Downbeat Chatter Feeds an Ugly Session

Market mavens took out their big sticks and helped to bash stocks lower in a light-volume drubbing.
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If

Oscar De La Hoya

can score a TKO with a (near-)broken left hand, it's not surprising to see some (relatively) healthy analysts inflict serious damage on the stock market in a preholiday week amid modest volume. A cadre of analysts took shots at two of the market's leaders -- financials and technology -- and with its head cut off, the market's body withered.

Technology stocks suffered the brunt of the damage today. The

Nasdaq Composite Index

fell 66.48, or 2.6%, to 2453.66.

TheStreet.com Internet Sector

index tumbled 46.70, or 7.5%, to 576.68 after Ralph Acampora, chief technical analyst at

Prudential Securities

issued some cautious comments on Net favorites.

"There's a lot of rotation going on," Acampora told

TheStreet.com

. "This morning was another group call. I said former leaders are under pressure and some Internet stocks look like they're rolling over."

Specifically, the technician said

America Online

(AOL)

could fall as low as 90 if it breaks through 112, which -- coincidentally -- is also the key support level for

@Home

(ATHM) - Get Report

. Plus, "I wouldn't want to see

Infoseek

(SEEK)

below 41," he said.

AOL closed down 5.4% to 119 9/16, @Home shed 11.3% to 115 7/16, and Infoseek lost 5.7% to 42 7/8.

More troubling,

Yahoo!

(YHOO)

and

Excite

(XCIT)

each breached Acampora's key levels of 146 and 130, respectively.

Yahoo! fell 8.8% to 137 7/8 and Excite closed off 11.2% to 118 1/16.

Other Net leaders, such as

Amazon.com

(AMZN) - Get Report

and

CMGI

(CMGI)

, tumbled in concert, as did secondary plays such as

eToys

(ETYS)

and

TheStreet.com Inc.

(TSCM)

, the publisher of this Web site.

'Amazon.com, Yahoo! and CMGI are all 100 points off their highs,' said Gotham Capital's Ronny Kraft. 'Acampora downgrading the Internets now is like warning the guy that got run over by a train that the train is coming.'

Conversely,

Customtracks

(CUST)

jumped 26% and

Hauppage Digital

(HAUP)

gained a further 11%.

Still, some market players said Acampora's negative Net call is too little, too late.

"The Internets have been pulling back viciously since the end of April. Amazon.com, Yahoo! and CMGI are all 100 points off their highs," said Ronny Kraft, CEO of

Gotham Capital Management

, who is short AOL, CMGI and Amazon.com (among others). "Acampora downgrading the Internets now is like warning the guy that got run over by a train that the train is coming."

Kraft said "a lot of stocks are coming into major

support areas," citing

Intel

(INTC) - Get Report

and

Dell

(DELL) - Get Report

as prime examples.

"If Intel breaks 55 it's going to be ugly," he said, dubbing Dell's weakness "stifling."

Intel fell 1.9% to 55 15/16 while Dell slid 3.4% to 36 1/8.

Meanwhile, Thomas Galvin, chief investment officer at

Donaldson Lufkin & Jenrette

, issued some negative comments about tech stocks today (as reported in the

Midday Musings).

Tech leaders fell in near-unanimity, notably

IBM

(IBM) - Get Report

,

Cisco

(CSCO) - Get Report

and

Hewlett-Packard

(HWP)

, which fell 4.1% despite announcing a $2 billion stock buyback program

late Friday. The

Morgan Stanley High-Tech 35

fell 2.9% while the

Nasdaq 100

shed 2.6% and the

Philadelphia Stock Exchange Semiconductor Index

lost 3.3%.

Blue-Chip Blues

IBM and H-P were the biggest drags on the

Dow Jones Industrial Average

, which fell 174.61, or 1.6%, to 10,654.67 after trading as high as 10,856.42 early on. The

S&P 500

shed 23.64, or 1.8%, to 1306.65 and the

Russell 2000

dipped 8.75, or 2%, to 440.39.

In addition to flagging techs, the Dow and S&P were sideswiped by weakness in financials. Citing Y2K concerns, among others,

Credit Suisse First Boston

downgraded

Citigroup

(C) - Get Report

,

Chase

(CMB)

,

J.P. Morgan

(JPM) - Get Report

and

Bank One

(ONE) - Get Report

to the rarely used sell recommendation. The brokerage simultaneously downgraded

BankBoston

(BKB)

to hold from buy.

Citigroup and Chase each fell about 4%, leading the

Philadelphia Stock Exchange/KBW Bank Index

down 2.4%.

Seperately, airline stocks tumbled after

BT Alex. Brown

downgraded the group; the

American Stock Exchange Airline Index

slumped 3.4%.

Finally, energy stocks weakened amid a dip in crude prices; the

American Stock Exchange Oil & Gas Index

fell 2.3% while the

Philadelphia Stock Exchange Oil Service Index

lost 4.7%.

