Like a tired yet impatient preschooler who's getting a little sick of that one with all the colorful pictures of aluminum, chemicals and paper, the stock market seems to be waiting for a new story. Thing is, the market doesn't seem to care for what Ma and Pa Investor have in the bag -- the never-ending tale of interest rates.
All of the major equity indices were in the smelly dumps at lunchtime, but market watchers couldn't agree on whether that had more to do with
record or recent weakness in the bond market and related concerns about rising interest rates.
Bonds traders, meanwhile, were pacing in anticipation of tomorrow's speech from
Chicago Federal Reserve
conference and Friday's April
report. Bond types also were nervously awaiting a sign as to whether this bottom range will hold. Today's somewhat volatile 30-year Treasury lately was up 8/32 to 93 20/32, dropping its yield to 5.70%. (For more on the fixed-income market, see today's early
The ever-bullish Philip Tasho, CEO of
Riggs Investment Management
in Washington, said he had no worries about inflation.
"Oil prices are almost at $19, and the last time we had these prices, we still had declining interest rates," he said. "And we've seen huge increases in productivity -- there's still plenty of competition out there. We still have broad-based strength
"It's my conjecture that, if you look at all the equity strength, the
interest-rate concern is in inflation-hedged areas, the commodity areas. Whenever GDP comes in above what economists forecasted, bonds haven't responded favorably -- and they will continue until there's a sign there's no inflation. The
Commodities Research Bureau index is still down 6% even if the price of oil rises -- that's why I'm still relatively optimistic about everything."
Paul Rich, a stock trader at
, said he didn't think today's weakness in stocks could be attributed to the bond market.
"We're just bouncing off the highs here," Rich said. "It was crazy up here Monday -- people all over the place talking about valuation, making disparaging comments about Internet stocks. And now this overvaluation is hitting tech pretty hard. People are looking at the bond market, and they see the benchmark going lower, but I don't think that's it. I think it's the follow-through, taking some profits from the highs. It got a little too hot."
While rate jitters among some investors replaced positive earnings news for most companies, the big news from
wasn't enough to keep the
Dow Jones Industrial Average
in its early-morning positive territory.
The Dow recently was down 109 to 10,777, above its session low of 10,776.44. Telephone was climbing 8% on word it and
agreed to swap about 2 million U.S. cable subscribers in a deal that will allow AT&T to move ahead with its $56.4 billion takeover of
. Along with AT&T,
were the only members of the gilded 30 up more than a fraction.
and recent cyclical stars,
, were exerting pressure on the Dow.
was losing 13 to 1319, while the small-cap
was falling 7 to 426.
Things in techland weren't much better than things in the blue-chip world, as the
Nasdaq Composite Index
was tumbling 52 to 2433, well off its intraday high of 2504.82. The
Morgan Stanley High-Tech 35
was down 2.6% and the
Philadelphia Stock Exchange Semiconductor Index
was down 1.5%.
TheStreet.com Internet Sector
index was off 24 to 591.
Market internals were negative by about 2-to-1. On the
New York Stock Exchange
, decliners were leading advancers 1,753 to 1,075 on 499 million shares. And the downs had the ups 2,339 to 1,391 on 581 million shares in
Nasdaq Stock Market
activity. New 52-week highs were outpacing new lows 38 to 16 on the Big Board, but new lows were leading 45 to 32 on the Nasdaq.
Cyclicals Will Lead On, Some Say
Tasho argued that after a near-term sideways pause, the Dow will continue to pop higher -- 2000 more points by the year's end, he said -- with none other than the economically sensitive cyclical stocks to thank.
"Oh my God, this
cyclical rally has just started," he said. "I believe we will see a direct mirror-image of what we've seen for the last 18 months for the same amount of time. Because the global economy has troughed. For the year, we've seen Japanese markets up 12% and smaller Japanese companies up 48%, last I looked. They lowered their taxes for consumers. I mean, it's not stuff you'll see in the GDP, not yet, that comes later. Over in Latin America, Brazil's interest rates are falling and their currency has seen some strength, their market is going up. They even issued some debt and it was well-received."
