in the session about a massive order for puts on the Dow.
bought July 10,700 puts to the tune of 20,000 contracts, at an average price of 2 1/2 ($250 per contract), according to a trader at
Wall Street Access
. It was "a very bearish signal," the trader said. "Even if they bought stock and this is a hedge against it." The order crossed at 4:09 p.m. EDT.
Goldman Sachs declined to comment.
"I'm surprised there's so much complacency as evident by volume being so extremely light," Meehan went on. "I'm hard-pressed to conclude it's rationale given the backup we've had in rates and a new low on the September
bond futures contract."
Surprisingly, however, Meehan believes the market's ability to ignore bad news could lead to a short-term revival, assuming the Fed will raise interest rates 25 basis points next week. "All the gnashing of teeth over 50 basis points is unwarranted," he said.
Meehan expects more tightening later in the year but believes the bond market will "stabilize and bounce" if the Fed hikes just 25 next week. That, plus the "ability of tech stocks to bounce back, assuming second quarter earnings are going to be good, could lead to some kind of blow off move to the upside."
The move could "definitely" get major averages to new highs. At that point, Meehan would be "looking to sell."
Among other indices, the
Dow Jones Transportation Average
fell 52.84, or 1.6%, to 3326.07; the
Dow Jones Utility Average
slid 1.92, or 0.6%, to 324.76; and the
American Stock Exchange Composite Index
lost 2.01, or 0.3%, to 769.15. Also, the
Toronto Stock Exchange 300
dropped 34.31, or 0.49%, to 6902.66 and the
Mexican Stock Exchange IPC Index
fell 88.17, or 1.56%, to 5549.18.
Thursday'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.
Morgan Stanley Dean Witter
slipped 1 15/16 to 91 5/16 after posting second-quarter earnings of $1.95 a share, better than the 14-analyst estimate of $1.56 and up from the year-ago $1.37. Earlier this week,
both blew away earnings estimates.
IPOs, meanwhile, remained a bright spot in a rather dark market.
hopped up 2 5/8, or 23.9%, to 13 9/16 after
priced its 4 million-share IPO above range at $11. The company develops and provides real-time e-commerce transaction services, such as global payment processing and fraud prevention, to online merchants.
Elsewhere in new issues,
shot up 5 1/8, or 42.7%, to 17 1/8 after its 4 million-share offering priced at $12 by
. The company is an Internet portal and search engine aimed at the Hispanic market.
climbed 3, or 20%, to 18 1/16 after
Credit Suisse First Boston
priced its 6 million-share IPO above range at $15. The company offers browser-based email, desktop-based email, Internet-based voice mail and fax-mail messaging.
Mergers, acquisitions and joint ventures
slipped 3 to 105 3/8 after completing its $24 billion merger with
, which slipped 1 11/16 to 64.
gave up 3/4 to 22 11/16 after confirming it's in preliminary talks for
to acquire its
unit. Compaq said the discussions "also include the establishment of a strategic relationship between Compaq and CMGI designed to advance Compaq's Internet strategy."
pulled in 2 1/16 to 95 7/16 even after
The Wall Street Journal
said merger discussions between the company and CMGI, which owns 18% of Lycos, recently have stalled amid ill feelings between the companies' CEOs. The newspaper said discussions foundered partly on the unwillingness of Robert Davis, Lycos' chief executive, to work for CMGI's David Wetherell.
vaulted 1 3/4, or 8.8%, to 21 9/16 on market rumors its merger with
might be unraveling. In April, Covance agreed to acquire Paraxel, which sank 4 1/2, or 21%, to 16 15/16, through a stock swap valued then at $800 million.
shaved off 2 3/4 to 70 11/16 after offering to buy
, a British regional newspaper group, for about $1.43 billion.
lowered 7/16 to 26 15/16 after launching a hostile $68-a-share tender offer for
Columbia Energy Group
. After saying it will review the unsolicited bid, Columbia sloughed off 3/16 to 63 9/16.
rocketed 8, or 38.6%, to an annual high of 28 3/4 after
agreed to buy it for about $2 billion in cash and stock. After
Donaldson Lufkin & Jenrette
lifted it to top pick from buy, VoiceStream fell 15/16 to 28 1/2.
grew 3 1/4, or 13.5%, to 27 1/4 and
grew 2 7/16, or 22.7%, to an annual high of 13 1/4 on expectations of further consolidation in the industry.
