Equity Players' Belated Cheers Mix With Bond Market's Daylong Glee

With the latest economic data looking friendly, a few Wall Streeters dare to suggest the Fed won't hike next week.
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The bated breath with which Wall Street awaited today's key economic data proved ever so fresh and zesty for bonds, but took longer to filter through to equities.

A

Consumer Price Index

in line with expectations and a friendly

industrial production and capacity utilization

report helped the price of the 30-year Treasury bond rise 1 3/32 to 101 17/32, its yield falling to 6.02%. Still, neither CPI proper nor the bond's reaction seemed to provide much more than an initial inspiration to major stock gauges. But after overcoming some midday lassitude, equities rallied toward the close to finish with decent gains.

The

Dow Jones Industrial Average

traded as high as 11,111.69 early on then stumbled as low as 11,011.65. The index rebounded to finish up 70.29, or 0.6%, to 11,117.08.

American Express

(AXP) - Get Report

was far and away the Dow's best performer, rising 2.9%. Financials were strong overall, tracking bonds; the

Philadelphia Stock Exchange/KBW Bank Index

rose 2.8%.

The blue-chip index was hampered throughout by

Hewlett-Packard

(HWP)

, which fell 5.6% as investors interpreted the firm's quarterly earnings as not quite stellar enough to continue the stock's recent ramp.

"H-P has enjoyed a terrific turnaround, but we think the stock is a bit ahead of itself near term,"

Merrill Lynch

analyst Steven Milunovich wrote in a research report today.

But H-P's dilemma did not materially affect other traditional tech bellwethers; the

Morgan Stanley High-Tech 35

gained 0.1% while the

Nasdaq 100

rose 1%.

The bigger focus in techland was a rumor

Micron Technology

(MU) - Get Report

lowered DRAM prices, plus anticipation of earnings from

Dell

(DELL) - Get Report

.

Micron lost 4.6%, dragging the

Philadelphia Stock Exchange Semiconductor Index

down 0.8%. Dell, meanwhile, slid 0.6%; after the close, the PC maker posted second-quarter earnings of 19 cents a share vs. the 30-analyst estimate of 17 cents (see below).

The

Nasdaq Composite Index

could not sustain its early impetus, which took the index as high as 2680.00. But thanks to gains in Net stocks such as

Amazon.com

(AMZN) - Get Report

,

eBay

(EBAY) - Get Report

and

E*Trade

(EGRP)

, the tech-engulfed index overcame its midday lassitude -- and its session low of 2631.34 -- closing up 25.94, or 1%, to 2671.22.

The Comp also got a lift from second-tier tech plays such as

EchoStar Communications

(DISH) - Get Report

, which rose 10.4% following an upgrade from

Donaldson Lufkin & Jenrette

.

TheStreet.com Internet Sector

index gained up 16.74, or 3.1%, to 557.86 while the

S&P 500

climbed 13.39, or 1%, to 1344.16 after trading as low as 1328.72.

The

Russell 2000

edged up 0.48, or 0.1%, to 434.30.

Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee, attributed the late-session rise to three factors. One, the benign economic data has "breathed some life into this market."

Second, rumors of better-than-expected earnings filtered through the market, causing some short covering. Like Dell,

Applied Materials

(AMAT) - Get Report

beat the Street with third-quarter earnings of 61 cents, 8 cents ahead of consensus. (However, AMAT shares were reportedly lower in

Instinet

trading amid concerns about their order rate, the trader noted.)

Speculation about earnings coupled with the third factor: light trading volume. "You did see some short-covering late in the day and with volume not overwhelming, that enhanced volatility, today to the upside," he said.

Today's rise had some market players talking about new highs for the major averages but Herrick believes "it is too early" for such discussions. "I think the only way we'll see new highs is if

Greenspan

doesn't do anything," he said. "In the meantime, we're still in a trading range and might be at the upper end now."

In

New York Stock Exchange

trading, 691.5 million shares were exchanged while advancers led declining stocks 1,834 to 1,144. In

Nasdaq Stock Market

action 902.3 million shares traded while gainers led 2,068 to 1,786. New 52-week lows bested new highs 87 to 46 on the Big Board while new highs led 81 to 68 in over-the-counter trading.

