Fed Provides No Certainty as Market's Eyes Turn to November

The mixed outcome of the FOMC meeting leaves Wall Streeters focusing on upcoming data for clues to the Nov. 16 Fed meeting.
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Those searching for some sort of resolution to the ongoing

Fed

interest-rate saga didn't get it today.

And if you were sick of reading about and hearing about every bit of economic data that's released and the market's reaction to it, adjust, get over it and get used to it. Because it's most likely going to be more of the same for a while after today's Fed inaction and sort-of action. At its meeting today, the

Federal Open Market Committee

left its target for the federal funds rate unchanged but adopted a bias toward raising rates.

The Fed decision: Join the discussion on our

message boards.

The news out of Washington wasn't exactly a surprise. The vast majority of Wall Street expected the FOMC to leave the target for the fed funds rate unchanged. There was some dispute among analysts on whether the policymaking board would shift to a tightening bias.

About five minutes before the results of the big meeting were announced, the

Dow Jones Industrial Average

was up about 100 points; the

S&P 500

was up 10 points, while the

Nasdaq Composite Index

was up 37 points.

After the results of the FOMC meeting were announced, a bout of selling hit stocks and sent major market averages well off their best levels of the session. The S&P 500 and the small-cap

Russell 2000

tumbled first into the red. The S&P promptly rose out of negative territory, while it took the small-cap gauge a little longer. But within 30 minutes of the announcement, all the major averages -- including the Nasdaq Comp, the last holdout in the plus column -- had slumped under water.

And in the end, major stock proxies closed mostly lower, but the losses were slim and well off the session's lows.

The 30-year Treasury bond, which had spent the session trading around the flat line, ended up suffering huge losses. The 30-year Treasury bond tumbled 1 5/32 to 99 9/32, yielding 6.18%.

Jay Suskind, head of institutional equity trading at

Ryan Beck

, said the big stock selloff caught him by surprise but the rebound was nice to see. The trader said the market's volatility shows that people on the Street aren't sure what the Fed is going to do. Suskind sees the Dow continuing a trading range in the low 10,000s.

Although the FOMC adopted a tightening bias, the panel pointed out that doesn't mean it's a done deal it's going to hike rates in November. In its

statement, the FOMC said although it "was biased toward a firming of policy going forward" the panel members "emphasized that such a directive did not signify a commitment to near-term action."

The crucial medium-term question of whether the Fed will raise rates at its second-to-last meeting of the year, Nov. 16, won't be answered until everyone gets a look at economic data -- if even then.

"The answer is, we don't know," said Alan Skrainka, chief market strategist at

Edward Jones

in St. Louis. He added that the Fed doesn't even know, because it doesn't know what upcoming economic data have in store ahead of the next FOMC meeting. He said that because of the Fed's concerns about the tight labor market, upcoming employment data will be critical. If the upcoming employment data are strong, chances are they'll raise rates, Skrainka said.

Analysts won't have to wait long to get a look at jobs data. On Friday, the

Labor Department

will release the September

employment report

. Beyond that, the October jobs report is set to hit the market Nov. 5.

Skrainka pointed out that the S&P 500 has undergone a 10% correction and said that almost always represents a good opportunity to buy stocks, because only one time out of four does a 10% correction turn into a bear-market drop of 20%.

As for the upcoming earnings season, he said he thinks the market will see the strongest earnings growth in five years in the third quarter.

The Dow slipped 0.64 to 10,400.59. The S&P 500 gave up 3.25, or 0.3%, to 1301.35. The Nasdaq Comp added 3.69, or 0.1%, to 2799.66. The Russell 2000 dipped 0.60, or 0.1%, to 426.01.

Elsewhere,

TheStreet.com Internet Sector

index jumped 12.41, or 1.9%, to 668.02.

Corporate news was dominated by official word that

MCI WorldCom's

(WCOM)

agreed to buy

Sprint

(FON)

in the biggest deal in history. MCI WorldCom fell 5.1% on the news, while Sprint fell 3.3%.

