Late Burst in Bonds, Blue-Chips Puts More Pressure on Tomorrow

Traders placed early bets today that tomorrow morning's ECI and GDP reports will be market-friendly.
Author:
Publish date:

SAN FRANCISCO -- Ahead of some heavily anticipated economic data tomorrow, stocks floated along on the slow boat to nowhere for much of the day today. But, buoyed by a rebounding bond market, buyers put their oars in the water and paddled furiously in the final hour of the session, sending blue-chip averages to solid gains and lifting tech proxies off their session lows.

The price of the 30-year Treasury bond rose 23/32 to 97 10/32, its yield falling to 6.33%. The advance followed a weaker-than-expected

durable goods

report here and a strong rally over there (meaning

Europe).

The bond market's ability to close at its session highs inspired a round of buying by equity traders who had previously been reticent as they await tomorrow's key third-quarter

GDP

and

Employment Cost Index

reports.

"Bonds are looking good and we're getting more buyers. More people are feeling comfortable to dip their toe in," Sam Ginzburg, managing director of equity trading

Gruntal

, said in the waning moments of the session. "The tape is telling me maybe somebody has an idea of what's going on. The scuttlebutt is somebody had an idea about the

ECI number."

Ginzburg acknowledged the action could be a "sucker's play," but admitted to "getting longer" and "covering some shorts" into the close today "just in case."

Noting the heavy short position and record-high negativity in the bond market, "there's more risk to the upside than the downside right now," the trader said. "If we get some benign numbers tomorrow, I wouldn't know how high everything goes. It's going to go ballistic."

While shy of ballistic, the

Dow Jones Industrial Average

rose 92.76, or 0.9%, to 10,394.89 after trading as high as 10,420.54. Prior to the final hour's spike, the index traded in a tight range between 10,344.24 and 10,273.95.

The index was supported largely by

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

as financials in general rallied in concert with the bond market. The

Philadelphia Stock Exchange/KBW Bank Index

gained 5% while the

American Stock Exchange Broker/Dealer Index

rose 4.9%.

Financials also gave a boost to the

S&P 500

, which closed up 14.80, or 1.2%, to 1296.71 after trading as low as 1280.48.

Even before the blue-chip averages' late-day flurry, market players were impressed with the action in the

Dow Jones Transportation Average

, which rose 89.50, or 3.2%, to 2918.70 and the

Dow Jones Utility Average

, which gained 7.13, or 2.4%, to 302.37.

"The transports and utility averages are having big days," said Scott Bleier, chief investment strategist at

Prime Charter

. "This suggests there is a chance some believe rates have peaked and that oil has peaked. If in fact that is the case, then the next

Fed

raise will only be a quarter

basis point, enough to slow mortgage origination and homebuilding."

Bleier noted comments last Wednesday by Saudi Arabia oil minister Ali al-Naimi were largely unnoticed but highly significant. The official said oil production is likely to remain steady but that clear signs of increased demand have yet to appear,

Reuters

reported.

"That's a telling thing," Bleier said. "That means oil prices have peaked and will come down because demand is illusory. If we haven't seen demand since Japan bottomed in February, then there's something wrong. Oil back to $23 doesn't mean anything yet, but transports are flying. If oil isn't going up more, inflationary pressure remains stable and you buy the utilities."

Crude oil futures dipped 1.3% to $22.90 a barrel today.

Tech Stocks Dawdle

Tech gauges took a hit amid renewed concerns over earnings for bellwethers of both the traditional and online variety.

The

Nasdaq Composite Index

rose off its worst level of the session at 2768.87, but still closed down 8.95, or 0.3%, to 2802.52.

The downward trend in technology extended to the Dow industrials, where

Hewlett-Packard

(HWP)

was the biggest negative influence, sliding 8.2% after

Merrill Lynch

cut its earnings estimates. After the close, H-P warned that it sees an "increased risk" of missing its fourth-quarter expectations.

