Can't Lay Off 'Em: Wall Street's Appetite for Net Stocks Still Unsated

Blue-chips and the broad market finish off their worst, but Net stocks and other techs finish at their best ever.
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Tech names -- specifically Internet stocks -- enjoyed another day at the races and another session for the record books, while blue-chip stocks stumbled.

A seventh-consecutive all-time high for the

Nasdaq Composite Index

and new record for

TheStreet.com Internet Sector

index notwithstanding, it was a tough day for equities as the dollar got dumped again, taking the bond market along for a most unpleasant ride.

The greenback fell a further 2.30 yen to 108.60, exacerbating the bond market's recent weakness. The price of the 30-year Treasury bond fell another 24/32 to 99 5/32, its yield rising to 5.30%.

Seemingly immune to the recent tumult in fixed-income and currency markets, the Nasdaq Comp rumbled up 40.18, or 1.7%, to yet another new record, 2384.59. Meanwhile, more than a billion shares traded in the over-the-counter market for an unprecedented fourth consecutive session.

Intel

(INTC) - Get Report

was the standout among traditional tech bellwethers, rising 7.6% after

Lehman Brothers

upped its price target on the chip giant to $180 a share. Anticipation about both the expected first-quarter release of the Pentium III microprocessor and tomorrow's report on fourth-quarter earnings also inspired Intel.

Intel was joined by

Dell

(DELL) - Get Report

and

Compaq

(CPQ)

on the upswing among traditional players but the

Morgan Stanley High-Tech 35

rose a relatively modest 2.5% while the

Nasdaq 100

closed up 1.3%.

The "relative" in that modest move refers to TheStreet.com Internet Sector index, which soared 88.42, or 17.7%, to a new all-time high of 588.19. Just to name a few Net favorites,

Yahoo!

(YHOO)

climbed 21% in anticipation of its earnings report tomorrow;

America Online

(AOL)

jumped 12% after

Merrill Lynch

upped its price target to 195; and

Broadcast.com

gained 43.5% after setting a 2-for-1 stock split.

As has often been the case of late, the experience of Internet and high-tech stocks was not shared by other blue-chip groups. Still, major proxies were able to climb off their worst levels of the session.

The

Dow Jones Industrial Average

closed down 23.43, or 0.2%, to 9619.89 after trading as low as 9532.61 with about an hour left in trading. The

S&P 500

shed 11.21, or 0.9%, to 1263.88 but finished off its low of 1253.43.

General Motors

(GM) - Get Report

, up 7.9%, helped prevent a steeper decline for the Dow.

Merck

(MRK) - Get Report

and

Exxon

(XON) - Get Report

were the biggest drags on the Dow and overall weakness in drug makers and oil concerns hampered the broader market. The

American Stock Exchange Pharmaceutical Index

slid 2.8% and the

Amex Oil Index

lost 1.1%. Losses by retailers, consumer giants, and transports also weighed on blue-chip measures.

Aside from technology brokerage stocks were one of the few rising groups; the

American Stock Exchange Broker/Dealer Index

jumped 5.5%.

The

Russell 2000

rose 1.43, or 0.4%, to 433.10, up from its nadir of 429.95.

In

New York Stock Exchange

trading, 818.1 million shares were traded while declining stocks led advancers 1,956 to 1,102. In

Nasdaq Stock Market

activity, 1.147 billion shares traded -- the seventh-busiest day ever -- while gainers led 2,145 to 2,202. New 52-week highs bested new lows 56 to 30 on the Big Board and by 194 to 26 in over-the-counter trading.

"It was definitely a very thin, thin rally," said Doug Myers, vice president of equity trading at

Interstate/Johnson Lane

in Atlanta. "A lot of volume is the individual with newfound wealth and buying power out there buying stocks. This is type of activity we get.

"My clients are sticking to their discipline, whatever it is," Myers continued. "They're not allowed to buy stocks with no earnings and no prospects for earnings."

