FreeMarkets Drama Earns Applause from Analyst, Buyers

The markets were mixed at midday as most of the attention was on the latest in a string of hot IPOs.
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After

yesterday's drama in the stock market, one could expect today to be a little quieter.

For the most part, it is. But make no mistake, it isn't without some drama.

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That drama would be newcomer

FreeMarkets

(FMKT)

, which was up 445.8% to 262, in its trading debut. Also making FreeMarkets' debut even more interesting was an analyst's call on the stock.

Scott Ehrens, Internet/New Media analyst at

Bear Stearns

, began coverage of FreeMarkets -- even before the stock began trading -- with a buy rating and slapped a 300 12-month price target on the stock.

Bear Stearns came out with a press release on the analyst's action this morning, stating that Ehrens "who has been at the fore-front of the business-to-business Internet explosion, has found his latest star, FreeMarkets."

Meanwhile, as for yesterday's IPO whopper,

VA Linux Systems

(LNUX)

, which makes computers and servers that run the Linux operating system, today it was giving back some of its hefty gains and was down 15 1/8 to 228.

Major market averages opened higher on tame wholesale inflation data, however, amid lunch hour on Wall Street, gauges were mixed.

The

Dow Jones Industrial Average

was up 39.15, or 0.35%, to 11,173.94.

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were powering the Dow on the upside.

The

S&P 500

was up 4.71, or 0.33%, to 1412.82. The

Nasdaq Composite Index

was down 6.06, or 0.17%, to 3588.11. The small-cap

Russell 2000

was down 1.39, or 0.3%, to 463.51.

TheStreet.com Internet Sector

was up 10.84, or 0.96%, to 1117.46, led higher by

RealNetworks

(RNWK) - Get Report

.

"It looks a little toppish," said Dave Eberhart, analyst at

Optima Investment Research

in Chicago, of the market. He said the Nasdaq's pretty overdone and that sooner or later it should get a decent retracement.

The March S&P 500 futures contract was lately up 3.80 to 1433. Eberhart pegged first support for the March S&P 500 futures contract at 1425, and then after that it goes to 1410.5, which would be about a one-and-a-half week low. He said if the contract fell through there it could "pretty easily" see 1406.

As for the Treasury market, the 30-year Treasury bond was up 21/32 to 99 12/32, yielding 6.161%, thanks to the good news in the

Producer Price Index

. (For more on the fixed-income market, see today's early

Bond Focus.)

The

Labor Department

reported the overall November PPI rose 0.2%, in line with expectations, while the core PPI -- which excludes food and energy prices -- was unchanged, below estimates. Economists polled by

Reuters

were expecting the overall PPI to come in at 0.2% while the core was expected to rise 0.1%. The news helped ease inflation fears.

Sector-wise, financials, e-commerce and airline stocks, were all strong, while computer makers and oil service stocks were among some of the sectors taking a hit.

Bank stocks were rallying in part thanks to the advance of the bond market. The

Philadelphia Stock Exchange/KBW Bank Index

was up 2.4%.

Elsewhere on the upside sector-wise, the

American Stock Exchange Airline Index

was up 1.2%.

On the downside, the

Philadelphia Stock Exchange Computer Box Maker Index

was down 2.4%, while the

Philadelphia Stock Exchange Oil Service Index

was down 2.9%.

Running on Empty?

Jay Suskind, head of institutional equity trading at

Ryan Beck

, said he thinks "the action's going to stay where it's been," in the market going forward, pointing to technology and Internet names. He added: "My bet is you see more profit-taking on that side, just because they've come so far so quickly."

For the rest of the year, he said he thinks a lot of people are going to be doing year-end positioning in their portfolios, with people running into tech and others cashing out their gains, which could make for a choppy trading environment.

Of the action in VA Linux yesterday and what it said about the market, Suskind said it highlights "the casino mentality," and shows the frothiness and speculation in the market. He said that won't end until one of them "blows up."

"The pyramid is getting tighter and tighter on the way up," he said.

Volume was robust on both the

New York Stock Exchange

and the

Nasdaq Stock Market

, while breadth was negative. (see below).