The Comp, meanwhile, was waylaid by

Intel

(INTC) - Get Report

, which declined 2.7% after

Salomon Smith Barney

cut earning estimates.

"We are getting multiple reports that Intel is still having some manufacturing issues this quarter and is having trouble meeting all the commitments it made to customers," the brokerage said in a report today.

Like Intel, fellow

newly minted Dow component

Microsoft

(MSFT) - Get Report

also took a dip, falling 1.6%. Additionally,

Dell

(DELL) - Get Report

declined 3% after

Hambrecht & Quist

cut its recommendation to market perform from buy. The

Nasdaq 100

shed 0.4%.

In addition to those heavyweights, the Comp got lambasted by Internet favorites.

eBay

(EBAY) - Get Report

tumbled 8.8% after investors expressed displeasure with the earnings and spending plans announced by the online auctioneer

last night.

Meanwhile,

Amazon.com

(AMZN) - Get Report

declined 6.6% ahead of its third-quarter results. After the close, the online retailer posted a loss of 26 cents a share vs. the 22-analyst consensus of a loss of 28 cents.

In sympathy,

Yahoo!

(YHOO)

declined 2.8%, helping send

TheStreet.com Internet Sector

index down 16.66, or 2.3%, to 706.49 vs. its intraday low of 691.73.

Still, there was plenty of interest in Internet plays such as

F5 Networks

(FFIV) - Get Report

, which rallied 38% after posting better-than-expected earnings.

Meanwhile, IPOs enjoyed a stellar session.

InterTrust Technologies

(ITRU)

gained 202%,

Predictive Systems

(PRDS)

rose 99% and

JNI

(JNIC)

jumped 121%.

In

New York Stock Exchange

trading, 950.1 million shares were exchanged while advancers led declining stocks 1,738 to 1,305. In

Nasdaq Stock Market

action 1.08 billion shares traded while losers led 2,027 to 1,851. New 52-week lows outpaced new highs 234 to 30 on the Big Board and by 127 to 79 in over-the-counter trading.

Among other indices, the

Russell 2000

added 0.98, or 0.2%, to 416.77 and the

American Stock Exchange Composite Index

fell 3.58, or 0.5%, to 786.31.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

dropped 53.41, or 0.8%, to 7011.47 and the

Mexican Stock Exchange IPC Index

climbed 7.26 to 5142.22.

Thursday'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.

)

Investors sorted through a number of initial public offerings, mostly applauding anything with a tie to the Internet. Shares of InterTrust Technologies soared 36 5/16, or 201.7%, to 54 3/8. The company makes software that helps control the rights to download technology.

Shares of JNI, a maker of speedy networking gear, jumped 23, or 121%, to 42. And Predictive Systems, a network consulting firm, sailed up 17 7/8, or 99.3%, to 35 7/8. (See table below for more IPO results.)

Mergers, acquisitions and joint ventures

Black Box

(BBOX) - Get Report

fell 9/16 to 49 5/16 after saying it bought privately held

Communications Contractors

for an undisclosed amount. Communications provides computer cabling services in the Chicago area and has about $10 million in annual revenue.

Exodus Communications

(EXDS)

edged up 1/16 to 77 1/4 after it agreed to acquire

Service Metrics

for about $280 million in stock. Service Metrics provides Internet monitoring applications that measure Web site performance, consistency and availability.

Unisys

(UIS) - Get Report

fell 1 3/8, or 6%, to 21 3/4 after it saying it has established e-business pacts with

BEA

(BEAS)

,

Intershop

and

Siebel

(SEBL)

. Unisys forecasts that its Internet business will rake in 50% of its revenues. BEA dropped 1 to 42, while Siebel rose 1 3/8 to 93 7/8

Earnings/revenue reports and previews

Allegheny Teledyne

(ALT) - Get Report

was unchanged at 15 after reporting third-quarter earnings of 23 cents a share, beating the nine-analyst estimate of 18 cents but down from the year-ago 33 cents.

