Indecision Rules the Day as Market Coolly Awaits a Fed Move

A move or a nonmove, that is. Market players say it doesn't matter, seeing more rallying ahead for stocks either way.
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SAN FRANCISCO -- Apparently, somebody

is

afraid of the big, bad

Fed

. Conventional wisdom says tomorrow's

Federal Open Market Committee

meeting will be good for stocks (barring a shock), as a rate hike means the Fed is done for the foreseeable future and no tightening means ... well, no tightening.

Nevertheless, stock proxies were hesitant and indecisive throughout the session today, ending mixed with a slightly negative bias.

The highlight of the trading session may have been the

Nasdaq Composite Index's

failure to set another record, closing off 1.6, or 0.1%, to 3219.5 after trading as high as 3236.35.

The Comp was saddled by day-long weakness in tech stalwarts such as

Microsoft

(MSFT) - Get Report

,

Intel

(INTC) - Get Report

and

Cisco

(CSCO) - Get Report

. The

Nasdaq 100

shed 0.5%.

Join the discussion on

TSC

Message Boards.

Chip and equipment makers such as

Applied Materials

(AMAT) - Get Report

surrendered recent gains after

Goldman Sachs

reportedly made cautious comments about the short-term sustainability of stock price momentum. The

Philadelphia Stock Exchange Semiconductor Index

fell 2.6%.

New York Stock Exchange

-traded tech favorites such as

Motorola

(MOT)

,

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

followed a similar path, leading the

Morgan Stanley High-Tech 35

down 0.6%.

Tech giants were a drag on blue-chip averages as well. The

Dow Jones Industrial Average

fell 8.57, or 0.1%, to 10,760.75 after trading as high as 10,798.37. The

S&P 500

dipped 1.66, or 0.1%, to 1394.40 while the

Russell 2000

gained 3.28, or 0.7%, to 452.97.

As more conventional stock averages stumbled, Internet proxies continued to rally.

TheStreet.com Internet Sector

index gained 14.25, or 1.7%, to a record 859.93.

The DOT was paced by

Yahoo!

(YHOO)

as well as

E*Trade

(EGRP)

, up 4.3%, one of many online brokers enjoying stellar gains today following positive comments from

Robertson Stephens

. Elsewhere,

TD Waterhouse

(TWE)

rose 14.3%,

Ameritrade

(AMTD) - Get Report

gained 20.5%, and

Knight/Trimark

(NITE)

rose 15.9%.

Among so-called momentum stocks, it was a mixed session.

Global Crossing

(GBLX)

rose 11.2% after announcing a business venture with

Hutchinson Whampoa

while

Ariba

(ARBA)

gained 7% following an upgrade from

SG Cowen

. Conversely,

Qualcomm

(QCOM) - Get Report

dipped 2.8% to 368 after trading as low as 350 while

Commerce One

(CMRC)

slid 4.5%.

"People have shrugged it off," Randy Billhardt, co-head of block trading at

PaineWebber

, said of tomorrow's FOMC meeting. "The thinking is even if the Fed does raise 25 basis points it will be the last time before the end of the year. Even if they do

tighten, it's still a low-inflation, high-growth environment.

"If you look at how stocks are trading it seems the economy is going full-blast," Billhardt continued, noting strength in cyclical stocks such as

International Paper

(IP) - Get Report

and

Union Carbide

(UK)

. The

Morgan Stanley Cyclical Index

gained 1.4%.

Energy stocks were also strong as crude prices rose above $25 a barrel for the first time since January 1997; the

Philadelphia Stock Exchange Oil Service Index

gained 4.6%.

The action suggests a rate hike may be justified, but that sentiment "doesn't seem to be stopping anybody's momentum today," he said. "This market does not come in

much; it acts like a million bucks. People don't seem to be that concerned."

Still, it was a "strange" session, the trader conceded.

In NYSE trading, 803.1 million shares were exchanged while advancers led declining stocks 1,623 to 1,397. In

Nasdaq Stock Market

action 1.27 billion shares traded while gainers led 2,298 to 1,788. New 52-week lows outpaced new highs 100 to 82 on the Big Board while new highs led 206 to 76 in over-the-counter trading.

