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Great Expectations Are Met in Tech, Dashed on the Dow

A mixed session leads your faithful correspondent to wax Dickensian.

It was the best of times (for chipmakers and telecom stocks). It was the worst of times (for

Lockheed Martin

(LMT) - Get Lockheed Martin Corporation (LMT) Report

and airlines). It was the age of wisdom (questionable, very questionable). It was the age of foolishness (much more likely). It was the epoch of belief (in the stock market). It was the epoch of incredulity (where's my dictionary?). It was the season of Light (beer? potato chips? sabers?), it was the season of Darkness (who turned out the light?). It was the spring of hope (let's go

Knicks

!), it was the

summer

of despair (and tremendous humidity). We had everything before us (such as gout), we had nothing before us (hindsight being 20-20 and all). We were all going direct to Heaven (whew!), we were all going direct the other way (darn) --in short, the period was so far like the present period (wait, which period?), that some of its noisiest authorities (such as the

FOMC

) insisted on its being received for good or for evil (well, which one, already?), in the superlative degree of comparison only (to, say,

Charles Dickens

, who somehow got all of the above -- save the parenthetic phrases -- past his editors as ONE sentence, assuming he had editors).

Yes, it was a tale of two markets today as technology stocks performed admirably while blue-chips acted like they were getting paid by the word.

The

Nasdaq Composite Index

was the session's standout, rising 44.79, or 1.8%, to 2519.35, largely behind strength in chip and telecom stocks.

Chips were inspired by a bullish report from the

Semiconductor Industry Association

. Industry titan

Intel

(INTC) - Get Intel Corporation (INTC) Report

rose 2.8%,

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

added 5.5%,

Micron Technology

(MU) - Get Micron Technology, Inc. (MU) Report

gained 9.7%, and

Novellus

(NVLS)

climbed 7% on the SIA news.

Additionally,

STMicroelectronics

(STM) - Get STMicroelectronics NV ADR RegS Report

jumped 9% on an increased price target and 2000 earnings estimate at

Morgan Stanley Dean Witter

, and

Cypress Semiconductor

(CY) - Get Cypress Semiconductor Corporation Report

soared 19.5% upon receiving an upgrade by

Prudential Securities

.

Interest in telecom was sparked by speculation

BellSouth

(BLS)

plans to acquire the 90% of

Qwest Communications

(QWST)

it does not already own. Qwest jumped 8.7%, while telecom plays such as

MCI WorldCom

(WCOM)

and

Tellabs

(TLAB)

benefited from residual interest. The

Nasdaq Telecommunications Index

rose 2.6%.

Tech bellwethers such as

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

,

Dell

(DELL) - Get Dell Technologies Inc Class C Report

and

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

marched higher too, helping the

Nasdaq 100

rise 2.3%. The

Morgan Stanley High-Tech 35

gained 2.2%.

Techs helped the

S&P 500

scratch out a gain of 1.31, or 0.1%, to 1318.64. Internet standards lagged their traditional counterparts, but

TheStreet.com Internet Sector

index rose 5.48, or 1%, to 575.03.

But the best-known proxy of all wasn't so fortunate: The

Dow Jones Industrial Average

slid 75.35, or 0.7%, to 10,690.29.

American Express

(AXP) - Get American Express Company Report

led Dow decliners, falling 3% as some financials wavered in the face of the bond market's ongoing struggles.

Bond prices closed up from session lows after

Minnesota Fed

President

Gary Stern

passed on the opportunity to play chicken hawk (

boy, I say, boy, listen to me when I'm talking to you about inflation

) at a speech in New York. Still, the price of the 30-year Treasury bond slid 11/32 to 89 10/32, its yield rising to 6.03%.

The Dow's feathers were also ruffled by

Procter & Gamble

(PG) - Get Procter & Gamble Company Report

and

General Motors

(GM) - Get General Motors Company (GM) Report

. Procter fell 2.7% after formally announcing a restructuring, the rumor of which sent the stock higher last week. GM slid 4.8% after delaying a planned $1 billion consolidation when the Troy, Mich., city council voted down the company's plans to move 1,800 workers from Troy to plants in nearby Warren and Pontiac. (Somewhere,

Karl Marx

is smiling.)