Perhaps not helping Tasho's cyclical argument was a research note from
Charles Clough, who is viewed by some Wall Streeters as a, uh, living contrarian indicator.
On a day when the largest piece of corporate news came from the telecom sector and the
Morgan Stanley Cyclical Index
was dropping 1.2%, Clough increased his cyclical exposure through building-material stocks and removed the media/cable TV sector from his emphasis list.
"We believe the global reflation story is full throttle," Clough said in the note. "The shift in leadership was so extreme that much of the extremes of undervaluation in cyclicals and overvaluation in growth dissipated in a few short trading sessions. ... We think the rise in economically sensitive issues will be selective. Among cyclical sectors, we are overweight energy and in recent days our paper and chemical models have moved positive."
Wednesday's Midday Movers
The dust was starting to settle at midday from the MediaOne merger triangle. Dow component AT&T was up 4 1/8, or 8.0%, to 44 11/16 on news that it has forged a deal with Comcast to avert a bidding war for MediaOne. A customer swap with Telephone will give Comcast 750,000 additional subscribers -- and ultimately 2 million more on top of that -- in exchange for offering AT&T telephone service to its customers and walking away from its MediaOne bid. Separately, AT&T is negotiating a deal that would involve
paying about $5 billion for a 2% to 3% stake in the company in return for AT&T's agreement to use the
operating system in its new digital services packages, according to
The New York Times
. Comcast was lately up 4 3/8, or 6.9%, to 68 5/16; MediaOne was lately down 7/8 to 76 3/4.
In other news:
was up 4 15/16, or 9.2%, to 58 11/16 after it said it will beat its goal of one million digital TV subscribers by October. The company also set plans to quicken the transition to digital TV by giving away its
are the poster children for another big selloff in the Internet sector today. CMGI was down 16, or 6.7%, to 223 7/8; RealNetworks was off 18 1/4, or 9.1%, to 184 1/4.
was up 3 5/8, or 8.1%%, to 48 3/4 after
Warburg Dillon Read
raised its rating from a hold to a buy and set a price target of $70 to $75 per share.
Computer-aided design software maker
was down 5 1/2, or 19.3%, to 23 1/8 after warning of first-quarter pro-forma earnings between 10 cents and 15 cents a share and diluted earnings between 2 cents to 5 cents a share. The
10-analyst view called for a profit of 40 cents vs. the year-ago 55 cents.
cut the stock from market outperformer to market performer, and
Dain Rauscher Wessels
reduced it from buy to hold.
was down 1/2 to 13 1/16 after reporting first-quarter earnings of 20 cents a share, 2 cents under the 14-analyst call and down from the year-ago 30 cents.
Behavioral health care company
Magellan Health Services
was up 1 9/16, or 30.5%, to 6 11/16 after the company posted second-quarter earnings of 21 cents a share, in line with the 5-analyst forecast and up from last year's 15 cents.
Digital networking gear maker
is getting hammered after preannouncing last night that its fourth-quarter earnings will be 12 cents to 14 cents a share, well shy of the 15-analyst forecast of 21 cents vs. the year-ago 12 cents. Newbridge was lately down 8 13/16, or 23.9%, to 28.
Class B shares of
PacifiCare Health Systems
were rocketing up 9 1/8, or 11.4%, to 89 5/8 after reporting first-quarter earnings of $1.61 a share, bludgeoning the 16-analyst estimate of $1.28 and up from the year-ago 90 cents. PacifiCare yesterday set plans to combine its two classes of common stock and buy back 5.9 million shares.
posted first-quarter earnings of 65 cents a share, 3 cents above the 11-analyst consensus and up from the previous year's 51 cents. The stock was lately up 13/16 to 41.