SAN FRANCISCO -- After a long and glorious (weatherwise, at least) weekend, traders were back in the saddle today, only to get harpooned by a couple of arrows early in the ride. A stronger-than-expected
National Association of Purchasing Management
index proved the most poisonous (yet not deadly), while summary comments from
governors left both bond and equity markets saddled with weakness.
However, while a host of negative developments ambushed several high-tech warriors, blue-chips closed well off their intraday lows and the
Dow Jones Industrial Average
ended with a modest gain. Once as low as 10,409.14, the Dow closed up 36.52, or 0.4%, to 10,596.26.
In reaction to the steaming-hot NAPM report, the price of the 30-year Treasury bond fell 1 6/32 to 90 17/32, its yield rising to 5.93%. The data, plus comments from Fed governors such as
New York Fed
, left traders convinced the central bank will raise interest rates later this month.
The Dow began its comeback roughly in the wake of comments from Fed Vice Chairwoman
, who said in a midday speech in Montreal there is "no clear indication" inflation has revived.
Still, Doug Myers, vice president of equity trading at
in Atlanta, questioned the impact of Rivlin's comments. "I can't say Americans heard the news and ran to call their brokers," Myers said. "I think the ones that were paying attention went out and nibbled in what they perceive are the safest equities they could get into."
Beyond the Dow, however, "it was an ugly day for equities," he said.
Not surprisingly, unrest in the bond market proved most damaging to so-called growth stocks, whose outsized price-to-earnings ratios are far less justifiable by even new-era pontificators when interest rates are rising.
Nasdaq Composite Index
fell 58.49, or 2.4%, to 2412.03 while
TheStreet.com Internet Sector
index lost 23.77, or 4.1%, to 556.87.
But it wasn't just bonds that beleaguered tech stocks today. A negative cover story in
this weekend helped scuttle
, which fell 11%. Also,
fell 5.1% after spending $400 million to acquire privately held
had an inauspicious debut as a DOT component. On its first day in the index after replacing
, whose acquisition by
was completed late Friday, E*Trade fell 11.5%. The online broker and many of its ilk were walloped by revelations
is planning a major push into online trading.
Heeding the potential onrushing giant,
fell 5.7% and
lost 11.1%. Merrill, meanwhile, lost 10.4%, helping drag the
American Stock Exchange Broker/Dealer Index
Financials in general got spanked by the prospect of higher interest rates; the
Philadelphia Stock Exchange/KBW Bank Index
Among traditional tech bellwethers,
fell 6.7% after agreeing to acquire
for $780 million. Additionally,
BancBoston Robertson Stephens
chip analyst Dan Niles made some negative comments about the chip giant's ability to meet earning estimates.
fell 6.2% and
lost 4.4% after
Banc of America Securities
The bulk of tech bellwethers tumbled in sympathy, leaving the
down 3.1%, the
Morgan Stanley High-Tech 35
off 2.5% and the
Philadelphia Stock Exchange Semiconductor Index
slid 7.58, or 0.6%, to 1294.26 but closed off its session low of 1281.44. The
lost 1.22, or 0.3%, to 437.46.
led Dow decliners but cyclical issues, led by
, helped reverse the downturn. The
Morgan Stanley Cyclical Index
New York Stock Exchange
trading, 698.6 million shares were traded while declining issues bested advancers 1,560 to 1,403. In
Nasdaq Stock Market
activity, 746.7 million shares were exchanged while losers led 2,212 to 1,674. New 52-week lows led new highs 36 to 30 in NYSE trading, while new highs led 67 to 39 in over-the-counter trading.
Higher Rates Aren't Death Knell
"The odds are increasing the Fed will tighten," Alan Skrainka, chief market strategist at
in St. Louis, said today, echoing the thoughts of many on Wall Street. "Two key reports will be employment on Friday and
due on the 16th. Unless we see a significant change or new evidence the economy is slowing down" the Fed will likely tighten.
However, Skrainka argued a rate hike (or even two) wouldn't be so terrible to those long stocks. Since 1917, stocks were up an average 8.5% one year after a first tightening in a series and up 4.5% one year after the second, he said.
"It's only when the Fed gets caught off guard by inflation and has to play catch up with a series
of tightenings do you see the market deteriorate," the strategist said. "The notable exception being in 1987 when the Fed hiked rates in an overvalued market and stocks took a tumble."
Although some contend the current environment compares (un)favorably enough to 1987 to foster a repeat, Skrainka notes 30% of NYSE stocks are down 30% from their highs, as are more than 50% of Nasdaq stocks.
"From our point of view, you can't look at the P/E on the S&P 500 and say the market is wildly overvalued," he said. "There are a handful of stocks getting hit hard but individuals can still do well buying good stocks at a good price."
Specifically, he recommends
Leggett & Platt
Edward Jones has not done any underwriting for the aforementioned.
Among other indices, the
Dow Jones Transportation Average
rose 50.90, or 1.5%, to 3466.60; the
Dow Jones Utility Average
declined 3.78, or 1.2%, to 325.42; and the
American Stock Exchange Composite Index
lost 2.63, or 0.3%, to 776.11.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
rose 10.58 to 6852.38 and the
Mexican Stock Exchange IPC Index
fell 41.23, or 0.8%, to 5436.42.
Tuesday's Company Report
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.
As noted above, Merrill Lynch dropped 8 3/4, or 10.4%, to 75 1/4 after
announcing plans to offer online trading in December with a basic charge of $29.95 a trade for U.S. equities.