In addition to the aforementioned, the S&P 500 was restrained by Lockheed Martin, which fell 13.8% after posting a profit warning. Also, airline stocks continued their recent slide, exacerbated by a better-late-than-never earnings estimate cut by

Warburg Dillon Read

. The

American Stock Exchange Airline Index

fell 3% while the

Dow Jones Transportation Average

slumped 44.26, or 1.3%, to 3380.57.

The index was further dampened by weakness in drugmakers such as

Pfizer

(PFE) - Get Pfizer Inc. Report

, down 5.5% after warning of possible liver damage from its

Trovan

antibiotic. Additionally,

Amgen

(AMGN) - Get Amgen Inc. Report

slid 2.5% after giving a less-than-ebullient presentation at a

PaineWebber

conference.

Despite drama in some individual stocks, trading activity continued its descent into sleepy time.

In

New York Stock Exchange

trading, 662 million shares were traded -- the fourth consecutive sub-700 million-share sessions -- while declining stocks led advancers 1,526 to 1,378. In

Nasdaq Stock Market

activity, 845.9 million shares were exchanged while gainers led 2,072 to 1,824. New 52-week lows led new highs 59 to 49 in Big Board activity but new highs led 82 to 38 in over-the-counter trading.

"I think the markets are understandably nervous going into what are critically important inflation indicators in the next couple of days," said Phil Orlando, chief investment officer at

Value Line

. "Today you had sort of an odd market with the Dow sloppy but techs screaming. I think investors think tech is oversold and second-quarter earnings are going to be pretty good, so why not pick some up here?"

Today was "prebuying" to what Orlando anticipates will be a growth-stock-led advance "sparked first on the bond side that will help launch an equity rally that will take us to new highs over the course of the summer."

If Friday's

Producer Price Index

data and next Wednesday's

Consumer Price Index

are in line with consensus forecasts, "our expectation is that a lot of the interest rates fear in both the stock and bond markets will start to dissipate," he said. "If we get blowout numbers on CPI and PPI all bets are off.

But all things being equal, the Fed would just as soon play the jawbone and leave everything else alone. The surprise is they don't tighten because inflation remains tame."

Among other indices, the

Russell 2000

added 1.43, or 0.3%, to 445.19; the

Dow Jones Utility Average

fell 0.51, or 0.2%, to 331.86; and the

American Stock Exchange Composite Index

added 0.07 to 772.99.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

TheStreet Recommends

rose 22.74, or 0.3%, to 6960.41 and the

Mexican Stock Exchange IPC Index

slid 30.46, or 0.6%, to 5398.42.

Wednesday's Company Report

By Heather Moore
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.

)

Aerospace giant Lockheed Martin swooned 5 9/16, or 13.8%, to 34 7/8 after warning it expects to lose 10 cents to 15 cents a share in the second quarter, a far cry from the 72 cents estimated by 10 analysts. Lockheed, which blamed increased costs and reduced production rates, also said it sees full-year 1999 earnings of $1.50 and 2000 earnings of $2.15. Analysts were expecting $3.10 and $3.39, respectively.

Comsat

(CQ)

tumbled 3 9/16, or 10.8%, to 29 7/16 in sympathy with Lockheed, which is in the process of buying the satellite capacity provider through a tender offer.

Mergers, acquisitions and joint ventures

Coach USA

(CUI) - Get CUI Global, Inc. Report

jumped 2 57/128, or 7.9%, to 33 1/2 after saying it's talking with an unidentified party about a potential merger which would value the company at $42 a share.

Qwest Communications expanded 3 3/4, or 8.7%, to 47 on word BellSouth was considering buying the company. BellSouth, which last month completed a $3.5 million purchase of a 10% stake in Qwest, slipped 1/16 to 46 1/16.

