IBM Grants the Appearance of Strength, but the Records Count

The new highs on the Dow and the S&P 500 are almost entirely thanks to Big Blue, as the broader market takes a late-day dip.
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Coupled with relief from recent inflation anxiety,

IBM's

(IBM) - Get Report

ongoing Internet-like ascension to the bright blue skies above made for a record-recording day on Wall Street.

For IBM. Oh yeah, and for the

Dow Jones Industrial Average

and the

S&P 500

, but what else is new?

IBM's somewhat isolated story today was somewhat disguised earlier in the session, when all the major indices were up, and somewhat exaggerated late in the session, when the

Nasdaq Composite Index

fell into negative territory.

But the session finale did leave Big Blue standing tallest. None of IBM's boxmaker colleagues benefited strongly from the groovy vibes surrounding the company's annual meeting and analyst upgrades.

And after four straight gains, the Nasdaq decided to take a breather. The tech-infused index lost 24.54 to 2582.00, off its intraday high of 2632.74.

Around 2:30 p.m. EDT, when the Comp turned negative, Rosanne Lang, vice president of program trading at

Cantor Fitzgerald

, said: "The S&P futures seem to be at resistance levels. It seems like more of a technical selloff in the Comp. IBM is what's holding this market up. We've seen this the last few sessions, and today is no different. We've got these big buy programs, but they tend to be very well paired off. So I wouldn't be surprised to see something of a selloff or a flattening going into the close. These turnarounds don't surprise us anymore."

As for IBM's inability to ignite a fire throughout techland, the trader said: "IBM has its own good story, and others have already benefited. They're tired. This is a market leader where people see potential. It's of such a higher caliber, it has so much more going for it.

Dell

(DELL) - Get Report

and

Compaq

(CPQ)

-- they have different projections on PC sales, for one."

Lang continued: "IBM is just an animal -- and it's possible it's trading where it should and it should be gearing for a split. There's another reason to buy. It's been around forever, it's making money, but it's in every mainstream business the Net companies are in. The philosophy is increasingly to diversify portfolios, and sometimes away from the old dot-com stories, they're getting old. And part of this volatility is getting out of these smaller Internet names."

Said Richard Cripps, chief market strategist at

Legg Mason

in Baltimore: "IBM is such a big weight -- if you're a fund manager, you've got to be full or overweight. It still represents to a lot of investors broad participation in the whole tech spectrum -- it's a tremendous service business. To me, it's a 'franchise valuation,' meaning it's undervalued since its multiples are above the market average."

Cripps, who's bullish on small-caps and cyclical, industrial and retail names, said that in recent months tech stocks have demonstrated a pattern of correction, recovery, correction, recovery. "They've been making lows lower than their previous lows and highs lower than previous highs, which is reflective of this valuation problem. These stocks are peaking. And they don't have to have a serious break -- at some point it just flatlines."

Instead of its tech siblings, IBM's partners in prosperity today were bonds and financials stocks.

Bond traders took solace in a lower-than-expected

Producer Price Index

figure and an in-line

retail sales

number, which signaled to many that the economy just may be taking care of this whole inflation thing all by itself. Indeed, from the data, it seems consumer demand might be slowing. The price of the 30-year Treasury lifted 31/32 to 92 27/32, yielding 5.76%.

"We seem pretty comfortable with inflation right now," Lang said. "No one's gonna hone in on it. Mortgage rates are rising -- we've pretty much given the

Fed

no reason to do anything. Long-term rates have corrected themselves, it's not an issue."

Playing Bonnie to IBM's Clyde in the movie of the Dow Jones Industrial Average was

J.P. Morgan

(JPM) - Get Report

, flying on extremely old rumors that the bank will sell itself. Fellow financials felt the love from both J.P. Morgan and the inflation-friendly economic data, and the

American Stock Exchange Broker/Dealer Index

rose 1.8%.

"We saw

KeyCorp

(KEY) - Get Report

move yesterday -- the rumors are out there for some further consolidation in the industry," Cripps said. "Yeah, the obvious one is J.P. Morgan, but there are others rising. We even saw the insurance stocks go up yesterday -- it's the whole financial sector and it's interest-rates-driven. Even the utilities have been acting well despite rising yields.

"The

Federal Open Market Committee

meeting Tuesday is a nonevent," he went on. "If there were any uncertainty, you would not have stocks doing what they're doing right now. Investors are impressed with the resiliency of the market right now."

