Indices Muddle Through Uncertain Session as Rates Rise

The aftermath of the Fed decision is doing little to stocks either way, while bonds slide.
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Stocks paused for a breather this morning, after yesterday's runup left major proxies in tired but excellent shape.

With the exception of the hyperactive tech sector, which worked off excess energy for most of the morning, stocks were bouncing close to their opening levels. The

Dow Jones Industrial Average

was down 1 to 10,931, while the

S&P 500

was up 1 to 1421. The small-cap

Russell 2000

was up 2 to 459.

The

Nasdaq Composite Index

was slipping off its intraday high and was lately up 10 to 3305, remaining on pace for another record close.

TheStreet.com Internet Sector

index was still going strong, huffing up 11, or 1.3%, to 909, after closing at a record yesterday.

The October

Consumer Price Index

, which arrived in line with expectations, was treated as an afterthought, now that the real news -- a quarter-point rate hike from the

Fed

-- is official. If anyone is interested, the headline CPI gained 0.2% overall, meeting expectations, while the core rate, which excludes food and energy prices, gained 0.2%, also in line with expectations.

Profit-taking was weighing on the financial sector as heavyweights

J.P. Morgan

(JPM) - Get Report

and

Citigroup

(C) - Get Report

were pushed lower. The

American Stock Exchange Broker/Dealer Index

was slipping 3.1%.

Aside from this short-term -- and unsurprising -- dip, traders and strategists waxed optimistic about the overall economic backdrop. "Although I think there has been a shift in perception in the past few months, we have basically cashed that check," said Paul Rabbitt, president of

RabbittAnalytics.com

in Hermosa Beach, Calif. "The Fed would have been right either way." There is a group of people who would have said "fine" had the Fed left rates alone, while another group appreciates the pre-emptive action and thinks "now we won't have screaming inflation," said Rabbitt, adding there is an excellent balance between the stock and bond markets right now.

The benchmark 30-year Treasury was lately down 27/32 to 99 31/32, its yield rising to 6.13%. (For more on the fixed-income market, see today's early

Bond Focus.)

Dan Marciano, head of trading at

First Albany

, echoed the sentiment. "Now we have a little bit of respite until the Fed meets again," he said. "Especially if the numbers remain like they are, it's going to bode well for a neutral bias in the interest-rate environment." Marciano added that he doesn't think the effects of the three past rate hikes have been felt yet and they'll probably begin surfacing late in the first quarter of 2000.

But at least one strategist today thinks interest rates are not in the clear yet. "The risk is that interest rates continue to bounce, and that is worrisome, because the market psychology is different on a fourth rate hike than a third one," said Robert Robbins, market strategist at

Robinson-Humphreys

in Atlanta. Robbins points out that the three hikes have all corresponded to prior cuts, and that investor concern might "easily start to rise" if talk of a fourth rate hike starts to get louder.

The transportation sector was getting socked after December crude oil futures hit $26.11 in Asia, 41 cents higher than New York's Tuesday close and the highest level since January 1997. The

Dow Jones Transportation Average

was sliding 2.3%.

On the

New York Stock Exchange

, laggards were beating leaders 1,671 to 1,226 on 519 million shares, while on the

Nasdaq Stock Market

, advancers were neck-and-neck with decliners 1,866 to 1,877 on a massive 950 million shares. New 52-week highs were edging out new lows 88 to 82 on the Big Board, while new highs were beating new lows 201 to 47 on the Nasdaq market.

Wednesday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified

.)

Mergers, acquisitions and joint ventures

BB&T

(BBT) - Get Report

is buying

Hardwick Holding

in a stock swap valued at $138.7 million. Shares of BB&T were off 3/4 to 35 15/16.

Dime Bancorp

(DME)

said that its stockholders would get a larger share in a new mid-Atlantic regional bank that would be created under its planned $3.6 billion merger with

Hudson United Bancorp

(HU)

. The banks said the change was necessary due to a 3% stock dividend that was set by Hudson yesterday. According to the new terms, Dime shareholder share holders will now receive 0.60255 shares in Dime United Bancorp for each share held, up from the initial 0.585 shares. Shares of Dime Bancorp were gaining 5/16 to 18 9/16, while Hudson United Bancorp was climbing 5/16 to 32 3/8.

IBM

(IBM) - Get Report

and

SBC Communications

(SBC)

have forged a pact to offer DSL Internet Consumer Service. Shares of IBM were falling 1 1/16 to 93 9/16, while SBC was adding 13/16 to 51 1/2.

