Dow Cruises Higher but Techs Still Can't Get Going

Rotation continues to favor the cyclical side of the market, with big-cap techs and Net stocks suffering.
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After nearly evaporating from the (equity) market's consciousness in recent years, economic data suddenly matter again. As the

Employment Cost Index

and

GDP

figures were dominant features of trading last Thursday and Friday, respectively, so it is this morning with the

National Association of Purchasing Management's

index of business activity.

When a weaker-than-expected NAPM report hit the tape at 10 a.m. EDT, equity proxies overcame a lethargic start and pushed above break-even. The positive sentiment increased thereafter and sustained as lunchtime beckoned on Wall Street, but bellwether tech names were mixed and Internet favorites continue to struggle.

"I think NAPM is significant," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee. "I think there was some concern now that earnings season is pretty much over, the focus is back on rates. After Friday's higher-than-expected

GDP numbers, you saw bonds sell off and rates moving up and some money that came out of equities. This calmed some investors' fears we'd see a bump in rates this summer."

The

Dow Jones Industrial Average

was up 90 to 10,879 following an early decline as low as 10,756.11.

Cyclical favorites

Chevron

(CHV)

,

DuPont

(DD) - Get Report

and

Goodyear

(GT) - Get Report

were leading Dow gainers.

Overall, the once-abhorred cyclical stocks are maintaining their recent allure. The

Morgan Stanley Cyclical Index

was up 1.2%; the

S&P Chemical Index

higher by 2.4%; the

American Stock Exchange Oil & Gas Index

up 1.6%; and the

Philadelphia Stock Exchange Forest & Paper Products Index

up 2.7%.

The

S&P 500

was higher by 3 to 1338, overcoming an early dip to as low as 1329.83. The

Russell 2000

was up a fraction to 433.

Moreover, the

Dow Jones Transportation Average

was up 32 to 3679, the

Dow Jones Utility Average

was higher by 3 to 315 and the

American Stock Exchange Composite Index

was up 7 to 784; each is in shouting distance of respective all-time highs.

Bond prices remain lower but also climbed from early weakness after the NAPM report came in at 52.8. That's its third-consecutive month with a reading over 50, indicating an expanding manufacturing sector, but down from 54.3 in March and expectations for a reading of 54.5. The price of the 30-year Treasury bond lately was down 7/32 to 93 28/32, its yield rising to 5.68%. (For more on the fixed-income market, see today's early

Bond Focus.)

Meanwhile, the

Nasdaq Composite Index

was off 24 to 2519, near a session low after trading briefly in positive ground.

TheStreet.com Internet Sector

index was off 22 to 634, also near a low for the day.

Tech stalwarts such as

Microsoft

(MSFT) - Get Report

,

Cisco

(CSCO) - Get Report

and

Oracle

(ORCL) - Get Report

remain out of favor. The

Nasdaq 100

was off 0.7%.

Also, Internet giants such as

Amazon.com

(AMZN) - Get Report

and

Yahoo!

(YHOO)

continue to take on water.

However, the

Philadelphia Stock Exchange Semiconductor Index

was up 0.4%, thanks largely to

VLSI Technology

(VLSI)

, up 10.3% on word

Philips Electronics

(PHG) - Get Report

has raised its bid for the firm to $21 a share from $17. Phillips was up 3.7%.

In

New York Stock Exchange

trading, advancers were leading declining stocks 1,795 to 1,035 on 440 million shares. In

Nasdaq Stock Market

activity, gainers were leading 1,918 to 1,781 on 497 million shares. New 52-week highs were topping new lows 45 to 14 on the Big Board and 64 to 25 on the Nasdaq.

Strange Days, Indeed

Notwithstanding the positive tone and relative clam on Wall Street this morning, many traders are bracing for another week of zanity (zany

and

insane, that is). With the NAPM data out, many players are already looking ahead to Friday's April employment data as the next "big" number. Plus,

Warren Buffett is speaking today and when the Oracle speaks, even

E.F. Hutton

listens. Also,

MediaOne

(UMG)

has given

Comcast

(CMCSK)

(and its potential partners Microsoft and

America Online

(AOL)

) a Thursday deadline to counter

AT&T's

(T) - Get Report

huge buyout offer.