Beyond the action in Internet names, GM, Intel and a few other blue-chips, the trader said the day was "mildly uneventful with nothing overwhelming or outstanding."

Internet Madness, or Method?

While many market pros continue to be flummoxed by the Internet sector's ascent, some observers say the sector is neither a bubble, nor due to burst.

"We're looking at the Internet permeating corporate life," said Steven Harmon, senior investment analyst at

Mecklermedia's Internet.com

. "This is not biotech. Will the guy yelling 'biotech' in the back of the theatre please sit down. They're driving backwards into the future using the rearview mirror for guidance. It doesn't work."

Harmon compared the Internet sector to "watching a movie and you expect the credits to start rolling and then there's a plot twist. It's a never-ending story."

The most recent plot twist is the better-than-expected earnings expected (that's right) from AOL and Yahoo!, plus some positive analyst commentary. Additionally, "there's some genuine New Year's enthusiasm," he added. "A lot of investors and some mutual-fund guys are saying the same thing -- 'I can no longer ignore Internet stocks.' The joke of 1997 and 1998 has now become the talk of the town. Nobody is laughing except the day traders and retail investors that put their faith in the group."

With the growing interest of institutional investors, "the already thin float will get eaten up and these values could go ballistic because they're going to buy in volume," the Internet proponent continued. "It's simple supply/demand. I think we're seeing it and it's just the beginning."

Harmon further observed that while AOL and Yahoo! continue to soar, investors are searching for Internet names attractive to peers on a "relative value basis" (you heard it here first). Examples include

Lycos

(LCOS)

which jumped 43.5% today and

Infoseek

(SEEK)

, up 59.3%.

The analyst went onto wax philosophic about the "revolution" the Internet represents and that some investors may already be taking that for granted.

Still, "I'm not going to say it means blue skies forever for Internet stocks," Harmon said. "I think we'll see a correction, probably this spring, maybe when e-tailers start coming in with first-quarter numbers that don't look so great compared with fourth quarter. If they're looking for a reason to correct that may be one

but it'd be a good thing. I think Internet stocks should appreciate and depreciate on real news. Still, your grandchildren may thank you if you buy the right Internet stocks."

Among other indices, the

Dow Jones Transportation Average

shed 73.96, or 2.2% to 3286.32; the

Dow Jones Utility Average

lost 2.73, or 0.9%, to 307.41; and the

American Stock Exchange Composite Index

slid 0.44, or 0.1%, to 707.32.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

lost 26.62 to 6842.31 and the

Mexican Stock Exchange IPC Index

dropped 46.35, or 1.3%, to 3592.20.

Monday'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.

)

Most Internet creatures great and small were at it again, helping to bring the Nasdaq to its seventh consecutive record, as noted above.

America Online shot up 18 5/8, or 12.7%, to an all-time high of 165 1/8 after Merrill Lynch increased its 12- to 18-month price target to 195 from 75 a share. Elsewhere in Netnews, Broadcast.com took in 85 7/8, or 43.5%, to an all-time high of 285 1/16 after setting a 2-for-1 stock split. And

Sharper Image

(SHRP)

jumped 8, or 65.3%, to 20 5/8 after saying it will launch an Internet auction site in February. Faced with looming competition, online auctioneer

uBid

(UBID)

dropped 5 3/4 to 114 1/2. Infoseek powered up 32 5/8, or 59.3%, to an all-time high of 87 3/4 and

CMGI

(CMGI)

hopped 72 3/8, or 36.1%, to an all-time high of 272 on further Internet euphoria.

Go2Net

(GNET)

lifted 54, or 82.6%, to an all-time high of 119 15/16 after

Pacific Crest Securities

initiated coverage with a strong buy, saying its shares are worth at least 125 a share.

