DOT Moves Into Positive Territory as IBM Keeps Weighing on Dow - TheStreet

DOT Moves Into Positive Territory as IBM Keeps Weighing on Dow

Net stocks have moved into the green and major indices are all off their lows, but negativity remains widespread.
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After a brief visit to the year-end rally thought to lie in its future, Wall Street has leapt back into its downbeat, hard-selling past.

Just when it started looking like the worries were overblown,


(IBM) - Get Report

earnings report brought Y2K woes back to the fore again, just a day after upbeat


(MSFT) - Get Report

sent market movers on a full-out buying spree.

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"The story is IBM," said Ronny Kraft, CEO of

Gotham Capital Management

, referring to IBM's plunge after warning investors that Y2K concerns could slow sales for its fourth-quarter and first-quarter fiscal 2000. "People are starting to wake up to the fact that there is going to be a slowdown in tech revenues as a result of Y2K. I think the fourth-quarter is going to be extremely challenging for all

tech companies. If you think this quarter is problematic, wait till you see the fourth quarter."

Kraft said earnings problems like IBM's aren't foreign to Wall Street, but this latest blow is one of the harshest. "There are so many companies that are blowing up:


(INTC) - Get Report






(XRX) - Get Report



(UIS) - Get Report



(STK) - Get Report






(DELL) - Get Report

and now IBM," said Kraft. "This is a continuous problem. The multiples that exist on these stocks are absurd in the context of continuous evidence of a slowdown for Y2K, not to mention the yield of the long bond is 6.3%."

Yesterday's booming market conditions made for some buy-happy investors, convinced that Microsoft's heyday might last for more than one session. But the market's return to negative territory has left yesterday's bullish buyers running for cover. "We're right back at where we were before yesterday," said Todd Clark, head of listed trading for

Volpe Brown Whelan

in San Francisco. "We're seeing a lot of short-covering after yesterday's big run-up in the over-the-counter market."


Dow Jones Industrial Average

was plummeting 133, or 1.3%, to 10,259, with IBM sinking 15 7/8, or 14.8%, to 91 1/16. IBM was hacking nearly 110 points out of the Dow, though, because it was down 21 11/16 from its New York close, on which the Dow is based. IBM lost some ground in late composite trading yesterday.

(For a look at mutual funds with the most exposure to IBM stock, click


The tech giant was helping to push the

Morgan Stanley High-Tech 35

down as well, 1.5%.

In other tech news, the

Nasdaq Composite Index

was losing 16, or 0.6%, to 2772, with

BMC Software


, down 6 13/16, or 11.3%, to 53 5/16, contributing to its negative stance.

But Internet Sector

index was actually in positive territory, up 5, or 0.7%, to 715 behind gains in

America Online






(AMZN) - Get Report

. The DOT's turn reflects a general improvement in the major indices despite their overall negative cast, with all measures of their worst levels of the session.

On the

Nasdaq Stock Market

, shares of



were skidding 9, or 13.7%, to 56 5/8 on disappointing third-quarter results.

On the upside,



was climbing 6 11/16, or 12.9%, to 58 11/16 with upgrades from

Bear Stearns


Warburg Dillon Read


On the

New York Stock Exchange


SmithKline Beecham

(SBH) - Get Report

was stumbling 7 1/2, or 11.1%, to 60 1/16 after receiving a negative opinion from the

European Union

on an antidiabetes drug, while


(NOK) - Get Report

was bouncing 6 15/16, or 7.3%, to 102 11/16 after its positive third-quarter earnings report.

Other major indices were dripping in red, with the broad

S&P 500

off 12, or 1%, to 1277, while the small-cap Russell 2000 was down 2, or 0.5%, to 412.

On the Big Board, decliners were leveling advancers 1,918 to 937 on 586 million shares, while on the Nasdaq, laggards were also edging out leaders 2,140 to 1,474 on 653 million shares. The new 52-week lows were pummeling the new highs on the NYSE, 243 to 16, while on the Nasdaq, lows were beating out the highs 126 to 74.

On the bond front, the benchmark 30-year Treasury was down 2/32 to 97 4/32, with its yield at 6.34%. (For more on the fixed-income market, see today's early

Bond Focus.)

Thursday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

IBM sank 15 7/8, or 14.8%, to 91 1/16 after it posted third-quarter earnings yesterday of 90 cents a share, in line with analysts' estimates and up from the year-ago 78 cents.

Worrisome to the market today, though, were the company's warnings about the end of this year and next year. IBM cautioned that soft spending by big clients before Y2K could dent profits for the fourth quarter of this year and the first quarter of fiscal 2000. IBM said its fourth-quarter earnings could dip 15 cents to 20 cents below the year-ago $1.24, leaving profits below the $1.33 consensus estimate. The company sees first-quarter 2000 earnings matching or slightly missing the year-ago 78-cent profit, also well short of analysts' consensus estimate of 90 cents a share.

Merrill Lynch

analyst Steve Milunovich downgraded the shares to an intermediate neutral, long-term buy from intermediate buy, long-term buy.

Lehman Brothers

cut the stock to outperform from buy and slashed its price target to 105 from 155.

Bear Stearns

cut its 1999 and 2000 earnings estimates on Big Blue.