Sun Microsystems grew 2 7/8 to 61 15/16 after signing a 10-year agreement with

Motorola

(MOT)

to develop equipment to allows network operators deliver a high level of wireless telephone service. Motorola added 5/8 to 84 11/16.

VWR Scientific Products

(VWRX)

shot up 8 9/16, or 30.7%, to an all-time high of 36 7/16. Last night, the company said it's being bought by majority shareholder

Merck KgaA

-- a German drug, specialty chemicals and medical equipment maker with no relation to U.S.-based drug maker

Merck

(MRK) - Get Merck & Co., Inc. (MRK) Report

-- for $37 a share in cash. Merck KgaA already owns 48.9% of VWR Scientific.

Earnings/revenue reports and previews

Condor Technology Solutions

(CNDR)

plummeted 4 31/32, or 50.3%, to an all-time low of 4 15/16 after saying it expects to post a second-quarter loss of 5 cents to 3 cents a share. The four-analyst outlook called for earnings of 25 cents a share.

Conexant Systems

(CNXT) - Get VanEck Vectors ChinaAMC SME-ChiNext ETF Report

sprouted up 6 1/16, or 13.4%, to an all-time high of 51 1/2 after the semiconductor and chip maker said last night it expects third-quarter earnings to "significantly" beat the 11-analyst estimate of 11 cents a share. Morgan Stanley and

Credit Suisse First Boston

upped their 1999 earnings estimate for the company to 45 cents from 30 cents and to 42 cents from 28 cents, respectively.

U.S. Bancorp Piper Jaffray

analyst Ashok Kumar also upped his estimate -- to 42 cents from 28 cents a share.

As noted above, Conexant's strength was seen throughout the semiconductor sector. Cypress Semiconductor flew 2 5/16, or 19.5%, to an all-time high of 14 3/16 after Prudential upped it to strong buy from accumulate and lifted its price target for the stock to 18 from 14.

Triquint Semiconductor

(TQNT)

flew 5 1/8, or 11.6%, to an all-time high of 49 3/8 after

CIBC World Markets

upgraded it to strong buy from hold.

Additionally,

PRI Automation

(PRIA)

advanced 5 5/16, or 18.9%, to 33 5/8 after Morgan Stanley Dean Witter pushed it up to strong buy from outperform. Finally, French chipmaker STMicroelectronics vaulted 11 1/16, or 9%, to an all-time high of 134 9/16 after Morgan Stanley Dean Witter raised its price target to 160 from 130.

Gucci

(GUC)

excelled 2 1/16 to 65 after posting first-quarter earnings of 77 cents a share, 2 cents above the four-analyst consensus and up from last-year's 67 cents. Gucci also said it was "comfortable" with expectations for 1999 earnings of $3.40 a share.

Ocular Sciences

(OCLR) - Get Oclaro, Inc. Report

plunged 4 11/16, or 24%, to an all-time low of 14 7/8 after saying its second-quarter revenue would come in lower than expected, citing a stagnant U.S. optical market. Ocular stressed its second-quarter earnings would be in line with the nine-analyst estimate of 40 cents a share, but

SG Cowen

cut Ocular to buy from strong buy anyway and reduced the company's 1999 earnings estimate to $1.55 from $1.70 a share.

Quiksilver

(ZQK)

slipped 2 11/16, or 9.3%, to 26 1/4, following an earlier high of 30, despite announcing second-quarter earnings of 41 cents a share, beating the eight-analyst view of 35 cents and moving ahead of the year-ago 25 cents.

Stewart Enterprises

(STEI)

dwindled 9/16 to 18 5/16 after posting second-quarter earnings of 29 cents a share, meeting the nine-analyst forecast and topping the year-ago 25 cents.

Offerings and stock actions

After surging more than 80% in its first day of trading yesterday,

drkoop.com

(KOOP)

ratcheted up 1, or 6.1%, to 17 7/16. Tuesday's other big-gaining Net IPO,

BackWeb Technologies

(BWEB)

, however, slouched 2 1/8, or 10.8%, to 17 5/8.

