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Cowed by Collapsing Rate Picture, Traders Again Scramble Into Value

Traders take the safe route as the crowd thins on a warm Friday.

Every once in a while during the

Danny White

era (and we shudder to use the term), the

Dallas Cowboys

would employ the "quick punt." That is, instead of gambling on third and long, they had White punt from the shotgun formation, playing for field position and putting their faith in the defense. White was an ex-punter so the strategy made some sense, but it was more an acknowledgement by

Tom Landry

(best wishes) that White was no

Roger Staubach

.

Faced with a third and long of their own today, financial-market participants have chosen (thus far, at least) the safe route, cautiously putting money to work in value plays while largely eschewing growth stocks, save pharmaceuticals, which are recovering from their recent sacking. The strategy won't get you killed but reminds us that White never got "America's Team" past the NFC championship game.

The most hotly anticipated economic report of the week, the

Producer Price Index

, came in right in line with expectations, up 0.2% overall and 0.1% excluding the volatile food and energy sectors. The relatively benign PPI gave markets an opportunity for a Hail Mary pass: As the morning unfolded,

Drew Pearson

appeared open behind the

Minnesota Vikings

defense. But persistent fears of a

Fed

rate hike and a stronger-than-expected

retail sales

report played

Ed "Too Tall" Jones

, blocking the passing lanes.

Once again, stocks were taking cues from the bond market and sliding in concert with fixed-income instruments as lunchtime beckoned on Wall Street. Bonds have returned the initial improvement from earlier lows, with traders apparently focusing on the retail sales data rather than PPI. The price of the 30-year Treasury bond was down 19/32 to 88 9/32, its yield rising to 6.11%.

The

Dow Jones Industrial Average

was lately down 42.74 to 10,578.89, having climbed as high as 10,675.41 early on, retreating as low as 10,605.44 and then rising again as high as 10,691.56. The

S&P 500

followed a similar pattern. The index was lately down 2.24 to 1300.49 after an initial rise as high as 1310.44, a quick slide to 1301.36 and a climb as high as 1311.91.

United Technologies

(UTX) - Get United Technologies Corporation Report

and

Johnson & Johnson

(JNJ) - Get Johnson & Johnson (JNJ) Report

were leading Dow gainers, while drug makers overall were helping the S&P 500. The

American Stock Exchange Pharmaceutical Index

was up 1.1%.

"The markets want to do better because of PPI, which was pretty benign, even though retail sales were higher than expected," said Jim Volk, co-director of institutional trading at

D.A. Davidson

. "People were spooked waiting for these numbers, and when they came out, the futures rallied and then went right back down. Right now, it seems like the tone in the equity markets is pretty decent. Some techs are weighing on the market, but there are pockets of strength like

Intel

(INTC) - Get Intel Corporation (INTC) Report

and

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

. People are buying cyclicals and the safer stuff, or what they perceive to be safer stuff."

Volk expects the "churning" within stocks to continue in the short term, given the "tug of war" in the bond market and a rising consensus that "rates are going to stay above 6% until we see which way the wind blows at the Fed."

Not surprisingly, growth stocks were struggling most in the wake of ever-rising bond yields. The

Nasdaq Composite Index

was off 18.48 to 2466.14, having recovered from a decline to as low as 2469.67 but well off its early high of 2506.19.

TheStreet.com Internet Sector

index was off 13.46, or 2.5%, to 556.62 following an initial uptick to 574.07.

For the third day running, semiconductor and related stocks were the best performers in tech; the

Philadelphia Stock Exchange Semiconductor Index

was down just a fraction from its early high of 445.38. Meanwhile, the

Nasdaq 100

was down 0.6% and the

Morgan Stanley High Tech 35

was off 0.7%.

Among chip stocks,

Lattice Semiconductor

(LSCC) - Get Lattice Semiconductor Corporation Report

was the standout, up 4.5% after

Morgan Stanley Dean Witter

reiterated a strong buy recommendation. Additionally,

TheStreet Recommends

Motorola

(MOT)

, which is a SOX component, was up 2.4% to 84 3/8.

Although better known for telecommunications equipment, Motorola derived 19% of 1998 revenue from its chip business. Meanwhile, the firm's stock has enjoyed a solid rally in recent months, rising from 63 1/2 on Feb. 17 to as high as 87 7/8 on June 4. It remains within earshot of its all-time best of 88 7/8.

