John J. Edwards III
Smoking's no good for your lungs -- and it's no picnic for stocks, either.
The equity markets were cruising along with solid record gains right into the heart of the afternoon, with the
Dow Jones Industrial Average
above 7830 at 2:45 p.m. EDT and the
topping 901 at the same time. Stocks then turned choppily lower, and then came the announcement of a historic settlement against tobacco companies -- which sent the indices whistling straight down.
Tobacco stocks initially firmed up in advance of the Washington press conference, with investors smugly relieved at the end of the nerve-wracking negotiations. But when the state attorneys general took the microphone around 3:30 p.m. EDT, reality dawned on a waiting Wall Street: These folks mean business. It wasn't a mere deal, a no-harm-no-foul handshake pact -- the states want to see the tobacco companies suffer.
A trader said it was the harsh settlement, not triple-witching-related options activity, that sent stocks spiraling downward. "I think that was good for a bunch of the points that came off," he said. "Mo got crushed. The tobacco guys weren't expecting some of what came out." For example, the settlement stipulates that the tobacco companies will be penalized further if they don't meet specific targets for reducing smoking by children.
Indeed, Big Mo --
-- finished the
New York Stock Exchange
session down 1 3/4 at 45 3/4 and then headed still lower in late action on other exchanges, ending at 45 1/2. At 3:30, the stock was up 1/4 to 47 3/4.
Philip Morris took 6.33 points out of the Dow, contributing to its anemic rise of 19.45 to a still-record 7796.51. The S&P 500 inched up 0.71 to a record 898.70. The tech-fat
Nasdaq Composite Index
spent most of the day deeper in record territory but finished off a tiny 0.04 at 1447.10.
Besides Mo, other nicotine-delivery stocks felt the sting of the agreement.
lost 3 1/4 to 103 3/8,
lost 1 1/4 to 35 5/8,
lost 1 to 29 and the
American Stock Exchange Tobacco Index
, an option index including the above stocks and five others, fell 8.42 to 318.59.
And who benefited from the crackdown on cigarettes? Think "pure chewing satisfaction."
spent the morning and early afternoon underwater but broke out late, chomping up 1 3/8 to 65 1/4.
Expiry-related transactions pushed Big Board volume to 656.5 million shares, the second-highest level this year after a 683.8 million-share day in January. Decliners beat advancers by 1,479 to 1,101. On the Nasdaq, 2,167 advancers led 2,055 decliners on 622.8 million shares.
The bond market rallied in an economic-data vacuum, with the yield on the benchmark 30-year Treasury bond easing to 6.65%.
Wall Street's disappointment with merely brushing Dow 7800 without closing there is palpable, but the cautionary voices are as cautionary as ever. "It's astonishing," said Charles Crane, chief market strategist at
Key Asset Management
. "I would not have imagined eight or nine weeks ago that we would be anywhere close to where we are today. This market is believing its own press. It's ignoring every valuation concern that bears like me can throw in its way, and it's basically believing the stories from the apologists."
But what about the brisk pace of earnings growth? What about the dive in interest rates, even in the face of the March
tightening? Crane can counter them both: "Earnings are not as strong as those optimists are making them out to be. Interest rates are higher than they were six months ago and earnings are only 10% higher, so stocks are extremely overvalued."
But for good old-fashioned bullishness, one needs look no further than
strategist Abby Joseph Cohen. In a call to her trading floor today, Cohen reportedly revised her 12-month target on the S&P 500 to 950. So there.
Friday's market action
together and who knows what wackiness will ensue?
The Wall Street Journal Interactive Edition
reported that Malone's
would be the venture's chief target, slipped 1 1/8 to 82 1/4.
powered up 2 3/4 to 15 3/4 after
said it has extended a $15-per-share offer for the 33% of Wheelabrator that it doesn't own. Waste Management fell 1 1/8 to 32 5/8.
Ikon Office Solutions
(IKN:NYSE) plummeted 9 1/4 to 22 3/4 on the news late
yesterday that its third- and fourth-quarter earnings will fall below expectations.
downgraded the stock to hold from strong buy.
Great Plains Software
(GPSI:Nasdaq) blasted straight into hyperspace in its market debut, rocketing 16 1/8, or 100.7%, to 32 3/8. The company, based in Academy Award-winning Fargo, N.D., makes client-server financial management software.
jumped 2 3/8 to an all-time high of 22 after reporting third-quarter earnings of 20 cents per share, well ahead of the
two-analyst estimate of 15 cents and the year-ago 11 cents.
ascended 3/8 to 56 7/8 after
, which gained 1/2 to an all-time high of 67 5/8;
, which was unchanged at 45 3/4; and
, which gained 3/8 to 78 1/2.
Goldman Sachs downgraded
to market outperform from the recommended list, but the speedy-delivery service managed a gain of 3/8 to 59 1/2.
leapt 2 7/8 to 36 after
Hambrecht & Quist
upped its rating to strong buy from buy.
failed to get a boost from a story in
Inside Wall Street column that said the Pittsburgh-based regional banking company is a takeover target. It finished unchanged at 46 1/4. Why the stasis? Because just about every bank outside of the few biggest, such as
, is a takeover target these days. And Mellon is way down the asset-size list at No. 23.
(RII:NYSE) made its debut on the NYSE today, with troll-like CEO Wayne Huizenga ringing the opening bell. The stock dropped 1/2 to 25. Huizenga's other baby, the
hockey team, did much better, rising 2 7/8 to 25 5/8.
PacifiCare Health Systems
improved 1 11/16 to 81 11/16 after its CFO told analysts the company does not expect "spectacular" earnings growth this year as it digests
, which it acquired in February. PacifiCare will concentrate on selling some of FHP's assets and improving its performance in some areas, the CFO said.
gained 1 7/8 to an all-time high of 44 after Goldman Sachs upgraded the stock to market outperform from market perform.
Embattled fashion house
declined 1/8 to 10 7/8 after shareholders filed a lawsuit, charging that the company failed to adequately disclose its various problems.
moved up 7/8 to 36 after
upgraded the stock to long-term buy from accumulate. The firm kept Echlin's intermediate-term rating at accumulate.
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