Bank stocks, which were soaring before the afternoon Fed news, saw a marked reversal in their fate. The

Philadelphia Stock Exchange/KBW Bank Index

had risen as much as 2.4% intraday, but plunged on the word from the Fed. The BKX eventually closed down fractionally.

Halliburton's

(HAL) - Get Report

profit warning helped doom the

Philadelphia Stock Exchange Oil Service Index

to an abysmal session. The index tumbled 5.4%, while Halliburton swooned 13.2%.

On the

New York Stock Exchange

, decliners beat advancers 1,783 to 1,222 on 965.7 million shares. Meanwhile, on the

Nasdaq Stock Market

, losers beat winners 2,097 to 1,818 on 1.21 billion shares.

On the NYSE, 145 issues set new 52-week lows while 54 touched new highs. On the Nasdaq, 118 issues set new 52-week lows while new highs totaled 92.

On the Big Board,

AT&T

(T) - Get Report

was most active with 24.8 million shares changing hands. It gained 1 1/4 to 45.

On the Nasdaq, MCI WorldCom was most active with 58.9 million shares changing hands.

Among other indices, the

Dow Jones Transportation Average

gained 20.63, or 0.7%, to 2979.73; the

Dow Jones Utility Average

fell 2.47, or 0.8%, to 303.40; and the

American Stock Exchange Composite Index

said goodbye to 5.18, or 0.7%, to 784.65.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 51.80, or 0.7%, to 6990.50 and the

Mexican Stock Exchange IPC Index

lost 54.95, or 1.1%, to 4989.66.

Tuesday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Sprint lost 2 to 58 7/8 after MCI WorldCom forged a $115 billion deal to acquire the No. 3 long-distance carrier in the largest corporate buyout ever. MCI WorldCom upped its offer to counter rival

BellSouth's

(BLS)

higher bid. Shares of MCI WorldCom fell 3 5/8, or 5.1%, to 67 15/16, while BellSouth slipped fell 5/8 to 41 13/16. According to the agreement, MCI WorldCom said it would pay $76 in stock for each Sprint share, while each share of

Sprint PCS

(PCS)

would be exchanged for 1 new

WorldCom PCS

tracking share. Shares of PCS dropped 4 11/16, or 6%, to 74. After the merger, MCI WorldCom said Sprint CEO William Esrey would serve as chairman, while MCI WorldCom CEO Bernard Ebbers has been tapped as president and CEO. Ebbers called the deal "pro-competitive" and said it would not result in any layoffs.

TheStreet.com

wrote about what BellSouth's next move might be in a

story last night.

Separately,

Deutsche Telecom

(DT) - Get Report

climbed 9/16 to 42 5/8 after saying it would not enter a rival bid for Sprint and said it would sell its 10% interest in the company. Deutsche said it would rake in a $9.8 billion profit from the sale, revised upward from an earlier estimate.

Mergers, acquisitions and joint ventures

Ashland

(ASH) - Get Report

inched up 3/4 to 34 1/2 after it said it is considering strategic options for its

Arch Coal

(ACI) - Get Report

division, which closed down 1/16 to 12 1/16. The company said that a tax-free spinoff of the unit appears to be the most viable alternative, but it is in talks with a special committee of Arch Coal board members to discuss other solutions.

Boeing

(BA) - Get Report

added 1/8 to 43 13/16 after

The Wall Street Journal

reported that it inked a $2 billion agreement with

DHL

to change 44 jets into freighters, while providing ongoing maintenance for the international delivery service.

British Airways

(BAB) - Get Report

lost 1 1/4 to 56 1/2 after saying it would provide 34 of the 44 Boeing 757-200 aircraft used in the deal.

DTE Energy

(DTE) - Get Report

lost 3 7/8, or 10.5%, to a year-low of 33 1/8, after it unveiled plans to buy

MCN Energy

(MCN) - Get Report

which was jolted 5 7/8, or 33.2%, to 23 9/16, in a cash-and-stock deal valued at $2.6 billion. The agreement calls for DTE to pay $28.50 for each share of MCN. DTE said, including MCN's debt, the acquisition is worth roughly $4.6 billion.