Fed Watch '99

Herrick's prediction may come to pass if a small, but growing, minority on Wall Street proves prescient. Equity and fed fund futures markets reflect otherwise, but recent economic data have some convinced higher interest rates are not necessarily in the offing.

"I don't expect the

Fed

to raise rates next week and am further emboldened by today's CPI report," said John Ryding, chief economist at

Bear Stearns

. "I realize our view is a bit out on a limb, but unless the Fed wants to give the market a sense it will also raise in October, I think they'll go with a tightening bias

next week and probably wait" until the October meeting to actually raise rates.

Frank La Salla, CEO of

BHF Securities

, is in the same camp, believing the CPI was a "seminal event." He also suggested the

Federal Open Market Committee

will not hike rates next week, and "between the August and October meetings you'll get data to suggest the economy in the second half is going to moderate to 3% growth, perhaps less."

Nonetheless, the market watcher is cautious about the near-term outlook for stocks, while maintaining a year-end target of 11,500 to 12,000 for the Dow.

"You can't get a more sustained rally

in stocks until we're on the other side of the Fed meeting on the 24th," La Salla said. "The bias is toward the upside, but will be restrained until after the 24th."

While forecasting a rally toward the end of the year, La Salla foresees tech stocks underperforming. He sees better investment values in autos such as

General Motors

(GM) - Get Report

, drug makers such as

Pfizer

(PFE) - Get Report

and

Merck

(MRK) - Get Report

, and financials such as

Morgan Stanley Dean Witter

(MWD)

.

BHF Securities is long the aforementioned.

Among other indices, the

Dow Jones Transportation Average

slid 6.66, or 0.2%, to 3205.51; the

Dow Jones Utility Average

added 0.48, or 0.2%, to 313.06; and the

American Stock Exchange Composite Index

gained 3.09, or 0.4%, to 782.59.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

added 7.35 to 7053.00 and the

Mexican Stock Exchange IPC Index

slid 20.57 to 5279.89.

Dell Smashes Expectations

Dell

(DELL) - Get Report

earned $507 million, or 19 cents a share, in the second quarter ended July 30, beating the

First Call

consensus estimate of 17 cents a share. Dell's earnings were a 58% increase over its year-earlier period, when it earned $347 million, or 13 cents a share, on a postsplit basis. (Dell completed a 2-for-1 stock split March 5.) Revenue climbed to $6.1 billion from $4.3 billion one year ago, a 42% year-over-year increase and 11% sequentially from $5.53 billion in the company's first quarter.

This is the boffo quarter Dell investors have been looking for all year and Dell should move higher in after-hours trading. It was up 2 points by 4:30 p.m. EDT, according to Instinet.

For the first time in years, Dell investors in 1999 have stopped pushing this stock higher before earnings, a trend literally invented by the Dellionaires after nearly a decade of positive earnings surprises. Dell's stock was up only fractionally this week, closing today at 41 1/8, down 5/16.

So far this year, fears over continuing PC pricing deflation have outweighed the company's actual growth rate, which is still two times higher than that of the rest of the PC industry.

Gateway

(GTW)

, which is in the same direct sales business as Dell, has seen its stock nearly double this summer because the Street likes the San Diego-based company's beyond-the-box strategy. Recently, Dell has announced it will enter the ISP and online auction arenas -- with more beyond-the-box thinking on the way, according to what Michael Dell said at last month's shareholder meeting.

Other highlights from Dell's earnings announcement: The company is now selling $30 million of products a day online, which equates to 40% of total revenue. The company said it plans to sell half of all its revenue online by next year. One important indicator, gross margins, came in at 22%, down only slightly from the 22.7% result Dell posted in last year's second quarter. Net income, unit shipments and cash on hand all increased and Asia/Pacific sales were up 52% year-over-year.

--

Eric Moskowitz

Tuesday's Company Report

By Tara Murphy
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.

)

E*Trade

(EGRP)

leapt 3 3/8, or 12.5%, to 30 1/4 after it revealed plans to provided online trading after the close of the New York markets through Instinet, an electronic brokerage service. E*Trade says the postclose trading service will be available by September, allowing individual investors to trade from 4 p.m. to 6 p.m.