All News Is Good News

"It's hard to imagine a better set of numbers that relate to inflation coming out ahead of this meeting," said Ken Mayland, chief economist at

KeyCorp

in Cleveland, specifying the most recent

GDP

deflator,

Employment Cost Index

, wage component of the

employment report

and

retail sales

figures. "The fears keep on circulating around the issue of tight labor markets and the potential for a wage-hike spiral. But there's no evidence of it yet."

As a result, the economist predicts no rate hike tomorrow, admitting the odds only slightly favor the Fed standing pat. (

TheStreet.com

took a look at the case for and against tomorrow's likely hike in a

story today.)

Regarding speculation the Fed might tighten in order to curtail the stock market's recent momentum, the economist noted the Dow remains below levels it hit in May and that broader averages such as the S&P 500 and Russell have not "zoomed skyward" in concert with the Nasdaq. Thus, while the stock market will play a role in the Fed's decision-making process "it shouldn't be a spoiler," he said.

Meanwhile, the economist wondered which would be "more positive" -- the Fed tightening and going to a neutral bias or no move and the sustaining of a tightening bias.

"Whatever happens tomorrow, it's probably a win-win for the stock market," he said.

Indeed, most market watchers agree only a rate hike with the Fed maintaining its tightening bias (or the highly unlikely prospect of a 50-basis-point hike) would prove unsettling to financial markets.

But apparently, that message didn't get transmitted today.

Among other indices, the

Dow Jones Transportation Average

fell 24.97, or 0.8%, to 3064.60; the

Dow Jones Utility Average

slid 2.18, or 0.7%, to 298.13; and the

American Stock Exchange Composite Index

added 7.59, or 0.9%, to 830.66.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 74, or 1%, to 7600 and the

Mexican Stock Exchange IPC Index

gained 80.34, or 1.3%, to 6115.10.

Monday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

China.com

(CHINA)

soared 42 1/4, or 73.2%, to 101 3/16, on news of China's agreement with U.S. Trade Representative

Charlene Barshefsky

, which resuscitated its 13-year-old bid to join the

World Trade Organization

.

While the Nasdaq Composite handed back its intraday gains,

Finisar

(FNSR) - Get Report

used the energy it shored up over the weekend and kept a firm grip on a second solid trading day. Shares flew 30 11/16, or 35.4%, to 117 7/8.

Meanwhile, on the Big Board, shares of

Oak Industries

(OAK) - Get Report

popped 19, or 38.2%, to 68 3/4 following news Sunday that it will be acquired by

Corning

(GLW) - Get Report

in a stock deal valued at $1.8 billion. Under terms of the deal, Corning will swap 0.83 shares of its stock for each of Oak's shares. The deal, which signifies a 51% premium over Oak's 49 3/4 closing price Friday, will enable Corning to offer both components and modules for optical communications.

Corning's price target was upped to 105 from 85 by

Schroder

, to 115 from 86, by

Warburg Dillon Read

and to 125 from 100 by

Soundview

.

Merrill Lynch

cut its intermediate-term rating on Corning to neutral from accumulate. Shares of Corning fell 3 1/4 to 87 1/8.

Mergers, acquisitions and joint ventures

Air Express International

(AEIC)

was unchanged at 32 9/32 after saying it will be bought by European parcel giant

Deutsche Post

in a deal valued at $1.14 billion. The transaction calls for Deutsche Post to combine Air Express into its

Danzas

freight forwarding division.

Associates First Capital

(AFS)

gained 1/4 to 34 1/4 after saying it plans to acquire

Arcadia Financial

(AAC) - Get Report

for $200 million in cash along with security obligations. Arcadia climbed 7/8, or 23.3%, to 4 5/8.

Charming Shoppes

(CHRS) - Get Report

gained 3/32 to 5 1/4 after saying it plans to acquire

Catherines Stores

(CATH) - Get Report

for $150 million. The deal calls for Catherines' shareholders to receive $21 a share in cash, a 70% premium to the closing stock price on Friday. Catherines popped 7 9/16, or 61.7%, to 19 13/16.

Data Broadcasting

(DBCC)

lost 1 7/8, or 13.1%, to 12 7/16 after saying it will merge with the specialist asset valuation business (FTAM) of the

Financial Times

group, which is part of

Pearson

. Under the deal, the FT group will transfer ownership of FTAM to Data Broadcasting in exchange for a 60% stake in the combined business. Data Broadcasting owns about 32% of

MarketWatch.com

(MKTW)

, which operates

CBS MarketWatch.com

, a competitor of

TheStreet.com

. Under the deal,

CBS.MarketWatch.com

and the

Financial Times'

FT.com

, will form an international and domestic marketing alliance.