Anheuser-Busch

(BUD) - Get Report

lost 1 1/2 to 67 7/8 despite reporting third-quarter earnings of 97 cents a share, beating the 14-analyst estimate of 95 cents and the year-ago 84 cents.

Avnet

(AVT) - Get Report

fell 1 1/16 to 47 5/16 after it posted first-quarter earnings of 74 cents, missing the six-analyst estimate by a penny and down from the year-ago 75 cents.

Brush Wellman

(BW) - Get Report

slipped 3/16 to 13 1/2 after reporting a third-quarter loss of 3 cents, wider than the two-analyst estimate of a 2-cent loss and down from the year-ago 3-cent profit.

California Water

(CWT) - Get Report

climbed 1 9/16, or 5.6%, to 29 1/4 despite posting third-quarter of 62 cents a share, missing the lone-analyst estimate of 65 cents and the year-ago 72 cents a share. The stock appeared to benefit from an overall rally in the utility sector.

Conseco

(CNC) - Get Report

climbed 1/16 to 22 1/16 after it posted third-quarter earnings of 73 cents a share, in line with the seven-analyst estimate but down from the year-ago 90 cents.

Consol Energy

(CNX) - Get Report

gained 1 1/8, or 9.5%, to 13 despite posting first-quarter earnings of 13 cents a share, missing the single-analyst estimate of 15 cents and the pro forma year-ago 21 cents a share.

Dayton Superior

(DSD)

gained 1 13/16, or 15.2%, to 13 3/4 after saying it is comfortable with consensus estimates for the third quarter and fiscal 1999. The three-analyst estimate has the company forecasted to make $1.16 a share in the third quarter and $2.02 for fiscal 1999.

Engelhard

(EC) - Get Report

lost 1/4 to 17 11/16 after it posted third-quarter earnings of 40 cents a share, which includes gains from a sale. The report beat both the nine-analyst estimate of 36 cents and the year-ago 31 cents.

1-800-Flowers.com

(FLWS) - Get Report

lost 1/2 to 12 1/4 after it posted a first-quarter loss of 31 cents a share, narrower than the two-analyst estimate of a 36-cent loss but wider than the year-ago 5-cent loss.

Harman International

(HAR)

fell 3/4 to 37 13/16 after posting first-quarter earnings of 28 cents a share, beating the five-analyst estimate of 25 cents but down from 45 cents a year ago.

Ionics

(ION)

fell 1 1/16 to 28 15/16 after it posted third-quarter earnings of 33 cents a share, missing the five-analyst estimate of 37 cents, but up from the year-ago 32 cents.

Jones Apparel

(JNY)

slipped 11/16 to 29 1/16 after it reported third-quarter earnings of 75 cents a share, beating both the 15-analyst estimate of 72 cents and the year-ago 57 cents. J.P. Morgan upped the stock to buy from long-term buy.

Nu Skin

(NUS) - Get Report

lost 1/8 to 11 3/8 after it posted third-quarter earnings of 24 cents a share, in line with the five-analyst estimate but down from the year-ago 30 cents.

Northwest Natural Gas

(NWNG)

fell 1/2 to 25 5/16 after it posted a third-quarter loss of 17 cents, narrower than the five-analyst expected loss of 24 cents and a year-ago loss of 26 cents.

Pimco Advisors

(PA)

gained 11/16 to 34 3/16 after it reported third-quarter earnings of 42 cents a share, in line with the five-analyst estimate and up from the year-ago 39 cents a share.

TheStreet.com

wrote about Pimco's possible involvement in a key issue in the bond futures market in a

story today.

PP&L

(PPL) - Get Report

climbed 5/8 to 26 11/16 after it posted a third-quarter profit of 55 cents a share, in line with the five analyst estimate and up from the year-ago 54 cents.

