Disturbing Downturn Depresses Dow; Techs Trampled - TheStreet

Disturbing Downturn Depresses Dow; Techs Trampled

The second day of earnings season looked at lot like, well, the first day. Except worse.
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The Kinks, we hope tomorrow brings better things for those long. For today was again dominated by the sellers.

Stock proxies closed with substantial losses amid yet another disturbing downturn for bonds. The price of the 30-year Treasury bond fell 20/32 to 97 31/32, its yield rising to 6.28%, matching its 1999 peak.

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Message Boards.

Bonds were impacted by several influences, including the dollar's continued weakness and the supply of corporate paper from issuers such as

DuPont

(DD) - Get Report

. Fixed-income markets are also skittish ahead of this week's key economic data, including retail sales tomorrow and the

producer price index

report on Friday. (For more, see today's

Bond Focus).

Additionally,

Prudent Bear

fund manager David Tice -- author of the

Behind the Numbers

report -- expressed concerns about

Tyco International

(TYC)

, down 6.2% before being halted amid rumors of accounting irregularities. Tyco has reportedly denied that there are any problems with its accounting and plans to hold a press conference tomorrow morning.

The

Nasdaq Composite Index

-- just two-days removed from its record-setting close -- fell 71.16, or 2.5%, to 2801.27, amid the fallout from

last night's disappointing profit report from

Intel

(INTC) - Get Report

.

Intel declined 6% from

yesterday's New York close, leading a broad downturn in tech bellwethers. The

Nasdaq 100

shed 2.9%. The

Philadelphia Stock Exchange Semiconductor Index

fell 2.6%.

TheStreet.com Internet Sector Index

lost 31.97, or 4.4%, to 692.21. Additionally,

TheStreet.com Red Hots Index

was down 7.16, or 3.3%, to 209.30. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.

The story was much the same at the more traditional end of the tech spectrum.

IBM

(IBM) - Get Report

declined 4.3% to 105 5/16, below its 200-day moving average of 110.

Motorola

(MOT)

slid 4.8% after posting earnings in line with expectations last night. Profit warnings today from

Storage Tech

(STK) - Get Report

, down 24%, and

SAP

(SAP) - Get Report

, off 10.1%, further soured investors' demand for the group. The

Morgan Stanley High-Tech 35

shed 2.5%.

IBM was among the biggest drags on the Dow Jones Industrial Average, which fell beneath its 200-day moving average of around 10,385. The blue-chip index closed down 184.90, or 1.8%, to 10,232.16. The S&P 500 fell 27.49, or 2.1%, to 1285.55, below its 200-day moving average of 1312.38.

In addition to IBM,

J.P. Morgan

(JPM) - Get Report

and

American Express

(AXP) - Get Report

exerted big drags on the index. Financials in general were again sucker-punched by rising bond yields; the

Philadelphia Stock Exchange/KBW Bank Index

shed 3.3%. The

American Stock Exchange Broker/Dealer Index

fell 3.5%;

Bear Stearns

(BSC)

, down 8.7%, snapped a string of better-than-expected results from the group.

Meanwhile, commodity prices continue to rise, fueling inflation concerns. The

Bridge/Commodity Research Bureau

CRB index rose 2%. The price of crude gained 2.7% to $22.91 a barrel while gold rose 1.2% to $322 per ounce. Stocks in those industries bucked the downward trend today; the

American Stock Exchange Oil & Gas Index

climbed 0.9% while the Philadelphia Stock Exchange Gold & Silver Index rose 5.2%.

The

Russell 2000

declined 5.36, or 1.3%, to 419.32 amid another session of negative breadth accompanied today by accelerating volume.

In

New York Stock Exchange

trading, 821.8 million shares were exchanged while declining stocks whipped advancers 2,142 to 904. In

Nasdaq Stock Market

action 1.01 billion shares traded while losers led 2,582 to 1,357. New 52-week lows bested new highs 317 to 15 on the Big Board and by 137 to 46 in over-the-counter trading.

"It was more of a slow death than an immediate kill

but volume did sneak up to 800 million which is not like holiday trading," said Randy Billhardt, co-head of block trading at

PaineWebber

. "I put more credence

to a move as volume creeps up. I didn't feel like it was a disaster but I think some of the fundamentals people are starting to see are frightening."