The strategist said there are negative stories -- rising interest rates, rising oil prices, valuation concerns,

Robert Rubin's

return to private life -- accumulating at the margins, but that the stock market is discounting them for now. When the market decides it's time to pay attention, he said, it will trigger some kind of a correction.

Meanwhile, IBM grew 9.1%, contributing 82.5 points to the Dow, and J.P. Morgan grew 5.5%, bestowing 34.9 points upon the gilded 30. The venerable blue-chip index itself ended the day up 106.82 to 11,107.19, besting Friday's record of 11,031.59.

The broad

S&P 500

flew up 3.56 to 1367.56, topping yesterday's record of 1364.00; the smallish-cap

Russell 2000

picked up 1.58 to 450.84.

The

Dow Jones Transportation Average

slid 30.99 to 3752.51 -- in part due to a

Justice Department

suit against

American Airlines

parent

AMR

(AMR)

which accuses American of driving smaller airlines out of its Dallas hub. AMR ended down only a fraction, rebounding from earlier lows.

Back in techland, even the big-cap bellwethers failed to hold up, dropping the

Nasdaq 100

down 38.6, or 1.7%, to 2179.08.

Oracle

(ORCL) - Get Report

-- expected to hold a meeting with analysts late this afternoon during which many believe management will guide fourth-quarter earnings estimates lower -- fell 9.1%.

TheStreet.com's

Adam Lashinsky

wrote about the software company's "chief worrywarts" in a

column today.

Internets endured some bloodletting, with market watchers becoming increasingly confident that a "choosing the cream of the crop" process is beginning to take strong hold of the sector.

TheStreet.com Internet Sector

tumbled 15.21, or 2.3%, to 641.70.

In new issues,

Copper Mountain

(CMTN:Nasdaq), which had its IPO priced this morning at $21, soared 47 1/2, or 226.1%, to 68 7/16.

In

New York Stock Exchange

trading, 797 million shares were exchanged with gainers leading decliners 1,801 to 1,191. In

Nasdaq Stock Market

activity, 1.08 billion shares were exchanged while gainers led 2,118 to 1,834. New 52-week highs led new lows 101 to 27 on the Big Board and by 140 to 28 in over-the-counter trading.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 53.34, or 0.8%, to 7057.15 and the

Mexican Stock Exchange IPC Index

rocketed 145.58, or 2.5%, to 6022.86.

Thursday's Company Report

By Thomas Lepri
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.

)

As noted above, IBM and J.P. Morgan put a megaton of upward pressure on the Dow today. (Note: 1 megaton equals about 117 Dow points.) Big Blue lit some serious green on traders' screens after CEO

Louis Gerstner

told analysts yesterday that e-business accounts for about one-quarter of the company's revenue. Rating reiterations and revised price targets followed that well-timed comment (see below), and IBM closed up 20 1/2, or 9.1%, to 246.

Investors bid up Morgan 7 5/8, or 5.5%, to 146 3/4 on the same-old, same-old takeover rumors, with

Goldman Sachs

(GS) - Get Report

and

Chase

(CMB)

marked as the likely suitors. The rumors were sparked by

Warburg Dillon Read

analyst

Thomas Hanley's

April 7 research report on the company, in which he wrote that Morgan "may decide to sell out over the next year or so," and identified potential acquirers as Chase, Goldman,

Merrill Lynch

(MER)

and

First Union

(FTU)

.

Mergers, acquisitions and joint ventures

Here's one way to make baseball profitable.

Cleveland Indians

(CLEV)

closed up 6 3/16, or 62.2%, to 16 1/4 after hiring Goldman Sachs and

McDonald Investments

to explore selling the baseball team. The team is on top of the

American League's

Central Division with a 24-9 record.

Interplay Entertainment

(IPLY)

popped up 11/16, or 33.3%, to 2 15/16 after agreeing late yesterday to sell 6.25 million shares for $25 million to France's

Titus Interactive

.

Shares of

Johnson & Johnson

(JNJ) - Get Report

and biotechnology firm

Centocor

(CNTO)

were little changed amid widespread reports that the two have suspended their merger talks over disagreements over price and Centocor's co-marketing relationship with

Eli Lilly

(LLY) - Get Report

. Johnson & Johnson gained 9/16 to 95 1/4; Centocor picked up 3/16 to 41 7/8.

Atlanta-based utility firm

Southern

(SO) - Get Report

gained 5/8 to 27 5/8 after it said it is looking at "several" unsolicited offers for its 49%-owned, U.K.-based

South Western Electricity Board

.

