Can't Lay Off 'Em: Wall Street's Appetite for Net Stocks Still Unsated
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 Intel Corporation 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 Dell Technologies Inc. Class C Report
TheStreet Recommends
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
undefined
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 General Motors Company Report
, up 7.9%, helped prevent a steeper decline for the Dow.
Merck
(MRK) - Get Merck & Company Inc. Report
and
Exxon
(XON) - Get Intrexon Corporation 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 International Business Machines Corporation 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 CBS Corporation Class B 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 Ascendis Pharma A/S Report
grew 5 3/16, or 7.3%, to an all-time high of 76 11/16 on word
Lucent
(LU) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report
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 Cisco Systems Inc. Report
, which lost 1 15/16 to 104 11/16.
Bergen Brunswig
(BBC) - Get Virtus LifeSci Biotech Clinical Trials ETF 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 Cintas Corporation 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 AVX Corporation 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 Campbell Soup Company 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 Genpact Limited 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 The Walt Disney Company 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.