Among other indices, the

Dow Jones Utility Average

was down 0.1%; the

Dow Jones Transportation Average

was down 0.2%; and the

American Stock Exchange Composite Index

was down 0.86%.

Market Internals

New York Stock Exchange:

1,378 advancers, 1,472 decliners, 546 million shares. 60 new 52-week highs, 209 new lows.

Nasdaq Stock Market:

1,782 advancers, 2,014 decliners, 873 million shares. 162 new highs, 101 new lows.

Friday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.

)

Mergers, acquisitions and joint ventures

BellSouth

(BLS)

rose 3/16 to 47 7/16 after saying it will join forces with Dutch

KPN Telecom

(KPN)

and buy a 100% stake in German mobile phone operator

E-Plus

. KPN popped 9 3/16, or 13.3%, to 78 1/16. The deal struck between BellSouth and KPN frustrates a $9.3 billion bid by

France Telecom

for E-Plus. BellSouth, which already owns a 22.5% stake in E-Plus, said it is taking a $9.4 billion loan from KPN to buy shares in E-Plus owned by

Vodafone AirTouch

(VOD) - Get Report

and

VEBA

. Vodafone slipped 3/4 to 50.

Gannett

(GCI) - Get Report

, owner of

USA Today

, dropped 1 11/16 to 77 1/2 after it approached British publisher

News Communications & Media

about making a cash offer for the group. Newscom is currently valued at about $284 million. Today, Newscom rejected Gannett's approach, saying the offer was too low.

Japan's

Fuji Heavy Industries

said

General Motors

(GM) - Get Report

is buying a 20% stake in Fuji for approximately $1.4 billion. Shares of GM dropped 1 7/8 to 70 13/16. Fuji Heavy makes Subaru brand cars.

Hollywood Park

(HPK)

fell 1/16 to 21 15/16 after it said it will sell two properties to

Penn National

(PENN) - Get Report

for $195 million in cash. Penn climbed 7/16, or 5.4%, to 8 3/4.

Monsanto

(MTC) - Get Report

gained 1 13/16 to 44 1/16 after

The Wall Street Journal

reported its board is expected to formally discuss today ways of splitting its

Searle

pharmaceutical business from its agricultural business, which is struggling.

Earnings/revenue reports and previews

Ciena

(CIEN) - Get Report

gained 3 15/16, or 5.5%, to 64 7/8 after it posted fourth-quarter earnings of 3 cents a share, a penny ahead of the 17-analyst estimate and up from the year-earlier loss of 5 cents a share, which excludes merger-related charges.

Hussman

(HSM)

dropped 4 5/16, or 23.6%, to 13 15/16 after it warned its fourth-quarter results will not be as strong as expected. The company said it still sees record results for 1999, with earnings-per-share up 5% to 7%.

Panamerican Beverages

(PB) - Get Report

gained 1 3/16 to 19 1/2 after saying it expects to take a fourth-quarter charge of $21.7 million.

Sonoco

(SON) - Get Report

slipped 1/4 to 21 15/16 after saying it expects to meet fourth-quarter estimates. The current nine-analyst estimate is for 49 cents a share.

Separately, Sonoco said its fiscal 2000 spending budget is set for $444 million, topping the $423 million for 1999. The company said the budget contains $235 million for base infrastructure spending and $91 million for plant turnarounds. In addition, $118 would be allocated to growth programs.

Offerings and stock actions

Allegheny Technologies

(ATI) - Get Report

was slipping 1/8 to 22 9/16 after it said it approved a 10 million-share increase for its buyback plan.

Globix

(GBIX)

was climbing 6 7/8, or 11.6%, to 66 1/2 after it said its board approved a 2-for-1 stock split.

Leap Wireless

(LWIN)

was popping 3/8 to 55 3/4 after it said it plans to offer of 3 million common shares in the first quarter.

Wabash National

(WNC) - Get Report

said it set a $40 million share repurchasing plan. Shares of Wabash National were climbing 5/16 to 14 3/8.