Still elsewhere, Yahoo! climbed 71 3/4, or 20.9%, to an all-time high of 414 1/2 in part on its deal to offer Internet services for

IBM's

(IBM) - Get Report

new

Aptiva

PC line. The PCs connect to Yahoo!'s Web directory capabilities and personalized Web pages. IBM added 1 11/16 to 189 1/4. Also,

Zomax Optical Media

(ZOMX)

took in 11 3/8, or 61.5%, to an all-time high of 30 1/2 after its Internet commerce unit,

Chumbo.com

, announced a deal to offer software for buyers of IBM's Aptiva PCs. Separately,

Musicland Stores

(MLG)

brought in 7/16 to 13 1/16 on plans to launch several e-commerce sites late in the second quarter. And

Data Broadcasting

(DBCC)

spiked up 12 1/16, or 45.8%, to an all-time high of 38 7/16 on investor excitement about this week's planned IPO of

Marketwatch.com

, a joint venture between Data Broadcasting and

CBS

(CBS) - Get Report

. CBS rose 3/8 to 35 1/2.

Perfumania

(PRFM)

expanded 3 1/4, or 65.8%, to an annual high of 8 3/16 after executives said the company formed a division to go online before Valentine's Day.

Resortquest

(RZT)

excelled 3, or 19.8%, to 18 1/8 after launching its online booking service to rent vacation properties.

Big Dog Holdings

(BDOG)

vaulted 1 13/16, or 34.9%, to 7 1/16 after saying its fourth-quarter same-store sales rose 0.6% and that it expects to have a full-service Internet store operational by the second quarter.

Mergers, acquisitions and joint ventures

Ascend

(ASND) - Get Report

grew 5 3/16, or 7.3%, to an all-time high of 76 11/16 on word

Lucent

(LU)

is close to announcing a $16 billion takeover of the company. The

Financial Times

said an announcement could be made as early as Wednesday. Separately, Lucent said it will buy privately held

Kenan Systems

in a deal worth roughly $1.5 billion. Lucent, which slipped 2 5/16 to 112 15/16, said the acquisition is expected to increase its earnings in the first year of combined operations.

TheStreet.com

took a look at what a merger between Ascend and Lucent would mean for

Cisco

(CSCO) - Get Report

, which lost 1 15/16 to 104 11/16.

Bergen Brunswig

(BBC) - Get Report

tumbled 5 1/2, or 16.9%, to 27 after announcing it will acquire

PharMerica

(DOSE)

in a stock swap valued at $1.4 billion. PharMerica hopped 5/8, or 9.7%, to 7 1/16.

SPR

(SPRI)

flew 2 3/8, or 13.5%, to 20 3/32 after

Metamor Worldwide

(MMWW)

agreed to acquire the company in a stock deal valued at $313 million. Each share of SPR will be exchanged for 0.8 of a share of Metamor stock. Metamor slid 2, or 7.1%, to 26.

Unitog

(UTOG)

soared 6 1/4, or 21.6%, to an all-time high of 35 5/16 after

Cintas

(CTAS) - Get Report

agreed to acquire the company in a stock swap valued at $350 million. Cintas skidded 4 3/4, or 6.6%, to 67 1/8.

Earnings/revenue reports and previews

AVX

(AVX) - Get Report

fell 1/8 to 16 3/4 after reporting third-quarter earnings of 7 cents a share, beating the five-analyst estimate by a penny but falling behind the year-earlier 38 cents a share.

Campbell

(CPB) - Get Report

slumped 6 7/8, or 13.2%, to an annual low of 45 3/8 after saying it expects 1999 earnings to come in 18 cents to 23 cents a share below estimates. The company announced cost-saving initiatives in its supply-chain operations, which it expects to result in annualized savings of about $100 million. The 16-analyst forecast called for $2.13 vs. the year-ago $1.90.

Deutsche Bank Securities

lowered the stock to hold from accumulate, and Merrill Lynch slashed it to near-term neutral from buy and to long-term accumulate from buy.