JB Oxford Holdings

(JBOH)

beat E*Trade to the punch when it announced last Friday that it would offer extended trading hours via Instinet. JB Oxford today bounced 5/8, or 6.7%, to 10.

Datek Online

also said plans are in the works for to offer postclose trades that would be processed through its own electronic system.

Mergers, acquisitions and joint ventures

algroup

CEO Sergio Marchionne told

Reuters

the pending

APA

alliance will not interfere in

Alcoa's

(AA) - Get Report

hostile takeover battle for

Reynolds Metals

(RLM) - Get Report

. Canada's

Alcan

(AL) - Get Report

is acquiring algroup and French aluminum manufacturer

Pechiney

(PY) - Get Report

to form APA. Marchionne said the parties are focusing on their own pending deal. Reynolds skidded 7/16 to 68 1/2 and Alcoa was off 1/8 to 66 3/4. Alcan popped 7/16 to 35 1/16, while Pechiney declined 5/16 to 30.

AlliedSignal

(ALD)

advanced 13/16 to 63 13/16 after it said the

European Commission

is questioning the effect of its potential acquisition of Honeywell on a "limited number of aerospace products." AlliedSignal spokesman Thomas Craine said that it does not expect complications in completing the merger.

Excite@Home

(ATHM) - Get Report

was jumped 1 1/2 to 39 5/8 after it invested $15 million in

Tickets.com

and will invest an additional $40 million, subject to regulatory approval.

FirstEnergy Services

, a

FirstEnergy

(FE) - Get Report

subsidiary, announced an energy services pact with

Republic Technologies

that could potentially generate $1 billion in sales over five years. FirstEnergy Services will handle a variety of services for Republic including electric and natural gas supply and delivery, heating and ventilation. Republic, which is run by

Blackstone Group

, is the largest U.S. producer of special bar-quality steel products. Shares of FirstEnergy slipped 7/16 to 28 despite the positive news.

Global Crossing

(GBLX)

fell 1/8 to 32 1/4 on news that it has chosen French telecommunications company

Alcatel

(ALA)

to build a South American part of Global's fiber-optic network in a $700 million deal. Shares of Alcatel advanced 1/4 to 30 3/8.

World Access

(WAXS)

, a telecommunications company, climbed 5/8 to 14 3/8 after it announced plans to buy privately owned

FaciliCom International

.

Earnings/revenue reports and previews

AnnTaylor

(ANN)

slumped 1 3/4 to 35 7/8 despite reporting second-quarter earnings of 42 cents a share, ahead of the 12-analyst estimate of 41 cents and up from the year-ago 27 cents.

Applied Materials

(AMAT) - Get Report

rose 1 1/4 to 71 3/4 before reporting stellar third-quarter earnings of 61 cents a share, beating both the 29-analyst estimate of 53 cents and the year-ago 13 cents.

Commercial Intertech

(TEC)

increased 3/16 to 13 3/8 after it announced that third-quarter earnings would be lower than expected, citing declining profits from its

Astron Building Systems

and U.S. stampings operations. The company anticipates third-quarter earnings of 38 cents to 41 cents a diluted share, short of the two-analyst estimate (and year-ago figure) of 48 cents.

Cost Plus

(CPWM)

fell 3/8 to 42 11/16 even with second-quarter earnings of 8 cents a share, a penny ahead of the 11-analyst estimate and up from the year-ago 1 cent.

Deere

(DE) - Get Report

dropped 1/4 to 43 after it reported third-quarter earnings of 29 cents a share, ahead of the 20-analyst estimate of 25 cents but down from the year-ago $1.19.

Eaton Vance

(EV) - Get Report

advanced 3/16 to 35 1/8 after it posted third-quarter earnings of 70 cents a share, in line with the single-analyst estimate and up from the year-ago 36 cents.

Hewlett-Packard plunged 5 3/4, or 5.2%, to 104 1/2 despite yesterday's sound earnings report of 85 cents a share, ahead of the 21-analyst estimate of 80 cents and up from the year-ago 58 cents. This morning,

Lehman Brothers

raised its fiscal 2000 estimates for H-P to $4 a share from $3.95.