Earnings/revenue reports and previews

E-clothier

Bluefly

(BFLY)

lost 1/2 to 10 7/8 after posting a first-quarter loss of 26 cents a share, compared with the year-ago loss of 11 cents.

Cablevision

(CVC)

shed 1 to 88 1/2 after reporting a first-quarter loss of $1.57 a share, narrower than the four-analyst First Call consensus and but far wider than last-year's loss of 23 cents a share.

Dillard's

(DDS) - Get Report

reported first-quarter earnings of 63 cents a share, beating the 13-analyst forecast of 58 cents and up from 58 cents a year ago. The stock lost 7/16 to 31 5/8.

Produce distributor

Fresh America

(FRES)

lost 1 1/4, or 7.9%, to 14 7/8 after reporting first quarter earnings of 26 cents a share, a penny under the three-analyst call and up from the previous year's dime.

Gap

(GPS) - Get Report

backed off 3/16 to 62 1/16 after reporting first-quarter earnings of 34 cents a share, 2 cents higher than the 19-analyst view and up from 22 cents a year ago.

Gemstar

(GMST)

advanced 5 11/16 to 123 3/4 after last night reporting fourth-quarter earnings of 46 cents a share, 2 cents higher than the five-analyst prediction and above the year-ago 37 cents.

Global Telesystems

(GTSG)

surged 6 1/8, or 9.8%, to 69 1/8 after the company posted a first-quarter operating loss of $2 a share and a recurring net loss of $1.22 a share. The four-analyst outlook called for a quarter loss of 94 cents vs. a year-ago loss of 54 cents. Separately, Merrill Lynch started coverage with a near- and long-term buy, while

Bear Stearns

initiated with a buy.

Lands' End

(LE) - Get Report

swelled 3 13/16, or 10%, to 42 1/8 after it posted first quarter earnings of 18 cents a share, beating the five-analyst vision of 16 cents and up a penny from last year.

After rising as high as 115 1/8,

Lycos

(LCOS)

inched up 11/16 to 107 11/16 after forecasting its third-quarter results will be in line with the 20-analyst estimate for a loss of 3 cents a share vs. the year-ago loss of 8 cents. The company also said it signed new e-commerce agreements with a total value of $200 million during the quarter, highest for any quarter in its history.

Navistar

(NAV) - Get Report

sank 3/8 to 55 after reporting second-quarter earnings of $1.42 a diluted share, besting the six-analyst estimate of $1.36 and up from 89 cents a year ago. The company also said it will boost spending for product development, new plants and marketing by as much as $165 million.

Oracle dumped 2 5/16, or 9.1%, to 23 on word the company may issue a fourth-quarter earnings warning. The 29-analyst estimate calls for quarter earnings of 33 cents a share vs. the year-ago 27 cents.

Patriot American

(PAH) - Get Report

picked up 7/16, or 8.8%, to 5 7/16 after reporting a first-quarter loss of 13 cents a diluted share, reversing year-ago earnings of 16 cents.

Sotheby's Holdings

(BID) - Get Report

plummeted 4 1/16, or 9%, to 41 after reporting a first-quarter loss of 17 cents a share, 2 cents narrower than the 4-analyst forecast but wider than the loss of 11 cents a year ago.

Red Roof Inns

(RRI)

sneaked up 1/16 to 17 1/16 after reporting first-quarter earnings of 5 cents a share, 2 cents above the three-analyst call and up from 2 cents a year earlier.

Symons International

(SIGC)

gained 3/8, or 7.3%, to 5 1/2 after reporting first-quarter operating earnings of 28 cents a share, down from 34 cents a year ago.

Offerings and stock actions

Power company

Avista's

(AVA) - Get Report

board approved a plan to repurchase up to 10% of its common stock over two years. The stock gained 7/16 to 16 5/8.

Copper Mountain's 4 million-share IPO exploded today, rocketing up 47 1/2, or 226.1% from its above-range pricing of 21, to close at 68 7/16.

Morgan Stanley Dean Witter

was the lead underwriter for the supplier of high-speed digital subscriber lines.

Elsewhere in new issues,

Intelligent Life

(ILIF:Nasdaq) closed unchanged at 13 after its 3.5 million-share IPO was priced top-range.

ING Baring Furman Selz

led the underwriting syndicate for the online provider of independent research concerning consumer banking and credit products.

Laser Center

(LZRC)

picked up 2 3/8, or 5.4%, to 46 5/16 in a 4 million-share follow-on offering that was priced at $43 a share late yesterday.

