In a reversal of fortune that would cheer the cold heart of

Claus von Bulow

, stocks abandoned a sunny morning of gains in favor of a fogbound, disappointing finish.

Dell

(DELL) - Get Report

summed up the session, trading as high as 94 3/8 and as low as 85 15/16 on its way to a loss of 1 1/8 to 88 3/4. The PC stalwart, set to report its hotly anticipated fourth-quarter earnings after the bell, saw a market-leading 48.9 million shares change hands.

As Dell went, so went the

Nasdaq Composite Index

. The capitalization-weighted measure, largely controlled by the trading of Dell and a handful of other tech behemoths, rose as much as 46.52 to 2368.41 in the first 40 minutes of trading. The Comp then went into a steady decline that leveled off around 2 p.m. EST, and it cruised underwater to a closing loss of 8.02 to 2313.87.

(Minutes after the close, Dell reported earnings that met estimates and revenue that missed expectations. The stock reportedly plunged 11 3/4 to 79 in after-hours trading, even though Dell set a 2-for-1 stock split.)

Dell wasn't the only big tech stock under pressure ahead of a postclose report.

Hewlett-Packard

(HWP)

dipped below break-even just before 11 a.m. and finished down 3 3/16 to 73 1/4. That helped send the

Dow Jones Industrial Average

, once up 112.77 to 9387.66, to a gain of just 22.14 to 9297.03. Only

Alcoa

(AA) - Get Report

did worse than H-P among the gilded 30, while

Merck

(MRK) - Get Report

and

Wal-Mart

(WMT) - Get Report

led on the upside.

(Right after the close, H-P reported first-quarter earnings that beat estimates by 9 cents a share. But the company said it sees a "tough" year-over-year comparison coming in the current second quarter.

TheStreet.com

previewed the Dell and H-P reports in a

story this morning.)

The

S&P 500

enjoyed a more solid session, rising 11.74 to 1241.87. The

Russell 2000

remained pathetic, losing 2.04 to 396.40. The small-cap index is trading around its July 1997 levels.

Internet stocks suffered heavy losses, led by

Yahoo!'s

(YHOO)

steep drop of 17 3/4, or 11.8%, to 133 3/8 on news that cofounders David Filo and Jerry Yang slightly lightened their stakes.

TheStreet.com Internet Sector

index lost 11.35, or 2.4%, to 471.83 and

TheStreet.com E-Commerce Index

fell 0.93, or 0.9%, to 99.23.

America Online

(AOL)

countered the trend, gaining 1/2 to 159.

Market internals were sick and sorry.

New York Stock Exchange

decliners nudged past advancers 1,533 to 1,525 on a low 653.8 million shares, with 115 new 52-week lows swamping 29 new highs. On the

Nasdaq Stock Market

, 2,301 decliners topped 1,748 advancers on 824 million shares. New Nasdaq lows outpaced new highs 86 to 40.

Good News from Japan Goes Unheeded

Positive news out of Japan

this morning set the stage for a big Treasury rally. That's just what the market got, although bonds struggled at midsession along with equities. But when the long bond came back, surging 1 5/32 to 98 19/32 and dropping its yield to 5.34%, stocks failed to follow.

"If you use the common expression 'Where's the line of least resistance,' based on the last few weeks you'd have to say down, not up," said Hugh Johnson, chief investment officer at

First Albany

. "It's particularly disturbing today because we had what appears to be good news. It appears that Japan is going to begin to monetize its debt. That led to a strong dollar and a strong flow of money to the U.S. market from other markets."

The stock market's failure to respond to good news from a crucial region reflects deep-seated worries about valuation, Johnson said. "Technicians, small investors, large investors are looking at the same things, and their worries are intensifying," he said. "They notice that stocks are overvalued, particularly large-cap technology stocks. ... From my point of view, based on the numbers I do, the stock market is 9% overvalued, which tells me that if there is a correction or decline, it will either be a lot less than 9% or a lot more than 9%. My guess is 9%, but I'll be wrong. I just don't know if I'll be too bullish or too bearish."