The trader sees near-term support for the Dow at 10,150. With bond yields creeping toward 6.30% "there has to be real justification as to why we can maintain these lofty levels we've been trading at," either through a benign PPI report or blockbuster earnings news.

Meanwhile, the trader noted that trading itself is getting difficult, observing "liquidity in individual stocks is not high." For example, IBM traded nearly 15 million shares for the day but the average sized trade was 1200 shares, he said.

"If you want out of something, it's difficult to trade the stock," he said. "People want to buy 250,000 of IBM, yet they don't want to commit on any price. It's like Chinese water torture."

Earnings, Earnings, Earnings

Despite rising concerns about interest rates, Jack Ablin, managing director at

Colonial Asset Management

in Jacksonville, Fla. said earnings were the big catalyst for today's decline.

"The red flag is up on interest rates but everyone was looking for third-quarter earnings to justify valuations," he said. "So far, the bad news is outweighing the good."

Furthermore, disappointments are "coming from some large companies" such as Intel and

Raytheon

(RTN.B)

, which is "going to impact the indexes quite a bit," Albin noted.

The fund manager noted a recent report from

Salomon Smith Barney

showing stocks with $20 billion market caps are down an average of 20% from their highs, while those with $250 million caps are down an average of over 40%, he said.

Major indices "are just playing catch-up with the rest of the market," Ablin said. "IBM can't go on insulated from the rest of the market."

However, the market veteran believes the current selling represents the "last stage" and plans to "use this as an opportunity to be a little more optimistic." He met with clients yesterday who "have a lot of cash and say 'I want to put this to work. Let me know when you think the coast is clear.'"

Ablin plans to wait until after the

Federal Reserve's

mid-November meeting before giving the signal, but forecasts a strong year-end rally for stocks in conjunction with a reversal for bonds.

"I don't think there's a heck of a lot more downside in the bonds," he said, predicting 6.50% is the "worst case" for the long-bond's yield.

Colonial Asset Management is long IBM and Intel.

Among other indices, the

Dow Jones Transportation Average

lost 39.98, or 1.4%, to 2921.51; the

Dow Jones Utility Average

rose 0.90, or 0.3%, to 296.49; and the

American Stock Exchange Composite Index

fell 2.70, or 0.3%, to 789.41.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 12.26 to 7128.30 and the

Mexican Stock Exchange IPC Index

fell 125.30 to 5205.72.

Wednesday's Company Report

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Intel, after yesterday's close, posted third-quarter earnings of 55 cents a share, shy of the 23-analyst consensus estimate of 57 cents, but above the year-ago 45 cents a share.

TheStreet.com

wrote about Intel's earnings in a story

last night.

Credit Suisse First Boston

cut its per-share earnings forecast for 1999 on the chip giant to $2.23 from $2.31 and its 2000 forecast to $2.55 from $2.66, while, Meanwhile,

SG Cowen

sliced its Intel to neutral from buy. Intel fell 4 5/8, or 6%, to 72.

Consolidated Edison

(ED) - Get Report

, which slid 1/8 to 36 5/16, confirmed it's buying

Northeast Utilities

(NU)

, which climbed 7/16 to 21 11/16, for about $3.3 billion in cash and stock. Con Ed said it would pay $25 a share for Northeast. Northeast closed yesterday at 21 1/4. Con Ed CEO Eugene McGrath said in a teleconference with reporters that he expects the union to save $1.5 billion over the first 10 years.

Mergers, acquisitions and joint ventures

Chris-Craft Industries

(CCN)

, a TV-station operator, is exploring the sale of part or all of the company with companies including

CBS

(CBS) - Get Report

,

News Corp.

(NWS) - Get Report

and

Tribune

(TRB)

,

The Wall Street Journal

reported, citing people familiar with the talks. Shares of Chris-Craft jumped 7 1/4, or 12.3%, to 65 3/4.

Nokia

(NOK) - Get Report

slipped 1 3/16 to 97 1/16 after it said it was joining with

3Com

(COMS)

to develop pen-based wireless handheld computers. Shares of 3Com bounced 1 3/16 to 30 1/4.