Mergers, acquisitions and joint ventures

Bank of New York

(BK) - Get Report

fell 1/4 to 36 13/16 after it said it would buy the issuer, agency and depository services business of

Barclays Bank

in an effort to boost its global trust services and securities processing.

Liberty Media


slipped 1 to 36 5/16 after it announced its plans to acquire

Ascent Entertainment


in a stock transaction. Shares of Ascent jumped 2 11/16, or 21.3%, to 15 3/8 . Liberty said that Ascent shareholders would receive $513.6 million in Liberty shares, with Ascent valued at $17.26 a share.

Earnings/revenue reports and previews


Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.


America Online jumped 2 to 120 1/16 after late yesterday reporting first-quarter earnings of 15 cents a share on a fully taxed basis, beating the 32-analyst estimate of 13 cents and the year-ago 4 cents. Lehman Brothers raised its 2000 earnings estimates on the stock to 66 cents from 64 cents.


(CL) - Get Report

climbed 2 11/16 to 56 11/16 after it reported third-quarter earnings of 38 cents a share, a penny better than the 12-analyst estimate and up from the year-ago 33 cents.


(KO) - Get Report

inched up 7/8 to 53 5/8 after reporting third-quarter earnings of 32 cents a share, in line with the 16-analyst estimate, but down from the year-ago 36 cents a share.

El Paso Energy


edged up 1/16 to 41 1/8 after it posted third-quarter earnings of 50 cents a share, beating both the 13-analyst estimate of 48 cents and the year-ago 43 cents.


(GT) - Get Report

fell 1 11/16 to 43 1/8 after it reported third-quarter earnings of 61 cents a share including items. The six-analyst estimate called for earnings of 49 cents a share, while the year-ago figure was $1.17 a share, including a 20 cent gain.


(OMC) - Get Report

was unchanged at 74 11/16 after it posted third-quarter earnings of 39 cents a share, a penny better than the nine-analyst estimate and up from the year-ago 32 cents.


(MTC) - Get Report

climbed 3/4 to 39 after it posted third-quarter earnings of 9 cents a share, a penny below the 16-analyst estimate but up from the year-ago loss of 18 cents.


(VO) - Get Report

edged up 13/16 to 42 5/16 after posting a first-quarter loss of 22 cents a share, narrower than the 10-analyst estimate of a 32-cent loss but down from the year-ago 27-cent profit.


(S) - Get Report

fell 11/6 to 28 7/16 after it posted third-quarter operating net of 69 cents a share, beating the 16-analyst estimate but falling below the year-ago 76 cents. The company's third-quarter retail revenue fell 4.1%, to $6.8 billion from $7.09 billion a year ago, but it said it was encouraged by retail sales and gross margin improvements in September. Sears also said it would focus on cutting costs and investing in e-commerce.

Recently beleaguered



lost 2 3/8 to 86 after it reported fourth-quarter earnings of 92 cents a share, beating both the 15-analyst estimate of 89 cents and the year-ago 25 cents a share.



was soaring 33, or 27.7%, to 152 after reporting a third-quarter loss of 19 cents a share, 2 cents narrower than the 10-analyst expectation and narrower than the year-ago loss of 35 cents.

Banc of America Securities

upgraded it to strong buy from buy.

Offerings and stock actions



was surging 29 1/8, or 182%, to 45 1/8 in its trading debut.

Merrill Lynch

priced the 6 million-share IPO at $16 a share, above the $13-to-$15 range.


(AGN) - Get Report

inched up 5/16 to 108 1/4 after it set a 2-for-1 stock split, effective Dec. 9 for stockholders of record Nov. 18.



fell 3 1/4 to 81 9/16 after saying it plans to offer 20 million Class-A common shares in the U.S. and Canada, leaving the remaining 5 million up for grabs in other countries.

Morgan Stanley Dean Witter


Goldman Sachs

will serve as the deal's underwriters.


(NOK) - Get Report

jumped 4 15/16, or 5.2%, to 100 11/16 after it announced it would recommend canceling 64.28 million of its own shares and attempt to set a new stock buyback.

Analyst actions

Morgan Stanley Dean Witter cut its 1999 earnings estimates on


(AMGN) - Get Report

to $1.92 a share from $1.97. Amgen dropped 6 1/16 , or 7%, to 80.

CNF Transportation

(CNF) - Get Report

rose 5/8 to 31 1/8 despite Morgan Stanley's cutting its 1999 earnings estimates to $3.06 a share from $3.13.

Bear Stearns raised its 1999 estimates on Gateway to $1.43 from $1.40 and fiscal 2000 estimates to $1.82. Gateway jumped 5 7/8, or 11.3%, to 57 7/8.

United Airlines



(UAL) - Get Report

was down 5/16 to 60 11/16 even though

Donaldson Lufkin & Jenrette

upgraded it to buy from market perform and

Deutsche Banc Alex. Brown

reiterated a strong buy rating.


(UNM) - Get Report

was up 1 1/8 to 28 5/16 after Merrill Lynch upped it to near-term accumulate from neutral, while trimming earnings estimates, and

Salomon Smith Barney

raised it to buy from outperform.


Pratt & Whitney

, a unit of

United Technologies

said it received an engine contract from

America West Holdings'


America West Airlines

, worth about $500 million. Shares of UTX slipped 5/16 to 55 11/16.