Life insurance and annuities firm

Lincoln National

(LNC) - Get Report

set a 2-for-1 stock split and authorized a buyback plan as much as $500 million of its common stock. Lincoln National gained 1/8 to 104 13/16.

ReliaStar Financial

(RLR)

set plans to repurchase up to $100 million worth of shares of its common stocks, replacing a prior plan to buy 1.1 million shares in the open market for $47.5 million. ReliaStar rose 1 to 41 7/16.

Analyst actions

Calpine

(CPN)

gained 5 9/16, or 11.9%, to 52 5/16 after Goldman raised it to trading buy from market outperform.

Drug outsourcing company

ChiRex

(CHRX)

sank 1 15/16, or 6.4%, to 28 3/4 after

Janney Montgomery Scott

dropped it to hold from buy.

Destia Communications

(DEST) - Get Report

rose 3 3/4, or 33.7%, to 14 15/16 after

Credit Suisse First Boston

started it with a buy and a target price of 23; Morgan Stanley initiated coverage on the company with a strong buy and a price target of 17.

Lehman Brothers

upgraded

Federated Department Stores

(FD)

to buy from outperform. The stock picked up 3/4 to 55 1/16.

Pharma firm

ICOS

(ICOS)

swooned 3, or 6.5%, to 42 15/16 after Prudential lowered it to hold from strong buy.

Analysts had a mouthful to say about IBM today. Merrill Lynch reiterated its buy rating but raised its price target for the stock to 270;

SoundView Technology

upped its 12-month target to 260; CFSB reiterated its buy rating.

Plastic surgery product maker

Mentor

(MNTR)

rose 7/8, or 6.4%, to 14 7/8 after

Preferred Capital Markets

started coverage with a strong buy.

Motion sensor device maker

Optek Technology

(OPTT) - Get Report

squeaked out a gain of 3/16 to 24 13/16 after Prudential Securities downgraded the stock to hold from strong buy. Optek yesterday agreed to be acquired by private investment firm

Dyson-Kissner-Moran

for about $200 million.

One day after its IPO,

Time Warner Telecom

(TWTC)

surged 7, or 33.9%, to 27 3/4 after Lehman initiated coverage with a buy.

Networking components firm

Tut Systems

(TUTS)

exploded after Lehman Brothers raised it to buy from neutral. Tut gained12 15/16, or 32.3%, to 52 15/16.

ADRs of Brazilian bank

Unibanco

(UBB)

rose 1 7/16, or 5.2%, to 29 3/16 after

Donaldson Lufkin & Jenrette

raised it from market perform to top pick.

Cellular telecom company

Western Wireless

(WWCA)

added 1 1/16 to 25 1/2 despite Lehman's dropping it to neutral from buy.

Miscellany

AMR, parent of

American Airlines

, recovered from an initial swoon to dip just 5/16 to 74 on news that the

Justice Department

filed an antitrust suit against the airline unit, alleging that American illegally tried to drive smaller airlines out of its Dallas hub.

ConAgra

(CAG) - Get Report

rose 2 11/16, or 10.8%, to 27 1/2 after it last night introduced "Operation Overdrive," a plan to take $810 million in restructuring charges in the next three years after cutting 7,000 jobs or 9% of its workforce. Merrill Lynch reacted by raising the stock to long-term buy from long-term accumulate.

Cyprus Amax Minerals

(CYM)

eked out a 1/8 gain to 8 1/8 after setting plans to sell its remaining coal mining operations to Germany's

RAG International Mining

for about $1.1 billion in cash and debt assumption.

La Jolla Pharmaceutical

(LJPC) - Get Report

lost 1 11/16, or 51.9%, to 1 7/16 after late yesterday saying clinical trials for La Jolla's lupus drug candidate, LJP 394, have been suspended. Research partner

Abbott Laboratories

(ABT) - Get Report

gained 3/16 to 49 15/16 on the news. An interim analysis of the Phase II/III trial indicated that the drug wasn't as effective as expected.

Whoa.

Matrix Pharmaceutical

(MATX) - Get Report

shot up 3 13/32, or 123.8%, to 6 5/32 on last night's news it was granted fast-track review by the

Food and Drug Administration

for its IntraDose injectable gel, a cancer treatment.

Nortel Networks

(NT)

bumped up 1 1/4 to 74 13/16 after unveiling the details of a three-year restructuring plan announced in January. The plan includes selling to contractors most of its circuit board assembly plants electromechanical subsystems manufacturing operations, as well as a large portion of its repair business.