CBS

(CBS) - Get Report

owns a third of MarketWatch. CBS rose 1/2 to 52 5/16, while MarketWatch dropped 3, or 6.1%, to 46.

Health food maker

Galaxy Foods

(GXY)

rose 5/16, or 8.1%, to 4 3/16 after it forged a licensing deal with

Tropicana

, a division of

Pepsi

(PEP) - Get Report

to create a new drink called

Tropicana Smoothie with Veggie Milk

. Pepsi slipped 9/16 to 32 9/16.

Grupo Mexico

anticipates closing its acquisition of

Asarco

(AR) - Get Report

by Wednesday. According to Grupo Mexico, 81.5% of Asarco's shares were tendered in reaction to its offer of $29.75 a share, which expired Friday. As a result of the tender offer, Grupo Mexico will hold 91% of Asarco's common shares, enabling Grupo Mexico to finish its planned merger of Asarco, without gaining Asarco shareholders' approval. Asarco was unchanged at 29 11/16.

Nortel Networks

(NT)

gained 2 3/8 to 74 3/4 after saying it forged a two-year contract, worth roughly $100 million, with

ITC DeltaCom

(ITCD)

to expand and improve ITC DeltaCom's current voice and data networks. Shares of DeltaCom rose 1/2 to 29.

PairGain Technologies

(PAIR)

climbed 7/8, or 5.9%, to 15 3/4 after saying it plans to sell off its microelectronics engineering development group. The company also said it agreed to pay $2.5 million to another party to end a joint technology development agreement.

priceline.com

(PCLN)

popped 3 5/16, or 5.9%, to 59 15/16 after saying it has inked a deal with

Ford

(F) - Get Report

which closed up 1 1/4 to 54 5/8. The two companies said that they would roll out test marketing for a "name-your-own-price online" buying feature for Ford Motors in Florida this week.

Separately, priceline said more than 1,000 stores are participating in its grocery unit. The

priceline WebHouse Club

, launched Nov. 1 in the New York metropolitan area, said more than 120

Key Food

stores will join the unit in the coming weeks.

Red Hat

(RHAT)

gained 3 9/16, to 105 3/8 after saying it plans to buy

Cygnus Solutions

for $647 million. Red Hat also said it tapped Matthew Szulik as its new president and CEO.

TheStreet.com/nytimes.com

joint newsroom covered the

news in a separate story.

Schwab

(SCH)

gained 3/8 to 43 1/4, TD Waterhouse tacked on 2 1/2, or 15%, to 19 1/8 and Ameritrade added 4 1/2, or 20.5%, to 26 7/16, after the firms announced plans for a new online investment bank along with three venture capital firms. The VC firms are

Kleiner Perkins Caufield & Byers

,

Trident Capital

and

Benchmark Capital

.

Specialty Foods

announced plans to sell its

Metz Baking

division to

Earthgrains

(EGR)

in a cash transaction valued at $625. Shares of Earthgrains dropped 1 9/16, or 7.5%, to 19 3/8.

Vodafone AirTouch

(VOD) - Get Report

gained 1/8 to 47 1/2 after its all-stock $107 billion bid for

Mannesmann

(MNNSY)

was rejected. Mannesmann called the offer "extremely unattractive" monetarily, stirring up rumors that Vodafone will launch the largest hostile takeover bid in history in an effort to gain control of Mannesmann. Industry sources told

Reuters

that Mannesmann plans to explain to its shareholders today and Tuesday why it refused the offer.

Warner-Lambert

(WLA)

, which has agreed to merge with

American Home Products

(AHP)

, is considering terminating its

Lipitor

agreements with

Pfizer

(PFE) - Get Report

, which has made an unsolicited takeover bid for Warner. Pfizer and Warner have a co-marketing deal for Lipitor, the blockbuster cholesterol-fighting drug. Shares of Warner lost 7/8 to 92 3/4, American Home Products slipped 1/16 to 55 7/8 and Pfizer slipped 1/8 to 35.