Phelps Dodge

(PD) - Get Report

mounted 5/16 to 57 3/8 after it said stockholders authorized the issuance of new shares for the company's bids for

Cyprus Amax

(CYM)

and

Asarco

(AR) - Get Report

. Phelps CEO Douglas Yardley reiterated the company's decision not to raise its bid for Asarco. Phelps said it expects to finish the stock swap for Cyprus over the next week.

Earnings/revenue reports and previews

Abercrombie & Fitch plummeted 6 5/16, or 19.4%, to 26 3/16 after it announced it was suffering a decline in October sales, but it is still confident that it will post earnings in line with analysts' estimates. The company said in a statement that "strong back-to-school increases have been reduced somewhat by less favorable results from the company's regular October sales event." The 23-analyst estimate forecasts Abercrombie to report third-quarter earnings of 31 cents a share. Earlier today,

First Union

restated its buy rating on the stock

Bear Stearns

(BSC)

sank 3 1/2, or 8.7%, to 36 3/4 after it reported first-quarter earnings of $1 a share, 15 cents shy of the five-analyst estimate.

Bestfoods

(BFO) - Get Report

advanced 3/4 to 49 3/4 after it reported third-quarter earnings of 64 cents a share, above the 15-analyst estimate of 61 cents and up from the year-ago 56 cents.

Commerce Bancorp

(CBH) - Get Report

was unchanged at 42 after it posted third-quarter earnings of 58 cents a share, in line with the 10-analyst estimate and up from the year-ago 50 cents.

Delphi Automotive

(DPH)

slipped 5/16 to 15 13/16 after it reported third-quarter earnings of 24 cents a share, beating the 12-analyst estimate by a penny, and up from the year-ago pro forma 38-cent loss.

Dexter

(DEX) - Get Report

slipped 11/16 to 35 after it reported third-quarter earnings of 55 cents a share, in line with the two-analyst estimate, but below the year-ago 61 cents. The company said the latest quarter included a pretax charge of $3.9 million, or 8 cents a share, for a refund related to a supply contract with the

Department of Veterans Affairs

.

Ethan Allen

(ETH) - Get Report

added 2 1/8, or 7%, to 32 1/8 after it posted first-quarter earnings of 45 cents a share, better than the 12-analyst estimate of 43 cents and up from 38 cents a year ago.

W.W. Grainger

(GWW) - Get Report

gained 1 1/16 to 44 11/16 after it reported third-quarter earnings of 49 cents a share, a penny shy of the 12-analyst estimate and down from a year-ago 57 cents.

Hughes Electronics

(GMH)

mounted 7/16 to 65 11/16 after it reported a third-quarter loss of 13 cents a share, better than the 14-analyst estimate of a 16-cent loss, but down from the year-ago 11-cent profit.

Investment Technology Group

(ITG)

jumped 1 13/16, or 9.6%, to 20 11/16 after it reported third-quarter earnings of 34 cents a share, a penny below the four-analyst estimate and down from 45 cents a year ago.

Knight/Trimark

(NITE)

stumbled 5/8 to 24 3/8 after it posted third-quarter earnings of 19 cents a share, compared with a revised 10-analyst estimate of 18 cents, following the company's earnings warning. Pro forma year-ago earnings were 13 cents a share.

Motorola

(MOT)

fell 4 5/8 to 90 5/16 after it reported, after the close, third-quarter earnings of 53 cents a share, in line with the 27-analyst estimate and up from the year-ago 7 cents a share.

Separately, Motorola and

America Online

(AOL)

announced plans to launch a wireless instant messenger. Shares of AOL tumbled 2 3/4 to 111 1/4.

Riggs National

(RIGS) - Get Report

retreated 1/8 to 16 7/8 after it posted third-quarter earnings of 34 cents a share, beating the five-analyst estimate of 32 cents and the year-ago 29 cents.

Rowan

(RDC)

skidded 1 7/16, or 8.6%, to 15 1/8 after it reported third-quarter earnings of 1 cent a share, above the 24-analyst consensus of breakeven results, but down from a year-ago 38 cents. The company said third-quarter net fell on a $16 million contract dispute.

Separately, Rowan said it set plans for a 10 million-share offering, which will be managed by

Lehman Brothers

.