Pantry

(PTRY:Nasdaq) closed flat at 13 after Merrill Lynch priced its 6.25 million-share IPO low-end last night. The company is the third-largest independently operated convenience store chain in the nation.

Skechers

(SKX:NYSE) picked up 1/8 to 10 5/8 after

Deutsche Banc Alex. Brown

priced its 7 million-share IPO below-range at $11 a share. The company makes trendy footwear.

Analyst actions

Warburg Dillon Read downgraded already suffering airlines due to weak traffic and yields, which the firm expects to continue into the second half of the year. Warburg lowered the following to reduce (which means "sell" in English) from hold:

AMR

(AMR)

, which fell down 3/4 to 66 15/16;

Alaska Air Group

(ALK) - Get Alaska Air Group, Inc. Report

, down 1 53/64 to 39 1/4;

America West Holdings

(AWA)

, down 211/256 to 17 5/8;

Continental Airlines

(CAL) - Get Caleres, Inc. Report

, down 3 1/8, or 7.7%, to 37 9/16;

Delta

(DAL) - Get Delta Air Lines, Inc. Report

, down 3 1/8, or 5.2%, to 56 13/16;

Northwest Airlines

(NWAC)

, down 1 1/8 to 30 1/16;

UAL

(UAL) - Get United Airlines Holdings, Inc. Report

, down 1 15/16 to 61 7/8; and

US Airways

(U) - Get UNITY SOFTWARE, INC. Report

, down 1 5/16 to 47 9/16.

Internet credit card provider

NextCard

(NXCD)

swelled 8, or 22.1%, to 44 1/4 after

Donaldson Lufkin & Jenrette

started coverage with a buy and a price target of 70.

New York Times

(NYT) - Get New York Times Company Class A Report

tacked on 11/16 to 35 3/4 after

Bear Sterns

raised it to buy from attractive.

Miscellany

Alza

(AZA)

flourished 2 3/4, or 7.2%, to 41 1/16 on last night's news that a

Food and Drug Administration

panel supported new uses for two of its drugs. The panel endorsed

Ethyol

for preventing salivary gland damage during radiation and

Doxil

for helping ovarian cancer patients who have not responded well to initial therapies. The FDA already has approved both drugs for other cancer uses.

Andrx

(ADRX)

climbed 6 1/2, or 11%, to an all-time high of 65 3/4 after saying Germany's

Hoechst

agreed to dismiss a three-and-a-half-year-old patent-infringement suit against the company over its generic version of Hoechst's hypertension drug

Cardizem

.

Infoseek

(SEEK)

withered down 2 1/4 to 46 7/16 after the sound of silence fell upon eager ears during the company's presentation at

PaineWebber's Growth & Technology Conference

. Attendees thirsty for a smidgen of info about

Disney's

(DIS) - Get Walt Disney Company Report

possible plans to acquire the company? As we say here in the rotten apple, nuttin'.

Pfizer dropped 6 1/16, or 5.5%, to 104 15/16 after saying it will warn physicians to limit the use of its antibiotic Trovan because of reports to the FDA it may cause liver toxicity. Earlier in the day, the FDA said the drug should be used only for the sickest of patients. The agency has linked 14 liver failures, including six deaths, to Trovan.

Procter & Gamble shaved off 2 9/16 to 92 1/4 after setting plans to lay off 15,000 workers, or about 13% of its workforce, as part of a $1.9 billion restructuring plan. P&G, which also will close 10 plants, expects the plan to increase long-term annual sales growth to 6% to 8% and accelerate earnings per share growth, excluding program costs, to 13% to 15% in each of the next five years through fiscal 2004.

Terayon Communication Systems

(TERN)

hopped up 8 7/8, or 27.3%, to 41 1/2 after the

Gilder Technology Report

, a popular technology newsletter, penned a bullish piece on the cable-modem maker.