TheStreet.com/nytimes.com

joint newsroom covered the action in a separate

story.

Earnings/revenue reports and previews

Columbia Energy Group

(CG) - Get Report

slipped 7/16 to 65 3/4 after saying it expects a loss of $13 million, or 16 cents a share, from the sale of the wholesale and trading operations of its energy services unit.

Lowe's

(LOW) - Get Report

fell 3 1/4, or 5.6%, to 54 5/8 after it posted third-quarter earnings of 44 cents a share, beating the 20-analyst estimate of 42 cents a share and up from the year-ago 33 cents a share.

Millipore

(MIL)

moved up 1 11/16, or 5.1%, to 34 13/16 after it said it is revising its 1998 financial statement to move $5.8 million of discontinued operations in 1998 to earlier periods. The company said it revised the statements in response to correspondence with the

Securities and Exchange Commission

.

Metro One

(MTON)

shed 6 5/8, or 41.8%, to 9 5/16 after saying it sees fourth-quarter earnings at less than half the consensus estimate, citing staffing needs and labor costs. The current 10-analyst estimate calls for earnings of 17 cents a share.

NBTY

(NBTY)

added 3/8 to 10 5/32 after it reported fourth-quarter earnings of 19 cents a share, well above the five-analyst estimate of 13 cents and the year-ago 13 cents a share.

Sotheby's

(BID) - Get Report

fell 1 7/8, or 5.7%, to 34 3/4 after it posted a third-quarter loss of 41 cents a share, wider than the three-analyst estimate of a 27-cent loss and the year-ago 37-cent loss.

Toys R Us

(TOY)

gained 1 7/16, or 8.7%, to 17 15/16 after it posted third-quarter earnings of 13 cents a share, beating the 10-analyst estimate of 9 cents a share and up from the year-ago 8 cents

Universal Foods

(UFC)

climbed 1/16 to 19 1/8 after it posted fourth-quarter earnings of 46 cents a share, beating the three-analyst estimate of 44 cents and the year-ago 40 cents.

Offerings and stock actions

VA Linux Systems

, which provides Linux-based systems and software, set its IPO at 4.4 million common shares in a projected price range of $11 to $13 a share.

Mid-Atlantic Realty

(MRR)

climbed 1/16 to 9 1/4 after saying it expanded its stock repurchase plan to 3 million shares from 1.1 million.

Three-Five Systems

(TFS)

climbed 1 1/4 to 33 5/8 after it set a 4-for-3 stock split.

Analyst actions

Applied Materials lost 2 to 107 despite a positive outlook from

Robertson Stephens

which upped its 1999 earnings per share estimates to $1.77 from $1.73 and 2000 estimates to $3.00 from $2.85.

Credit Suisse First Boston

started coverage of

AnswerThink

(ANSR)

with a buy rating and a price target of 40. Shares of AnswerThink hopped 1 3/16 to 28.

SG Cowen upped its rating of on Ariba to a strong buy from a buy and set a price target of 250. Ariba soared 17, or 8.6%, to 212 7/8.

Morgan Stanley reiterated its outperform rating and $68 price target on

Coca-Cola

(KO) - Get Report

. Shares of Coca-Cola gained 3/4 to 58 1/4.

SG Cowen initiated coverage of

Crossroads

(CRDS)

with a strong buy rating. Crossroads popped 7 1/16, or 8.9%, to 86 5/8.

U.S. Bancorp

cut its rating on

Fritz

(FRTZ)

to buy from strong buy, citing in part lower near-term earnings estimates. Fritz climbed 1/8 to 11.

J.P. Morgan

initiated coverage of

Intimate Brands

(IBI)

with a buy rating. Intimate Brands edged up 3/16 to 38 1/8.

Deutsche Banc Alex. Brown

sliced its rating on

Masco

(MAS) - Get Report

to buy from strong buy. Masco declined 11/16 to 28 11/16.

Merrill Lynch started coverage of

Martha Stewart Living Omnimedia

(MSO)

with near-term accumulate and long-term buy ratings.

Morgan Stanley Dean Witter

rolled out coverage of the stock with an outperform rating. Martha Stewart was down 11/16 to 30 1/8.

Warburg Dillon Read initiated coverage of

PC-Tel

(PCTI) - Get Report

with a buy rating. PC-Tel was up 1/4 to 38.