Earnings/revenue reports and previews
Advanced Micro Devices sliced off 1 1/8, or 6.2%, to 17 1/16 after warning it will record a much wider-than-expected second-quarter loss due to collapsing prices and lower shipments for its K6 processors. AMD, whose main competitor is
, sees an operating loss of about $200 million for the quarter. Today,
Morgan Stanley Dean Witter
lowered its full-year 1999 outlook to a loss of $4.33 from a loss of $1.50.
flew 5/8 to 19 after recording first-quarter earnings of 46 cents a share, beating the five-analyst estimate by 1 cent and moving ahead of the year-ago 34 cents.
plunged 1 13/16, or 30.2%, to an all-time low of 4 3/16 after saying that, due to operating problems with a vacation package and Internet investments, it expects to earn 2 cents to 4 cents a share in the second quarter. The four-analyst view called for 17 cents vs. the year-ago loss of 4 cents.
Goodyear Tire fizzed down 1/8 to 56 1/2 after saying it sees second-quarter earnings coming in around 40 cents to 50 cents a share, which would fall below the five-analyst forecast for 77 cents a share and the year-ago $1.25 a share. The company attributed the warning to programs to realign production capacity and inventories in North America and Europe.
Micron Technology skidded 4 9/16, or 10.4%, to 39 3/8 after last night reporting a third-quarter loss of 10 cents a share, below the 21-analyst expectation for a break-even quarter but narrower than the year-ago loss of 51 cents. Micron Tech also said it will record a fourth-quarter charge of $9 million to $12 million to shut down its communications unit. Today, DLJ cut the stock to market perform from buy.
tumbled 1 3/32, or 13.6%, to 6 31/32 after last night saying it expects to record a fourth-quarter loss of 5 cents to 8 cents a share, which would be below the six-analyst forecast of earnings of a dime. The company, which earned 19 cents in the year-ago period, attributed the warning to a failure to obtain several large orders. Today, Goldman Sachs cut the stock to market perform from outperform.
SCM Microsystems shaved off 5 5/16, or 9.8%, to 48 7/8 after last night saying it sees second-quarter earnings of 10 cents to 13 cents a share, which would be below the three-analyst outlook of 24 cents. The company earned 11 cents in the year-ago period. SCM also said it will acquire a majority stake in
, which provides digital video products for Internet and PC applications, for an undisclosed amount.
flourished 3 1/4, or 12.2%, to 29 13/16 after posting fourth-quarter earnings of 53 cents a share, a penny higher than the seven-analyst prediction but below the year-ago 83 cents. The company also said it will split into two separate, publicly traded companies -- one comprised of its measurement business division, the other of its color printing and imaging division. Tektronix said it's considering an IPO of 15% of the new color printing and imaging company before the end of the current fiscal year.
expanded 9 1/2, or 34.8%, to 36 13/16 after saying it sees second-quarter earnings of around 55 cents a share, which would top the five-analyst prediction of 31 cents and the year-ago 15 cents. The company said it benefited from the acquisition of
and that higher capacity-utilization rates at its manufacturing plants and a stronger customer mix have helped operating margins.
tacked on 5/8 to 13 7/8 after
Deutsche Banc Alex. Brown
raised it to strong buy from market perform.
picked up 11/16 to an annual high of 38 1/4 after
Banc of America
started coverage with a buy.
deflated 1/2, or 6.1%, to 7 11/16 after announcing broad reforms including the possible closure of up to 14 stores, job cuts of up to 1,500 and a shift away from its focus on desktop PCs. The nation's biggest computer retailer said it expects to take a charge, mostly in the fourth quarter, of $40 million to $50 million related to the restructuring plan.
Staff Reporter Erin Arvedlund contributed to this story