Intel

(INTC) - Get Report

slipped 3/4 to 76 3/16 after saying it plans to acquire

IPivot

for $500 million.

iXL

(IIXL)

added 7/16 to 32 1/16 after saying it inked a $120 million stock deal to buy

Tessera Enterprises

.

Athletic footwear maker

K-Swiss

(KSWS)

was trampled 7 1/4, or 27.9%, to 18 3/4 after saying it expects to report record third-quarter earnings and revenues but sees a slowdown in the first quarter of 2000 due to retailer uncertainty.

Merrill Lynch

lowered its long-term rating on K-Swiss to accumulate from buy.

Oracle

(ORCL) - Get Report

slipped 1/4 to 46 1/4 after saying it is hooking up with

Exodus Communications

(EXDS)

so that Exodus customers will be able to use Oracle software. Shares of Exodus gained 2 3/16 to 68 7/16.

Texas billionaire

Ross Perot's

Perot Systems

(PER) - Get Report

lost 5/16 to 18 1/2 after saying it signed a $700 million, 10-year computer services agreement with

Harvard Pilgrim Health Care

. Perot Systems will help Harvard implement and manage computer systems, restructure its claims department and improve its technology infrastructure.

Pulitzer

(PTZ)

fell 1 1/2 to 44 1/4 after saying it would pay $180 million to buy the

Pantagraph

, a central Illinois daily newspaper, along with a group of seven community newspapers known as the

Illinois Valley Press

, from San Francisco-based

Chronicle Publishing

.

Earnings/revenue reports and previews

Foundry Networks

(FDRY)

flew 27 1/2, or 20.3%, to a record 163 1/2 after saying it expects to post third-quarter revenue between $36 million to $38 million, beating internal expectations. The company made its trading debut Sept. 28 at $25 a share.

Invacare

(IVC) - Get Report

gained 2 11/16, or 14.4%, to 21 5/16 after it said it expects to meet analyst estimates for the third quarter, due to strong sales growth in Europe, Asia and Australia.

Micron Technology

(MU) - Get Report

moved up 3 1/4 to 79 5/8 after last night posting a narrower-than expected fourth-quarter loss. Today

Deutsche Banc Alex. Brown

and

Gruntal

raised their 2000 earnings estimates on the stock.

Selective Insurance

(SIGI) - Get Report

fell 1/4 to 18 9/16 after saying it would report third-quarter earnings between 8 cents and 14 cents a share, greatly missing the four-analyst estimate of 45 cents a share and the year-ago 43 cents.

Talbots

(TLB)

tacked on 2, to a record 48 1/8 after saying it expects to post third-quarter earnings between 56 cents and 60 cents a share, beating both the 14-analyst estimate of 51 cents and the year-ago 40 cents.

Offerings and stock actions

Shares of

Altigen

(ATGN)

, a maker of integrated telecom systems, jumped 6 5/8, or 66.3% to 16 5/8 in its trading debut. The shares were priced at $10, the bottom of the expected price range.

Comfort Systems

(FIX) - Get Report

was in need of some repair, falling 5 3/16, or 44.4%, to 6 1/2 today. In an effort to fix up the stock, the company announced an up to 4 million share buyback plan. Yesterday the company said it would miss earnings estimates.

Partner Communications

, one of Israel's largest cellular telephone operators, said its board approved plans for an IPO in the U.S. and Europe.

Silicon Image

raised the expected price range of its IPO to $10 to $12 a share from $8 to $10 a share. The company, which develops and sells semiconductors, plans to raise about $38.3 million in the offering.

XM Satellite

(XMSR)

got a lackluster reception on its first day of trading with the stock closing flat at $12.

Analyst actions

Goldman Sachs

initiated coverage on four automotive industry companies.

Ford

(F) - Get Report

climbed 1/2 to 51 13/16 after it was placed on the recommended list.