Then there's

Goldman Sachs'

(GS:NYSE) planned IPO tonight, which some have compared to the second coming and others to the coming of the bull market's apocalypse. All the hoopla -- and this reporter has been guilty of the "Goldman IPO = Market Top" viewpoint -- probably means the public sale of the venerable firm will likely end up being nothing more than another IPO, albeit a big one.

Meanwhile, some market players remain a bit unnerved by the wildness of

Friday's action. Although major equity proxies recovered smartly from a midafternoon selloff, some claim they caught a whiff of the ghost of bear markets past.

"The most interesting thing on Friday with the mini-selloff was there was no liquidity," said Samuel Ginzburg, managing director of equity trading at

Gruntal

. "People were trying to sell things like

General Motors

(GM) - Get Report

and you couldn't get out if you wanted to. It scared a lot of people I do business with."

Ginzburg acknowledged the market's comeback late Friday took some of the sting out of the session and admitted "it was pretty cool watching it." But, "I know there was fear" among investors unable to get out of "even relatively small positions" during the worst of the session, even in high-quality names like GM, the trader said. "There was a real lack of liquidity when people wanted to get out of long positions. That spooked me."

Monday's Midday Movers

By Heather Moore
Staff Reporter

A mild dose of merger news was moving a few acquisition targets but failed to create the usual Monday-morning buzz.

ABR Information Services

(ABRX)

was climbing 7 1/2, or 42.9%, to 25 after

Ceridian

(CEN) - Get Report

said it's buying the company for $25.50 a share in cash, or about $750 million. Ceridian was down 3/4 to 35 7/8.

Mercantile Bancorp

(MTL) - Get Report

was up 2 1/2 to 59 1/2 after

Firstar

(FSR)

agreed to buy the company in a $10.6 billion stock swap late Friday. Firstar was down 9/16 to 29 1/2.

As noted above, VLSI Technology was up 1 15/16, or 10.3%, to 20 3/4 after reaching a friendly pact to be acquired by Philips Electronics in a deal valued at about $1 billion, bringing Philips' nearly two-month hostile takeover attempt to an end. Philips will pay $21 a share for VLSI, a premium above its hostile bid valuing the chipmaker at $17 a share. Philips was up 3 3/16 to 88 5/16.

In other news:

American Management Systems

(AMSY)

was down 3 7/16, or 10%, to 31 after late Friday the

Mississippi State Tax Commission

canceled the company's work on the state tax automated revenue system. The state filed suit, alleging that American Management failed to deliver software conforming to the contract and seeking compensatory damages of $235 million and punitive damages of $750 million.

Carnival

(CCL) - Get Report

was up 1 7/8 to 43 3/4 after

Donaldson Lufkin & Jenrette

upgraded the stock to buy from market perform.

Delphi Financial Group

(DFG)

was up 7 11/16, or 24.7%, to 38 13/16 after announcing it sold its troubled Unicover Managers unit to former shareholders of the unit. Delphi Financial said it expects to breakeven on its purchase and subsequent sale of Unicover Managers.

Marimba

(MRBA)

, an Internet-based software management company, was up 11 1/4, or 18.5%, to 72 in its second day of trading.

Earnings/revenue movers

Cable Design Technologies

(CDT)

was down 1 15/16, or 13%, to 12 15/16 after late Friday warning its third-quarter earnings would fall 5 cents to 7 cents a share below the six-analyst

First Call

forecast of 35 cents. The company blamed the news on "an extremely slow February" and delayed programming. The company earned 34 cents in the year-ago period.

Circus Circus

(CIR) - Get Report

was up 3 13/16, or 18.1%, to 24 7/8 after predicting it will record first-quarter earnings of 40 cents to 42 cents a share thanks to strong occupancy rates and room-rate increases at its Las Vegas resorts. The 20-analyst consensus called for 25 cents vs. the year-ago 23 cents. Circus Circus also set a repurchase plan to buyback 15% of its outstanding shares.

Pillowtex

(PTX) - Get Report

was down 3 3/16, or 19.4%, to 13 1/4 after posting first-quarter earnings of 31 cents a share, 9 cents behind the seven-analyst outlook and below the year-ago 33 cents.

theglobe.com

(TGLO)

was up 6 3/16, or 10.3%, to 66 13/16 after recording a first-quarter loss of 47 cents a share, narrower than the year-ago 76 cents. The company said that during the quarter, its number of users increased to 10.2 million from 1 million a year ago, excluding the audience of recently acquired

Attitude Network

.