Pegasus

(PEGS)

is buying hotel-reservation technology designer

REZsolutions

in a deal valued at $250 million. The transaction calls for Pegasus to issue 2.66 million shares in common stock and pay $115 million in cash and a $20 million note payable to

Reed Elsevier

division

Utell International

. Pegasus was sliding 7/16 to 47 3/4.

priceline.com

(PCLN)

will sell tickets for the three major airlines it does not already serve,

United Airlines

,

American Airlines

and

US Airways

(U)

, and will take a one-time $1.1 billion charge related to the move. United is a unit of

UAL

(UAL) - Get Report

, while American is a unit of

AMR

(AMR)

. priceline.com was jumping 8 7/16, or 12.2%, to 77 5/16.

SatCon Technology

(SATC)

said it purchased

Northrop Grumman's

(NOC) - Get Report

power electronics products division, in a stock-warrant deal valued at $4.9 million. SatCon Technology was bouncing to 8, while Northrop shares were declining 1/16 to 53 7/16.

Vodafone AirTouch

(VOD) - Get Report

said it will increase its bid for Germany's

Mannesmann

(MNNSY)

, in what could be the biggest takeover ever,

The Wall Street Journal

reported. The newspaper, citing people familiar with the situation, reported that Vodafone is pondering a bid valued at 220 euros to 230 euros a share, which would value Mannesmann at as much as 116.7 billion euros, or $120.59 billion. Earlier this week, Vodafone offered to buy Mannesmann; however, Mannesmann said no thanks. Shares of Vodafone were climbing 3/4 to 44 3/4.

Earnings/revenue reports and previews

Commerce One

(CMRC)

was sinking 7 1/8 to 315 9/16 after it kicked off the

U.S. Bancorp Piper Jaffray

Internet conference with a word of caution.

"We expect a modest increase in revenues in the fourth quarter (from the third quarter)," Peter Pervere, the company CFO, told a packed group of investors this morning. "We are a relatively young company. We have a significant pipeline right now, but we want to set expectations conservatively."

By comparison, sequential revenue from the second quarter to the third quarter ended Sept. 30 grew 147% to $10.4 million. Commerce One is a provider of business-to-business software and services.

--

Suzanne Galante

Brookstone

(BKST)

was gaining 1/8 to 16 3/4 after it posted a third-quarter loss of 55 cents a share, narrower than the three-analyst estimate of a 57-cent loss and the year-ago 56-cent loss.

CBRL Group

(CBRL) - Get Report

was declining 3/8 to 13 1/8 after it posted first-quarter earnings of 25 cents a share, in line with the 12-analyst estimate but down from the year-ago 42 cents.

Consolidated Stores

(CNS) - Get Report

was hopping 3/8 to 20 1/2 after it posted a third-quarter loss of 14 cents a share, narrower than the 14-analyst estimate of a 17-cent loss and the year-ago 15-cent loss.

Dillard's

(DDS) - Get Report

was advancing 3/8 to 19 1/8 after it posted third-quarter earnings of 33 cents a share, missing the 13-analyst estimate of 38 cents, but up from the year-ago 47-cent loss.

Ericsson

(ERICY)

was losing 1/2 to 47 after its President Kurt Hellstrom warned that problems in increasing handset output made it difficult for the company to meet its forecast operating margins for 1999. According to

Reuters

, Hellstrom said during a briefing in London that the output is probably in the low end of its projected range but "within what we consider normal."

Goody's Family Clothing

(GDYS)

was down 1/32 to 6 53/64 after it reported third-quarter earnings of 5 cents a share, in line with the four-analyst estimate but down from the year-ago 10 cents.

Talbots

(TLB)

was stumbling 2 3/8 to 45 3/8 after it posted third-quarter earnings of 63 cents a share, beating the 13-analyst estimate by a penny and the year-ago 40 cents.

Offerings and stock actions

Gemstar

(GMST)

was jumping 2 5/16 to 108 11/16 after setting a 2-for-1 stock split.

Phone.com

(PHCM)

was skidding 7 3/8, or 5.1%, to 135 15/16 after it announced that it is selling 6.6 million shares at $135 a share in a public offering.

Goldman Sachs

priced

Terra Networks'

(TRRA)

22.3 million-share IPO above-range at $13.41 a share. Shares of Terra were jumping 25, or 189%, to 38 15/16.

Analyst actions

Donaldson Lufkin & Jenrette

upped its rating on

Anheuser-Busch

(BUD) - Get Report

to buy from market perform. Shares of Anheuser Busch were adding 2 1/19 to 74 3/8.