Analyst actions

Credit Suisse First Boston

upgraded

Apache

(APA) - Get Report

to strong buy from buy. Shares of Apache was unchanged at 32 1/4.

First Boston late yesterday upgraded

Baker Hughes

(BHI)

to strong buy from buy. Shares of Baker Hughes was falling 3/16 to 19 1/16.

Merrill Lynch

upgraded

Caterpillar

(CAT) - Get Report

to intermediate-term accumulate from intermediate-term neutral. Shares of Caterpillar were edging up 3/4 to 46 9/16.

Credit Suisse First Boston started coverage of

Centennial Healthcare

(CTEN)

with a hold rating. Shares of Centennial Healthcare were unchanged at 2 15/16.

Deutsche Banc Alex. Brown

upgraded

Harcourt General

(H) - Get Report

to strong buy from buy. Shares of Harcourt General were bouncing 3 1/18, or 8.6%, to 39 3/8.

Merrill Lynch

reiterated a near-term neutral, long-term buy rating on

IBM

(IBM) - Get Report

. Shares of IBM retreated 2 15/16, to 110 7/16.

Warburg Dillon Read

raised its target on

National Semiconductor

(NSM)

to 68 from 58 , while

PaineWebber

increased its price target to 70. Merrill reiterated a near- and long-term neutral rating, while

SG Cowen

upped it to a buy.

Robertson Stephens

reiterated a buy rating and upped its earnings estimates. National Semiconductor was sliding 1 5/8 to 49 3/8.

First Boston analyst James Parmelee raised his price target on

Nortel Networks

(NT)

to 100 from 80. Shares of Nortel Networks hopped 3 1/2 to 86.

PaineWebber

initiated coverage of

Proxicom

(PXCM)

with an attractive rating and a price target between 95 to 100. Shares of Proxicom were hopping 2 3/8 to 89 1/2.

Donaldson Lufkin & Jenrette

upped its rating on

Ticketmaster Online-City Search

(TMCS)

to buy from market performer. Shares of Ticketmaster Online-City Search were climbing 4 5/8, or 11.7%, to 44 3/16.

Banc of America

initiated coverage of

Triad Hospitals Holdings

(TRIH)

with a buy rating and a price target of 17. The stock is a spin-off of

Columbia/HCA Healthcare

(COL)

Shares of Triad Hospitals Holdings bounced 3/16 to 14..

Lehman Brothers

resumed coverage of

Tyco

(TYC)

as a buy. Warburg Dillon Read maintained a strong buy rating and a price target of 60. Shares of Tyco were gaining 1 to 29 1/4.

Goldman Sachs

started coverage

Unitrin

(UNIT) - Get Report

with a market performer rating. Shares of Unitrin were unchanged at 38.

Merrill increased its rating on shares of

Vitesse Semiconductor

(VTSS)

to near-term buy from accumulate. Shares of Vitesse Semiconductor were mounting 2 3/16 to 48 5/8.

Lehman increased

WHX

(WHX)

to outperform from neutral. Shares of WHX were bouncing 1/4 to 9.

Miscellany

The Heard on the Street column in the

Journal

takes a look at

Pixar Animation Studios'

(PIXR)

and its stock price's inability to cash in on the success of

Toy Story 2

. Shares have fallen more than 25% since the film's release before Thanksgiving, while marketing and distribution partner

Disney's

(DIS) - Get Report

share price seems to be enjoying a boost. Shares of Pixar were advancing 13/16 to 39 1/4. Disney was up 1/2 to 28 1/8.

In the Inside Wall Street column in

Business Week

this week, penned as usual by Gene Marcial,

Adelphia Communications

(ADLAC)

is mentioned as a takeover target. James Boyle of

First Union Securities

said, with its undervalued assets and great management, the company is attractive, the column reported. Shares of Adelphia were climbing 1/2 to 61 1/2.

Elsewhere, the column offers a bullish piece on

Radware

(RDWR) - Get Report

, a developer of Internet traffic management systems, and also a positive item on

Gentner Communications

(GTNR)

. Gentner Communications were rising 1 3/4, or 13.4%, to 15, while Radware was popping 1 to 51 7/16.