Time Warner

(TWX)

declined 1 1/8 to 62 3/16 after it posted third-quarter basic income of 8 cents a share, above the 13-analyst estimate of 4 cents a share, and up from the year-ago loss of 3 cents a share.

U.S. Trust

(UTC)

fell 2 to 82 13/16 after it posted third-quarter earnings of 93 cents a share, in line with the 7-analyst estimate and up from the year-ago 73 cents.

Valley National Bancorp

(VLY) - Get Report

skidded 3/8 to 25 1/2 after it reported third-quarter earnings of 45 cents a share, a penny better than the 8-analyst estimate and up from the year-ago 42 cents.

Offerings and stock actions

Fleet Boston

(FLT) - Get Report

has ditched plans for a possible spin off and IPO of

Suretrade

, its online brokerage unit, the

Journal

reported. Fleet Boston was stumbled 7/8 to 37 3/8.

Tyco

(TYC)

plummeted 7 3/8, or 7.1%, to 96 on speculation of possible accounting problems. Before the close, company had not responded to the rumors.

Analyst actions

Bob Evans Farms

(BOBE)

fell 3 7/8, or 19.6%, to 15 7/8 after DLJ cut the shares' rating to a market perform from a buy and set a price target of 22. Yesterday, the company warned investors that it sees second-quarter results below analysts' estimate of 42 cents a share.

Dial

(DL) - Get Report

mounted 1/2 to 23 5/16 after

Merrill Lynch

upped its rating to near-term buy from accumulate.

E-Tek Dynamics

(ETEK)

plummeted 4 1/16, or 6%, to 63 after

First Albany

upgraded its shares to accumulate from neutral, saying "the company has taken significant steps to address the shortage issue it faced last quarter." Yesterday,

TheStreet.com

reported on the company's

third-quarter results.

General Dynamics

(GD) - Get Report

slid 5 9/16, or 9.6%, to 52 1/8 after SG Cowen downgraded the shares to neutral from buy.

PaineWebber

(PWJ)

declined 1 13/16, or 5.1%, to 33 3/16 even after

Warburg Dillon Read

raised its fourth-quarter earnings estimate to 83 cents a share from 62 cents, while raising

Merrill Lynch's

(MER)

fiscal 1999 estimates to $5.60 a share from $5.50. The firm also upped its fiscal 1999 estimate on

Donaldson Lufkin & Jenrette

(DLJ)

, to $3.65 a share from $3.50. Shares of Merrill Lynch retreated 1 3/8 to 65 5/8, while DLJ sank 3 1/16, or 7.2%, to 39 3/8.

In other PaineWebber news, the Heard on the Street column in the

Journal

reports that as part of a criminal inquiry into pension fund investments made by the former Connecticut state treasurer, Paul Silvester, federal prosecutors are looking into PaineWebber's activities in the state. The paper cited people familiar with the matter.

Raytheon

(RTN.B)

tumbled 1 5/8, or 6.7%, to 22 5/8 after Lehman Brothers cut its fiscal 1999 estimate to $2.70 a share from $3.50, while Donaldson Lufkin & Jenrette sliced its rating to market perform from buy.

Sun Microsystems

(SUNW) - Get Report

1 1/16 to 89 3/8 after SG Cowen upped its first-quarter 2000 estimates to 31 cents from 29 cents a share and its fiscal 2000 estimates to $1.74 a share from $1.70.

Vitria Technology

(VITR)

advanced 2 7/8, or 5.2%, to 58 after Merrill Lynch rolled out coverage of the stock at near-term accumulate and long-term buy.

Ziff-Davis

(ZD)

unit

ZDNet

(ZDZ)

climbed 2 1/2, or 12.5%, to 22 1/2 after Goldman Sachs upped its rating to trading buy from market outperformer.

Miscellany

Philips Realty

(PHR) - Get Report

added 5/8 to 16 1/4 after it said it hired Prudential Securities to weigh strategic options for the company.

The

United Auto Workers

said 77% of its members approved a new four-year contract with

General Motors

(GM) - Get Report

. The agreement, which covers 172,000 hourly workers General Motors, and 48,000 at Delphi Automotive, calls for a 3% pay increase annually, over four years, a $1,350 signing bonus and higher pensions. Shares of GM retreated 5/8 to 65 3/8.