Utilities were the lone positive standout today. The

Philadelphia Stock Exchange Utility Index

rose 1.3% while the

Dow Jones Utility Average

rose 2.28, or 0.7%, to 327.43.

In

New York Stock Exchange

trading, 754.7 million shares were traded while declining stocks whipped advancers 2,036 to 948. In

Nasdaq Stock Market

activity, 925 million shares were exchanged while losers led 2,638 to 1,368. New 52-week highs led new lows 55 to 43 in Big Board activity and by 88 to 53 in over-the-counter trading.

Staying the Course of 1000 Points of Light

Despite the selloff, most market players were largely undisturbed.

Acampora, for one, said cautiousness on Net leaders is "not a market call," predicting the Dow will be trading well above 10,000 six months hence.

"I'm long-term bullish and have been for some time," he said. "The market today around 11,000 is completely different than when we crossed 10,000 and everyone was moaning and saying the market was too narrow."

Portfolio managers are now coming to the realization the shift to small- and mid-cap stocks, as well as cyclicals, is "for real," Acampora said. "Portfolio managers are starting to sell older leadership, which is causing weakness in leading averages. This is a normal, long-overdue pause for old leaders and an opportunity

for investors to shift horses. It's tweaking time."

Even Kraft, largely bearish in recent weeks, described the session as a "healthy correction in the context of a strong market over the last few months."

The hedge fund manager predicted the market will be "range-bound" for the next few months. But while the 9100-to-9500 trading range earlier in the year was "resolved to the upside," he expects the current range will be "resolved to the downside."

Speaking of ranges, Scott Bleier, chief investment strategist at

Prime Charter

, noted the S&P 500 broke through its recent 1320-to-1365

trading range. Furthermore, it's "obvious" the market is undergoing a fairly serious correction, Bleier said.

Since markets rarely do as expected, the strategist is looking for a near-term reversal.

"I think we're going to bounce at some point and rally into the Memorial Day weekend," he said. "The market loves to rally into flag-waving holidays."

Among other indices, the

Dow Jones Transportation Average

fell 77.46, or 2.2%, to 3473.80 and the

American Stock Exchange Composite Index

added 9.96, or 1.3%, to 785.41.

The price of the 30-year Treasury bond rose 4/32 to 92 25/32, its yield steady at 5.76%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

slid 8.89 to 6965.97 and the

Mexican Stock Exchange IPC Index

tumbled 140.71, or 2.5%, to 5498.79.

Monday'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.

)

Wall Street today was kind of like that

Ray Bradbury

story

All Summer in a Day

. Except a) it was New York, not Venus b) everyone, not just Margot, felt the bitter cold of the rain, and c) it didn't seem like anybody anywhere was happy or enjoying any sun. But the bleak gray despair? Check, had that baby covered.

Most notably caught in the rain were the financial stocks, which felt reverberating pressure from an aforementioned downgrade to sell from hold on four bank names. The culprit? Michael Mayo, a bank analyst at Credit Suisse First Boston, who cited Y2K worries for his slashing. Bank One fell 1 5/16 to 58 1/2, off an earlier low of 56 5/16; Citigroup fell 2 11/16 to 65 1/8, off an earlier low of 64 1/8; Chase Manhattan fell 3 1/16 to 75 7/8; and J.P. Morgan fell 1 15/16 to 136 3/4, off an earlier low of 135 1/2. BankBoston, lowered by Credit Suisse to hold from buy, fell 1 11/16 to 46 3/4.

Mergers, acquisitions and joint ventures

Avis

(AVI)

tanked 7 3/8, or 20.9%, to 28 on word it's acquiring

Cendant's

(CD)

PHH

and

Wright Express

vehicle-management and fuel-card businesses in a deal valued at $1.8 billion. Cendant added 11/16 to 19 7/8.

Bank of Ireland

(IRE)

picked up 4, or 5%, to 83 1/2 after confirming merger talks with

Alliance & Leicester

.

Telecom Italia

(TI)

skidded 9 13/16, or 9%, to 99 3/16 after

Merrill Lynch

sliced it to near-term accumulate from buy. Following

Olivetti's

successful takeover agreement with the company Saturday, Italian Prime Minister Massimo D'Alema said Olivetti seemed willing to examine a merger with

Deutsche Telekom

(DT) - Get Report

. That's not what Olivetti seemed to be saying

yesterday, though. DT lowered 5/16 to 39 3/16.

Texas Micro

(TEXM)

swelled 1 1/2, or 32.4%, to an all-time high of 6 1/8 after

RadiSys

(RSYS) - Get Report

agreed to acquire it in a stock swap valued at about $115 million. Texas Micro shareholders will exchange four shares for one RadiSys share. RadiSys slipped 3 1/4, or 9.6%, to 31.

Varlen

(VRLN)

slid 1/4 to 37 1/16 after privately held

Amsted Industries

began a $35-a-share tender offer for the company.