Johnson cited his work on leading economic indicators with the

Foundation for International Business & Economic Research

, affiliated with

Columbia University

, as another ominous sign for the U.S. market. "It's troubling when the leading indicators for both Europe and Asia are still pointing down," he said. The indicators are designed to forecast six months to a year hence.

Charles Crane, chief market strategist at

Key Asset Management

, shared Johnson's concerns about overvaluation. "Add on top of that the degree of speculation evident in the Internet stocks and you've got the fingerprints of another August-September potential swoon," Crane said. "What's different today is you have a

Fed

that has been accommodative and you also have the seasonal cash surge that is usually a boost to the market in the early part of the year."

Given those mitigating factors, Crane sees the market trading raggedly in a narrow range for the next two or three months. "I don't see August in the near future, but I also don't see us surging to 10,000 in the near future," he said.

Among other indices, the

Dow Jones Transportation Average

rose 23.87 to 3120.76, the

Dow Jones Utility Average

improved 1.77 to 288.21 and the

American Stock Exchange Composite Index

slipped 0.28 to 695.84.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

lost 61.10, or 1%, to 6386.48 and the

Mexican Stock Exchange IPC Index

jumped 55.44, or 1.4%, to 4159.04.

Tuesday'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.

)

Wal-Mart flew 3 3/16 to an all-time high of 87 9/16 after reporting fourth-quarter earnings of 70 cents a share, topping the 20-analyst estimate by 3 cents and moving ahead of the year-ago 57 cents. Sales for the quarter rose to $40.8 billion from the year-earlier $35.4 billion.

On the flip side,

Pediatrix Medical

(PDX)

sliced off 1 5/8, or 5.8%, to an annual low of 26 3/8 after the physician practice-management company on Friday said it may restate 1998 earnings and is no longer backing analysts' fourth-quarter earnings estimates. Today,

Morgan Stanley Dean Witter

lowered the stock to neutral from outperform, and

BT Alex. Brown

cut it to market perform from buy. The stock fell about 48% in composite trading late Friday afternoon.

Mergers, acquisitions and joint ventures

American Safety Razor

(RAZR)

powered up 3 7/8, or 39.2%, to 13 3/4 after agreeing to be acquired by privately held

J.W. Childs Equity Partners

for $14.13 a share or about $173 million in cash.

ASA Holdings

(ASAI)

, the parent of

Atlantic Southeast Airlines

, jumped 1 7/8, or 5.9%, to 33 3/4 after

Delta

(DAL) - Get Report

announced it's buying the company for $34 a share in cash or about $700 million. Delta slipped 1/16 to 52 1/2.

Separately,

Baan

rose 9/16, or 6.3%, to 9 5/8 after agreeing to license its 1,200 seats of its BaanFrontOffice software for sales automation to Delta. Financial terms were not disclosed.

Compaq

(CPQ)

slid 3/16 to 42 13/16 after announcing it's buying

Zip2

, a privately held company that provides Internet platform solutions for media companies and local e-commerce merchants, as part of its goal to make

AltaVista

the leading Internet destination site.

Hudson General

(HGC)

picked up 2 1/2 to an all-time high of 76 after a unit of

Deutsche Lufthansa

agreed to buy the company for $76 a share in cash.

Navistar

(NAV) - Get Report

, the U.S. truck and engine manufacturer, shot up 7 1/8, or 20.2%, to an annual high of 42 3/8 after

Financial Times

reported that Sweden's

Volvo

(VOLVY)

is considering making the company a takeover offer in a move that could more than double Volvo's share of the North American truck market. Earlier this month, Volvo, which dropped 3/4 to 26 7/8, agreed to sell its car division to

Ford

(F) - Get Report

. Chicago-based Navistar has a market capitalization of $2.3 billion, meaning that a buyer would probably have to pay at least $3 billion to take full control of the company, the newspaper said.

Shoe Pavilion

(SHOE)

hopped 31/32, or 16.2%, to 7 1/16 on news America Online will link to the company's Web site at the apparel department of AOL's shopping channel. AOL lifted 1 to 159 1/2.