Kohl's

(KSS) - Get Report

hopped 2 5/16 to 71 3/4 before posting better-than-expected earnings of 27 cents, beating both the 17-analyst estimate of 24 cents and the year-ago 19 cents.

Limited

(LTD)

skidded 7/16 to 44 3/8 after it posted second-quarter operating earnings of 26 cents a share, in line with the 19-analyst estimate and up from the year-ago 13 cents.

Morgan Keegan

(MOR) - Get Report

fell 3/8 to 17 1/8 despite its positive fourth-quarter earnings of 40 cents a share, better than both the single-analyst estimate of 38 cents and the year-ago 35 cents.

Tiffany

(TIF) - Get Report

soared 6 5/16, or 13.5%, to 53 after it reported strong second-quarter earnings of 31 cents a share, ahead of the 15-analyst estimate of 24 cents and up from the year-ago 19 cents.

Offerings and stock actions

Mass email service provider

Exactis.com

said it has filed with the

Securities and Exchange Commission

for an IPO. The company did not provide a possible price range or specific size for the potential offering in its preliminary prospectus, stating that the $57.5 million worth of common stock noted was a mere gauge to tabulate the SEC registration fee. Exactis has applied to trade on Nasdaq under the symbol XACT.

Thomas Weisel Partners

,

Dain Rauscher

and

Wit Capital

are underwriting the deal.

Price ranges for

Imagex.com

,

NovaMed Eyecare

and

Tunes.com

were cut today because of continuing market uneasiness. Online printer Imagex, dropped its 4 million-share offering price range to $8 to $10 from $12 to $14. The deal is lead by underwriter

Volpe Brown Whelan

. DLJ said the laser vision correction firm NovaMed Eyecare bumped its range down to $9 to $10 from $11 to $13, while online music network Tunes.com sliced its range to $9 to $11 from $13 to $15.

Salomon Smith Barney

is serving as the 4 million- share deal's lead underwriter.

Silverstream

(SSSW)

leaped 15 7/16, or 96.4%, to 31 1/2 in its trading debut.

Morgan Stanley Dean Witter

priced the 3 million-share IPO after yesterday's close above-range at $16 a share.

Analyst actions

Carpenter Technology

(CRS) - Get Report

slumped 5/8 to 24 15/16 after

Goldman Sachs

downgraded the stock to a market perform from market outperform.

Merrill Lynch financials analyst Judah Kraushaar gave

Citigroup

(C) - Get Report

a boost, calling the stock one of his top picks. Shares of Citigroup popped 1 5/16 to 47 5/8.

Deutsche Banc Alex. Brown

initiated coverage of

Insight Communications

(ICCI)

with a buy rating. Insight declined 3/16 to 28 1/16.

CIBC World Markets

slashed

Kansas City Southern Industries

(KSU) - Get Report

to hold from strong buy. Shares of Kansas City Southern plunged 4 13/16, or 9%, to 48 3/16 on the news.

Banc of America Securities

maintained its buy rating on

Micron Technology

(MU) - Get Report

. Despite its positive rating, the stock skidded 2 13/16 to 57 3/4.

Safeway

(SWY)

climbed 11/16 to 49 9/16 after Lehman Brothers upped 1999 earnings estimates to $1.90 a share from $1.88.

Tricon Global Restaurants

(YUM) - Get Report

hopped 1 9/16 to 41 3/4 after

Credit Suisse First Boston

initiated coverage with a hold rating.

DLJ Web analyst Timothy Weller stamped

Voyager.net

(VOYN)

with an initial buy rating. Despite Weller's positive outlook, Voyager shares slipped 15/16 to 10 1/2.

Miscellany

America Online jumped 2 9/16 to 97 1/2 after it said worldwide membership of its AOL service has exceeded 18 million.

Planet Hollywood

(PHL)

said it will seek bankruptcy protection. The Hollywood theme restaurant chain, partially owned by film stars, said it has obtained a "conditional $30 million cash injection" and will pre-negotiate with lenders in an attempt to keep the chain open. The stock was unchanged at 3/4.

As originally published, this story contained an error. Please see

Corrections and Clarifications.