Credit Suisse First Boston

analyst Mark Wolfenberger resumed coverage of

AppNet

(APNT)

with a strong buy rating and a 12-month target price of 75. Shares of AppNet were gaining 1 1/8 to 52 5/8.

Lehman Brothers

raised its price target on

BEA Systems

(BEAS)

to 110 from 75. Shares of BEA were climbing 9 5/8, or 13.2%, to 82 3/16.

Merrill Lynch

raised its intermediate rating on

Fuji Photo

(FUJIY)

to an accumulate from neutral and its long-term rating to buy from accumulate. Fuji shares were climbing 1 5/8 to 40 3/4.

Credit Suisse First Boston raised its fiscal 2000 estimates on

Home Depot

(HD) - Get Report

to $1.48 from $1.45 a share and its fiscal 2001 estimates to $1.85 from $1.80 a share and upped its price target to 100 from 75.75. Home Depot was edging up 7/8 to 81 1/4.

Deutsche Banc Alex. Brown

initiated coverage of

Inhale

(INHL)

with a strong buy rating and a price target of 47. Inhale shares were popping 1 1/4 to 32 5/8.

Merrill upped its rating on

Lyondell Chemical

(LYO)

to near-term accumulate from neutral. Lyondell Chemical was up 1 11/16, or 11%, to 16 15/16.

DLJ raised its rating on

Oracle

(ORCL) - Get Report

to buy from market perform, while

Merrill Lynch

upped its price target to 80. Lehman Brothers raised the stock's price target to 82 from 53 and J.P. Morgan upgraded shares of the stock to buy from market performer. Oracle was jumping 6 13/16, or 10.5%, to 71 5/16.

PaineWebber

sliced its fourth-quarter estimates on

Pacific Gateway

(PGEX)

to 5 cents from 21 cents a share. Pacific Gateway was hopping 3/8 to 17 1/2.

Robertson Stephens

started coverage of

NaviSite

(NAVI) - Get Report

with a buy rating. Shares of NaviSite were losing 1 7/8 to 55 1/2.

PaineWebber raised its fiscal 2000 estimate on

Network Appliance

(NTAP) - Get Report

to 79 cents a share from 74 cents and its fiscal 2001 estimate to $1.10 from $1.05 a share. Network Appliance shares were leaping 10 9/16, or 10.2%, to 114.

First Boston analyst Harry DeMott III, reinstated coverage of

Radio One

(ROIA)

with a buy rating and a 12-month target price of 77. Radio One was declining 1/4 to 65 1/8.

Deutsche Banc Alex. Brown

rolled out coverage of

Sepracor

(SEPR)

with a buy rating and a price target of 114. Shares of Sepracor were jumping 7 5/16, or 8.1%, to 98.

Wachovia Securities

upped its rating on

Tropical Sportswear

(TSIC)

to strong buy from neutral. Tropical Sportswear was gaining 1 1/8, or 5.8%, to 20 3/8.

Banc of America Securities

upgraded

Whole Foods

(WFMI)

to a strong buy from buy. Whole Foods was advancing 4, or 12%, to 37.

Miscellany

British Telecommunications

(BTY)

announced that it has selected

N2H2

(NTWO)

as its preferred Internet filtering provider. Shares of British Telecommunications was plummeting 12 3/16, or 5.8%, to 197 13/16, while N2H2 shares were climbing 2 7/16, or 22%, to 13 5/8.

Ford

(F) - Get Report

and

DaimlerChrysler

(DCX)

are ratcheting up consumer rebates on some of their most profitable light trucks, the

Journal

reported. Shares of Ford were slipping 1 3/16 to 53 7/16 and DaimlerChrysler was adding 3/8 to 73 1/2.

Kennametal

(KMT) - Get Report

said it has hired

Goldman Sachs

to explore "strategic alternatives" regarding its

JLK Direct Distribution

unit, including selling it. Also, the company said it will incur special charges of about $25 million to $30 million in the quarter ended Dec. 31. The company plans to close, consolidate or downsize several warehouses, offices and plants and cut 400 to 500 jobs. Kennametal was sliding 3/16 to 29.

Kimberly-Clark

(KMB) - Get Report

was bouncing 1 13/16 to 68 13/16 after it said Thomas J. Falk has been named president and chief operating officer and will join the company's board of directors.

Stewart Enterprises

(STEI)

was climbing to 5 1/8 after it said that it has tapped President and COO William Rowe to become its new CEO after Vice Chairman and CEO Joseph Henican III resigned.