Goldman Sachs

sliced

Pep Boys

(PBY) - Get Report

to market perform from market outperform. Pep Boys was up 3/8 to 10 1/4.

Merrill Lynch analyst Jeff Kauffman raised his rating on

Rollins Truck

(RLC)

to long-term buy from accumulate. Rollins Truck shares gained 1 1/16, or 10.6%, to 11 1/16.

Merrill reinstated coverage of

Staples

(SPLS)

with a buy rating and named it a Focus One selection. Staples was up 2 3/4, or 12.5%, to 24 3/4.

PaineWebber

raised its price target on

Tanning Technology

(TANN)

to 70 from 45 to 50. Tanning tacked on 9 1/8, or 18%, to 60.

Robertson Stephens

upped its rating on

Ticketmaster Online-CitySearch

(TMCS)

to strong buy. Shares rose 8 1/16, or 36.2%, to 30 5/16.

Bear Stearns

upped its fiscal 2000 earnings outlook for

Tyco

(TYC)

to $2.20 from $2.10. Tyco hopped 7/8 to 43 7/8.

Deutsche Banc Alex. Brown initiated coverage of

Zapme!

(IZAP)

with a buy rating, while Merrill also stamped it a buy. Zapme! was off 1/2 to 12 1/8.

Miscellany

Royal Dutch Petroleum

(RD)

stock rose slightly, closing up 5/8 to 62 1/4 following a rise in December crude oil futures and the Dutch company's defiant agreement with the

National Iranian Oil Co.

, signed Sunday.

According to the deal, Shell will help develop the Soroosh and Nowrooz fields in the northern Persian Gulf for an estimated $800 million. Reserves at the fields are estimated to be 500 million to 550 million barrels of heavy crude oil, and Shell expects output to be a combined 190,000 barrels a day.

The agreement flies in the face of U.S. sanctions against non-U.S. oil companies doing business in Iran, stipulated in the

Iran-Libya Sanctions Act.

The

State Department

said today that in accordance with ILSA, it will review the Royal Dutch/Shell Group's agreement. The State Department did not indicate whether Shell would receive a sanctions waiver similar to those granted France's

Total Fina

(TOT) - Get Report

and other companies or whether the oil giant would be the first company to feel the full effect of ILSA.

--

Heather Bourbeau

Bausch & Lomb

(BOL)

gained 1 7/16 to 60 1/16 after it said it has been awarded

Food and Drug Administration

approval to sell its

Hydroview

intraocular lens, to correct patients' vision after cataract surgery. Bausch & Lomb said it would begin marketing the lens in the U.S. in early 2000.

Fed

Chairman Alan Greenspan expressed his approval for a new law removing Depression-era statutes, which enforced the separation of banking, brokerage and insurance activities, during remarks to the

American Council of Life Insurance

.

Nokia

(NOK) - Get Report

said it has been awarded a contract for digital subscriber line broadband Internet protocol equipment from German Internet service provider

KKF.net

. Nokia shares slipped 1/2 to 121 3/4.

Connecticut has brought legal proceedings against

Qwest Communications

(QWST)

, claiming the company had switched some customers' long-distance carriers without authorization, also known as "slamming," according to Attorney General Richard Blumenthal. Blumenthal said during a press conference that the lawsuit seeks "hundreds of thousands of dollars" in penalties and restitution, and that other states including Texas and Florida are conducting a probe, which may lead to legal proceedings. Separately, the

U.S. Federal Communications Commission

has issued a "notice of liability" against Qwest for $2.8 million. Shares of Qwest rose 1 13/16 to 38 11/16 despite the news.

Steel Technologies

(STTX)

rose 1/8 to 11 5/8 after it said Bradford Ray was named CEO and vice chairman. Ray succeeds his father, Merwyn Ray, as CEO. The senior Ray will continue as chairman.

Tricon Global Restaurants

(YUM) - Get Report

added 2 to 45 1/8 after it said it has tapped President David Novak as its CEO. For more on Tricon, check out a separate

story from

TheStreet.com/nytimes.com

joint newsroom.

Rite Aid

(RAD) - Get Report

said it has named Leonard Green chairman, while Timothy Noonan will continue as interim CEO.

TheStreet.com/nytimes.com

joint newsroom covered the news in a

story today.