General Motors

(GM) - Get Report

climbed 1 3/16 to 65 3/8,

Delphi Automotive Systems

(DPH)

was unchanged at 15 7/16 and

Magna International

(MGA) - Get Report

fell 1 1/2 to 48 5/8 after all three were rated market outperformers.

AMFM

(AFM)

slipped 3/16 to 65 after SG Cowen lowered its rating to buy from strong buy.

A.H. Belo

(BLC)

was unchanged at 18 13/16 despite a nod from

PaineWebber's

which initiated coverage with an attractive rating.

Colgate

(CL) - Get Report

climbed 7/8 to 50 13/16 after Goldman Sachs raised its rating to market outperform from market perform .

Computer Sciences

(CSC)

crashed 8 3/16, or 11.9%, to 60 9/16 after

Lehman Brothers

cut its rating to outperform from buy. Lehman said it is slightly more cautious in its revenue estimate because of a delay in an outsourcing deal with

Raytheon

(RTNA)

.

Electronics For Imaging

(EFII) - Get Report

rose 3 9/16, or 6.7%, to 56 7/8 after

Morgan Stanley Dean Witter

upped its rating to strong buy from outperform.

Gemstar

(GMST)

was looking pretty dull, down 6 3/4, or 8.8%, to 69 3/8 despite a lift from Lehman Brothers which raised its price target to 150 from 100.

Juniper Networks

(JNPR) - Get Report

xrose 1 11/16 to 184 after

Warburg Dillon Read

began coverage with a buy rating.

Mattel

(MAT) - Get Report

edged up 7/8, or 7.4%, to 12 3/4 after

US Bancorp Piper Jaffrey

lowered its price target to an $18 to $20 range from $30 but maintained a buy rating. The company said yesterday it sees lower than expected earnings for the quarter.

Medicis Pharmaceutical

(MRX)

lost 1/8 to 27 13/16 after PaineWebber started coverage with an attractive rating.

O'Charley's

(CHUX)

inched up 1/2 to 15 after

Banc America Robertson Stephens

initiated coverage with a strong buy and set a price target of 20.

Rex Stores

(RSC)

fell 1 1/16 to 32 15/16 despite

Credit Suisse First Boston's

buy rating to kick off coverage.

SunGard Data

(SDS) - Get Report

fell 1 1/4, or 6.2%, to 18 7/8 after Morgan Stanley sliced its rating to neutral from strong buy. Meanwhile

BancBoston Robertson Stephens

, raised its rating on the stock to buy from long-term attractive, despite SunGard's warning that third-quarter earnings will fall short of expectations. BancBoston cited a SunGard's low price-to-sales and P/E multiple.

Tribune

(TRB)

inched up 3/16 to a new high of 50 7/8 after PaineWebber initiated coverage with a buy rating.

TV Guide

(TVGIA)

lost 1 3/4 to 43 15/16 after PaineWebber sliced its rating to attractive from buy.

Miscellany

Apple

(AAPL) - Get Report

added 3 3/8, or 5.2%, to 67 15/16 after the company unveiled a line of its

iMac

personal computers starting at a suggested retail price of $999.

American Express

(AXP) - Get Report

jumped 3 1/8 to 140 11/16 after saying it plans to introduce an online trading and financial advisory service called

American Express Brokerage

this fall.

Ametek

(AME) - Get Report

slipped 1/4 to 19 7/8 after it announced plans to divide its electronic instruments division into two subunits. The division will be split into an aerospace and heavy vehicles unit and a process and industrial products group.

AT&T climbed 1 1/4 to 45 after the company said it plans to offer Web hosting services to small businesses, allowing them to create and manage their own sites.

Wal-Mart

(WMT) - Get Report

rose 15/16 to 51 1/4 after saying it plans to launch an aggressive expansion, including opening 40 new discount stores and 160 to 165 new supercenters. Separately, the company posted an October same-store sales increase of 7.2%, down from the year-ago 9.5% increase, while total sales were $15.7 billion, beating the year-ago $12.4 billion.