C-Cor Electronics

(CCBL)

jumped 3 1/8, or 20.3%, to 18 3/4 after saying it sees second-quarter earnings exceeding the single-analyst outlook for 16 cents a share. The company said it generated record bookings in its second quarter, with strong orders from North America and Asia. In the year-ago period, the company earned 17 cents.

Centura Banks

(CBC)

added 2 3/8 to 73 7/8 after reporting fourth-quarter earnings of 93 cents a share, a penny shy of the nine-analyst view but up from the year-earlier 89 cents.

E*Trade

(EGRP)

climbed 20 7/16, or 30.2%, to an all-time high of 88 1/2 after reporting a first-quarter loss of 23 cents a share, 7 cents narrower than the 11-analyst consensus but below the year-ago profit of 12 cents.

General Motors revved up 6, or 7.5%, to an all-time high of 86 1/16 after saying its fourth-quarter North American production figures totaled 1.5 million cars and trucks.

J.P. Morgan

raised the stock's 12-month price target to 95 from 90 a share.

Gillette

(G) - Get Report

brought in 6 1/2, or 14.2%, to 52 3/8 after saying it expects fourth-quarter earnings to be in line with the 15-analyst forecast for 39 cents a share vs. the year-ago 36 cents.

Pacific Gateway Exchange

(PGEX)

sliced off 14 3/4, or 32.2%, to 31 after warning fourth-quarter earnings will miss estimates. The 11-analyst view called for 32 cents a share vs. 19 cents a year ago.

Bear Stearns

cut the stock to neutral from buy,

Morgan Stanley Dean Witter

cut it to outperform from strong buy,

Goldman Sachs

cut it to market outperform from recommended,

BT Alex. Brown

cut it to buy from strong buy, and

Credit Suisse First Boston

cut it to hold from buy.

Theragenics

(TGX)

skidded 5 3/16, or 33.9%, to 10 1/8 after posting disappointing fourth-quarter sales and disclosing overcapacity of its TheraSeed radioactive seeds used to treat prostrate cancer.

Offerings and stock actions

Adelphia Communications

(ADLAC)

slipped 5/8 to 49 after agreeing to sell 8 million shares of stock at $43.25 a share.

Analyst actions

Disney

(DIS) - Get Report

shot up 2 11/16, or 8.3%, to 35 1/4 after

ING Baring Furman Selz

upped it to buy from hold and

PaineWebber

upped Disney's price target to 38 from 33 a share.

Gucci

(GUC)

stumbled 3 13/16, or 5.1%, to 71 1/16 after Credit Suisse First Boston lowered the stock to hold from buy.

IDT

(IDTC)

lowered 3 1/4, or 18.3%, to 14 1/2 after Credit Suisse First Boston downgraded it to hold from strong buy.

Miscellany

AmeriSource Health

(AAS)

rose 1 7/8 to 73 3/8 on news of a five-year contract worth $10 billion with the

Veterans Department

to provide prime pharmaceutical vendor services.

Blue Rhino

(RINO)

, which contracts with independent distributors to service and deliver propane cylinders to retailers, gave up 5 5/8, or 23.2%, to 18 5/8 after

The Wall Street Journal

said short-sellers are betting the stock could decline if investors focus on how the company reduced its inventory not long ago, thereby bumping its results before announcing plans last week to sell 2 million additional shares.

Echelon

(ELON)

soared 5 3/8, or 60.6%, to an all-time high of 14 3/8 after a demonstration on the company by Cisco.

Guidant

(GDT)

powered up 10 15/16, or 10.2%, to an all-time high of 117 15/16 after receiving approval from the

Food and Drug Administration

to market its

ACS RX Gemini

heart catheter in the U.S.

Merck dropped 3 1/8 to 150 11/16 despite word that the FDA assigned the pharmaceutical giant a six-month priority review for its application for

Vioxx

pain treatment.