Ziff-Davis

(ZDZ)

dropped 2 1/4, or 9.2%, to an annual low of 22 3/16 after saying it's considering selling

ZD Market Intelligence

, its technology sales and marketing services unit. The company has hired

Morgan Stanley Dean Witter

as an adviser.

Earnings/revenue reports and previews

American Medical Security Group

(AMZ)

collapsed 4 7/8, or 35.5%, to 8 7/8 after saying it will post a second-quarter charge of $6 million, or 36 cents a share, to strengthen its medical claims reserves. American said it expects full-year earnings to fall below the four-analyst forecast of $1.11 a share.

Engineered Support

(EASI) - Get Report

closed flat at 13 3/8 after posting second-quarter earnings of 34 cents a share, in line with the five-analyst forecast and above the year-ago 27 cents.

Jo-Ann Stores

(JAS.A)

closed unchanged at 16 1/16 after reporting first-quarter earnings of 12 cents a share, a penny ahead of the single-analyst estimate but down from the year-ago 15 cents.

Motorcar Parts & Accessories

(MPAA) - Get Report

plunged 4 1/16, or 36.9%, to an all-time low of 7 after saying it sees a "significant" loss for its fourth quarter and possibly for the entire fiscal year. The single-analyst view called for earnings of 37 cents for the fourth quarter, vs. the year-ago 29 cents, and $1.07 for the year, vs. the year-ago $1.16.

ResortQuest

(RZT)

dwindled down 6 1/8, or 41.5%, to 8 5/8 after saying it expects to post second-quarter earnings of 10 cents to 14 cents a share due to an increase in general and administrative expenses. The six-analyst forecast called for 18 cents vs. the year-ago 7 cents.

Vlasic Foods

(VL)

tacked on 1/8 to 8 1/8 after recording third-quarter earnings of 15 cents a share, missing the eight-analyst estimate by 1 cent but beating the year-ago dime.

Offerings and stock actions

IPC Information Systems

(IPI) - Get Report

grew 8 1/2, or 17.5%, to an all-time high of 57 after its

IXnet

unit late Friday announced plans to raise $185.4 million in an IPO. IXnet provides managed communications services to the global financial community and hopes to trade on the Nasdaq under the symbol IXNT.

Metamor Worldwide

(MMWW)

flew 4 3/8, or 19%, to 27 1/2 on word it plans to sell 20% of its e-commerce unit through an IPO and that it plans to sell its project support business.

Goldman Sachs

added Metamor to its recommended list from market outperform.

Analyst actions

As was the case with bank names, an analyst downgrade was to blame for painting airline stocks red.

UAL

(UAL) - Get Report

lost 2 1/4 to 72 1/8,

Alaska Air

(ALK) - Get Report

lost 2 1/8, or 5.3%, to 38 1/8 and

Comair Holdings

(COMR)

lost 5/8 to 19 5/8 after

BT. Alex Brown

cut them to market perform from buy.

AMR

(AMR)

lost 2 3/16 to 64 3/16 after the firm cut it to market perform from strong buy.

Continental

(CAL) - Get Report

lost 1 1/8 to 40 after the firm cut it to buy from strong buy.

SkyWest

(SKYW) - Get Report

lost 3/8 to 23 9/16, seemingly torn between paying attention to BT Alex. Brown's dropping its stock to buy from strong buy and a solid earnings report. SkyWest posted fourth-quarter earnings of 45 cents a share, topping the nine-analyst outlook by 10 cents and moving ahead of the year-ago 26 cents.

CustomTracks shot up 16, or 26.3%, to an all-time high of 76 after

Joseph Charles

set a one-year price target of 230 a share.

Ingram Micro

(IM)

slid 1 1/2 to 29 1/2 after

SoundView Technology

raised it to buy from hold.

Texas Instruments

(TXN) - Get Report

gave up 3 1/2 to 109 1/2 even after Prudential Securities lifted it to strong buy from accumulate.

Miscellany

CheckFree

(CKFR)

declined 1 3/8 to 47 and

Intuit

(INTU) - Get Report

declined 2 15/16 to 76 1/8 after resolving a lawsuit filed last March. Neither party will make a payment in the out-of-court settlement.

Hyseq

(HYSQ)

vaulted 5/16, or 11.1%, to 3 1/4 after saying it discovered a new gene code that prevents inflammatory disease, such as rheumatoid arthritis and chronic bowel diseases.

Protocol Systems

(PCOL)

jumped 2, or 29.6%, to 8 13/16 after this weekend

Barron's

said the company, which had been hurt by slowing sales and missed design cycles, is turning its business around under the direction of David Bolender.

SGI

(SGI)

rose 1 3/8, or 11.6%, to 13 3/16 after announcing plans to support

LogiCad3D's

Magellan Plus 3D Motion Controller. The stock's options also were highly active, indicating traders were taking bullish positions.

3Com

(COMS)

skidded 1 11/16, or 5.7%, to 27 3/4 after beginning to sell its wireless Palm VII hand-held computer for $599.