In related news,

Egghead.com

(EGGS)

took in 1 3/8, or 7.9%, to 18 7/8 after announcing it will be the main software merchant on

Microsoft's

(MSFT) - Get Report

MSN Shopping

. Microsoft lowered 1 9/16 to 156 1/4.

XL Capital

(XL) - Get Report

, a Bermuda-based insurer, skidded 13/16 to 59 11/16 after saying it is buying

NAC Re

(NRC) - Get Report

, a U.S. reinsurer. Under the deal, NAC shareholders will receive 0.9 of a XL share for each NAC share. NAC Re brought in 2 3/16 to 52.

Earnings/revenue reports and previews

Barclays

(BCS) - Get Report

scored 6, or 5.9%, to 108 after making bullish forecasts for strong revenue growth in 1999. Rival U.K. bank

National Westminster

(NW)

popped 13 11/16, or 11.7%, to an all-time high of 131 1/16 in sympathy.

Deere

(DE) - Get Report

added 1/2 to 33 1/8 after posting first-quarter earnings of 21 cents a share, beating the 16-analyst estimate of 16 cents but falling below the year-ago 81 cents.

Family Golf Centers

(FGCI)

tanked 5 5/8, or 43.1%, to an annual low of 7 1/2 after warning it expects fourth-quarter earnings of 3 cents to 5 cents a share, below estimates, because of lower revenue at sites acquired during the year. The 10-analyst forecast called for 11 cents vs. the year-ago 9 cents.

Inter-Tel

(INTL) - Get Report

slipped 3, or 13.2%, to 19 13/16 after late yesterday reporting 17.5% fourth-quarter revenue growth. Analysts were expecting 20% plus.

McDonald's

(MCD) - Get Report

picked up 1/2 to 81 13/16 after announcing its free cash flow rose to $887 million in 1998 from $331 million in 1997.

Sharper Image

(SHRP)

expanded 1 1/4, or 8.9%, to 15 1/2 after recording fourth-quarter earnings of $1 a share, in line with the single-analyst estimate and up from the year-ago 67 cents. The company said it plans to expand its cyberspace operations and will open an online auction site this month.

In other earnings news:

Offerings and stock actions

Mannatech

(MTEX) - Get Report

, a nutritional supplement company, soared 14 3/4, or 184.3%, to 22 1/2 in its IPO. Elsewhere,

Prodigy

(PRGY)

, one of last week's market newcomers, climbed 13 1/2, or 38.1%, to 49.

Analyst actions

C.R. Bard

flourished 2 3/16 to an all-time high of 53 1/2 after

Bear Stearns

lifted the stock to buy from neutral.

Hyperion Solutions

(HYSL)

declined 1 1/4, or 7.5%, to 15 7/16 after BT Alex. Brown slashed it to market perform from buy.

Spacehab

(SPAB) - Get Report

plunged 3/4, or 8.8%, to 7 15/16 after

Credit Suisse First Boston

downgraded it to hold from buy.

Yahoo! gave up 17 3/4, or 11.8%, to 133 3/8 despite an upgrade to buy from neutral at

Volpe Brown Whelan

. As noted above, news that co-founders David Filo and Jerry Yang lowered their stakes a bit hurt the stock.

Miscellany

Oxigene

(OXGN)

tumbled 15/16, or 10.5%, to 7 7/8 on word the company discontinued the development of

Neu-Sensamide

, a DNA repair inhibitor project, to focus on products with greater commercial promise.

Philip Morris

(MO) - Get Report

wasn't helped from its sorry state any by news it passed the antitrust waiting period on its purchase of three

Brooke Group

brands. MO lost 13/16 to 39 5/8 while Brooke tacked on 1/8 to 19 3/8.

SCM Microsystems

(SCMM)

spiked up 12 1/8, or 15%, to an all-time high of 93 5/8, with some analysts attributing the pop to short-sellers covering their positions ahead of the company's fourth-quarter earnings announcement next week.