Meanwhile, E*Trade slid 5 1/8, or 11.5%, to 39 5/16 after saying it will buy
in a stock deal valued at $1.8 billion. E*Trade will exchange 2.1 of its shares for each share of Telebanc. Telebanc jumped 8 3/16, or 12.4%, to 74 1/2.
Elsewhere in Net news, Amazon.com kerplunked down 13, or 11%, to 105 13/16 after a negative piece in
detailed problems the company faces in making a profit and in dealing with competitors.
BancBoston Robertson Stephens
analyst Lauren Levitan reiterated her strong buy rating on Amazon.
gave his take on the issue this morning.
Barnes & Noble
slipped 13/16 to 27 3/8 on word the
Federal Trade Commission
will oppose the bookseller's plan to merge with
Ingram Book Group
, arguing the acquisition of the book wholesaler would violate antitrust laws.
declined 3 1/4, or 14%, to a postoffering low of 20.
Mergers, acquisitions and joint ventures
America Online tumbled 6 1/8, or 5.1%, to 113 1/8 after agreeing to pay $400 million to acquire Spinner Networks and Nullsoft. Spinner's Internet music service,
, attracts 1.5 million users monthly and strong daytime at-work usage, AOL said. Nullsoft is the developer of Winamp, a branded MP3 player for Windows, and SHOUTcast, an MP3 streaming audio system.
Crompton & Knowles
picked up 1 1/4, or 6.8%, 19 5/8 and
picked up 15/16, or 5.4%, to 18 7/16 after the specialty chemical companies said they are planning a merger of equals "aimed as much at cutting costs as at boosting revenues." The merged C&K Witco would be formed by swapping each Crompton & Knowles share for one C&K Witco share and each Witco share for 0.92 of a share of the new company.
Dialogic grew 9 1/2, or 28%, to an annual high of 43 7/16 after Intel agreed to pay $780 million to acquire the company. Intel shed 3 5/8, or 6.7%, to 50 11/16.
added 3/16 to 52 11/16 after announcing a pact with
publishing group whereby the German concern will get 49% of Dow Jones'
The Wall Street Journal Europe
while Dow Jones will take a 22% share in
, Holtzbrinck's business daily.
climbed 2 13/16, or 6.9%, to 43 5/8 after
agreed to acquire the company in a stock swap valued around $6.3 billion. First American shareholders will receive 1.87 AmSouth shares for each share held. AmSouth lost 3 15/16, or 13.9%, to 24 7/16.
skidded 3/16 to 66 1/4 after agreeing to acquire
for about $3 billion, including debt assumption. Associated Group lowered 2 9/16 to 62 1/4.
spiked up 5 3/4, or 11.8%, to 54 9/16 after Liberty agreed to own the 41% stake in the company currently held by Associated.
Earnings/revenue reports and previews
tacked on 1/4 to 46 14 after reporting its May same-store sales rose 10.2%.
tanked 4 3/4, or 65%, to an all-time low of 2 9/16 after posting a second-quarter loss of 36 cents a share, excluding a charge to establish a reserve for undelivered paper machines, vs. the year-ago loss of 7 cents. The eight-analyst forecast called for a loss of 13 cents. Harnischfeger, which makes mining and papermaking equipment, blamed severe weak global original-equipment demand and said it doesn't expect significant financial improvement by year-end.
United Natural Foods
rose 1 1/8 to 28 9/16 after posting third-quarter earnings of 30 cents a share, a penny ahead of the six-analyst outlook for a repeat of the year-ago 29 cents.
Offerings and stock actions
gave up 5 3/4, or 12.2%, to 41 1/4 after filing with regulators for a 3.5 million-share offering.
picked up 13/16 to 44 13/16 after
Salomon Smith Barney
lifted it to buy from neutral and increased its 12-month price target on the stock to 55 from 42 a share. Analyst Richard Gardner noted strong March-quarter
shipments "suggest that the product maintains good momentum" and that sales could get a boost now that iMacs are being sold at
Complete Business Solutions
slid 7 7/8, or 32.6%, to 16 3/8 after
downgraded the stock to buy from strong buy. The firm also lowered its 1999 earnings estimate for the company to $1 a share from $1.20 and cut its 2000 view to $1.45 from $1.60. Cowen cited delays in the company's offshore projects and a transition in the offshore staff's skill base which could influence utilization rates. This afternoon, the company said it expects 1999 earnings of $1.05 to $1.15.
advanced 11/16 to 66 7/16 after
upgraded it to near-term accumulate from neutral.
swelled 8 7/16, or 9.8%, to 94 7/8 after
raised it to buy from attractive.
dwindled 3 3/4, or 5.5%, to 64 3/16 after several firms began coverage of the investment bank -- PaineWebber with an attractive, and
Morgan Stanley Dean Witter
, Salomon Smith Barney and
with neutral ratings.
flew 1 1/2, or 12%, to 13 7/8 after
Credit Suisse First Boston
initiated coverage with a strong buy and a price target of 20 and
Dain Rauscher Wessels
began coverage with a strong buy and a price target of 18 1/2.
lowered 1 1/2 to 40 13/16, off an earlier high of 43 1/4, even after Credit Suisse First Boston started coverage with a buy and a price target of 55.
added 5/16 to 37 7/8, off an earlier high of 44 1/2, after Credit Suisse First Boston started coverage with a buy and a price target of 44.
Sun Microsystems sank 3 11/16, or 6.2%, to 56 after Banc of America Securities slashed it to hold from buy, saying a recent survey of corporate and public buyers "leads us to no other conclusion than that we'll see a significant computer hardware spending falloff in fourth-quarter 1999 and, to a lesser extent, the first quarter of 2000." The firm also dropped Hewlett-Packard, which sank 4 3/16 to 90 1/8, to hold from buy.