"Motorla is a sleep-well-at-night technology name," said Scott Bleier, chief investment strategist at

Prime Charter

, who began recommending the stock last October and later named it among his top picks for 1999, which it remains. "It's a company that's not participated in this half of the decade's bull market and not subject to the whipsaws and volatility of so many other tech names because it hasn't gained 4,000%. Late last year, they really began to get their internal act together. Obviously, institutional investors who shirked the stock have come back in a big way and continue" to do so.

Bleier, who recently upped his target on the stock to 110 from 100, said he would continue to add new positions until 90 and buy on any near-term weakness. "It's about margin expansion -- hallelujah," he said. "Finally."

Clearly adding to the volatility was the continued meek audience participation.

In

New York Stock Exchange

trading, advancers were edging out declining stocks 1,365 to 1,356 on 352.7 million shares. In

Nasdaq Stock Market

activity, losers were leading 1,690 to 1,682 on 396.8 million shares.

Friday's Midday Movers

By Heather Moore
Staff Reporter

Ring-a-ding-ding, baby.

Phone.com

(PHCM:Nasdaq) was proving to be one of the most shagalicious Net IPOs in recent memory, warding off investor Dr. Evils who have (reasonably?) been trading initial offerings with a little less enthusiasm than a few months ago. PHCM lately was shimmying up 19 9/16, or 122%, to 35 5/8 after

Credit Suisse First Boston

priced its 4 million-share IPO above-range at $16 a share. The price range for the offering was raised to $14 to $15 from $10 to $12. Phone.com, formerly known as Unwired Planet, provides software for delivery of Internet services over wireless phones.

In other news:

CompUSA

(CPU)

was up 1, or 12.9%, to 8 3/4 after an unnamed New York money manager told

Business Week's

Inside Wall Street column that the company could reinvent itself as a technology superstore or be acquired by a big office-supply retailer, such as

Staples

(SPLS)

.

As noted above, Lattice Semiconductor was up 2 1/2 to 58 1/4 after Morgan Stanley Dean Witter restarted coverage with a strong buy.

MGM Grand

(MGG)

was up 3 5/8, or 8.4%, to 46 3/4 after last night approving a buyback of up to 6 million shares at 50 apiece.

SteriGenics

(STER)

was up 6 7/8, or 35.5%, to 26 1/4 after Belgian particle accelerator maker

Ion Beam Applications

agreed to acquire the company for $27 a share, or $214 million.

TriQuint Semiconductor

(TQNT)

was up 1 13/16 to 59 9/16, off an earlier high of 61 1/4, after last night setting a 3-for-2 stock split.

Viacom

(VIA.B)

was up 1 7/8, or 5%, to 39 11/16 after

Merrill Lynch

lifted the stock's Class B shares to long-term buy from accumulate.

Earnings/revenue movers

CMGI

(CMGI)

was down 10 1/8, or 10%, to 91 3/8 after the Internet venture firm last night posted a third-quarter operating loss of 29 cents a share and a net loss of 30 cents. The seven-analyst forecast called for a quarterly loss of 13 cents, reversing year-ago earnings of 9 cents a share.

TheStreet.com

listened to the company's conference call last night.

Federal Signal

(FSS) - Get Federal Signal Corporation Report

was down 3 5/8, or 14.7%, to 21 1/8 after warning its second-quarter earnings will come in around 30 cents a share, below the four-analyst forecast for 38 cents. The emergency vehicle and safety and signaling products maker blamed weakness in certain industrial markets and lower-than-expected productivity in its fire rescue vehicle unit.

Harbinger

(HRBC)

was up 1 15/16, or 18.6%, to 12 3/8 after last night saying its second-quarter earnings would meet or beat the 14-analyst estimate of 7 cents a share thanks to strong revenue growth. The e-commerce software provider made a dime in the year-ago quarter.

VF

(VFC) - Get V.F. Corporation Report

was down 3 1/8, or 6.8%, to 43 1/16 after last night saying it sees second-quarter earnings, excluding charges, coming in flat with the year-ago second quarter, when the company made 69 cents a share. The six-analyst estimate called for 75 cents. The maker of

Lee

and

Wrangler

jeans blamed a "difficult" European market and shipping difficulties. Today,

Prudential Securities

slashed the stock to accumulate from strong buy.