Qwest Communications

(QWST)

lost 9/16 to 33 7/8 after it posted third-quarter earnings of 3 cents a share, in line with the 20-analyst estimate and up from the year-ago pro forma loss of 2 cents.

Safeskin

(SFSK)

added 1/4 to 8 7/16 after it reported third-quarter earnings of 14 cents a share, missing the three-analyst estimate of 15 cents and the year-ago 24 cents.

Sara Lee

(SLE)

gained 1 7/8, or 7.9%, to 25 5/8 after it reported first-quarter earnings of 28 cents a share, in line with the 14-analyst estimate and up from operating net of 25 cents a year ago. The company said net income was boosted by strength in its non-food operations.

StarTek

(SRT) - Get Report

gained 7/16 to 48 after it posted third-quarter earnings of 21 cents a share, beating both the three-analyst estimate of 19 cents and the year-ago 13 cents.

Textra Technologies

(TTI) - Get Report

lost 1/8 to 8 3/8 after it posted third-quarter earnings of 2 cents a share, missing the three-analyst estimate of 4 cents but up from the year-ago 3 cents.

Washington Gas Light

(WGL)

added 1 5/16, or 5.1%, to 26 7/8 after it posted a fourth-quarter loss of 35 cents a share, wider than the 12-analyst estimate of 33 cents but a penny better than a year-ago loss of 36 cents.

Wrigley

(WWY)

jumped 5 1/16, or 7%, to 77 13/16 after it posted third-quarter earnings of 67 cents a share, better than the four-analyst estimate of 66 cents and up from a year-ago 63 cents a share. The company also announced it would repurchase up to an additional $200 million in shares.

Offerings and stock actions

Akamai Technologies

(AKAM) - Get Report

said it has upped the expected price range for its 8 million-share IPO to $21 to $23 a share from $16 to $18 a share.

Navistar

(NAV) - Get Report

climbed 1 to 41 7/8 after it said it set a share buyback worth up to $243 million.

Banyan

(BNYN)

rose 15/16, or 10.1%, to 10 1/4 after its division

Switchboard

said it plans to set a common stock offering.

CBS

(CBS) - Get Report

, which holds a minority interest in the unit, climbed 7/16 to 45 3/16.

United HealthCare

(UNH) - Get Report

rose 1/4 to 49 1/4 after it said that it has renewed a share-buyback plan for up to 10% of the company's stock.

Analyst actions

Merrill Lynch

initiated coverage of

Blackrock

(BLK) - Get Report

with a near- and long-term buy rating. Blackrock rose 1/16 to 14 1/16.

Bear Stearns

cut its 1999 fiscal estimate on

Compaq

(CPQ)

to 23 cents from 30 cents a share. Compaq fell 7/16 to 19 1/16.

Robertson Stephens

rolled out coverage of

Forest Labs

(FRX)

with a buy rating. Forest gained 3/16 to 43 7/8.

J.P. Morgan

rolled out coverage of

Goldman Sachs

(GS) - Get Report

with a long-term buy rating. Goldman jumped 2 9/16 to 64 3/8.

Hewlett-Packard tumbled 9 5/8, or 12.6%, to 67 after Merrill Lynch analyst Steve Milunovich cut the stock's fourth-quarter EPS to 73 cents a share from 78 cents. He also cut his estimate for fiscal 1999 EPS to $2.97 a share from $3.02, while taking its fiscal 2000 estimate to $3.35 from $3.40. Milunovich based his estimate cuts on the company's reorganization of its Unix sales force, PC component problems and Y2K.

Separately, Robertson Stephens also sliced H-P fourth-quarter estimates to 73 cents a share from 82 cents and its fiscal 2000 estimates to $3.20 a share from $3.30.

Salomon Smith Barney sliced estimates on Intel to $2.23 a share from $2.27 for 1999 and $2.65 from $2.85 for fiscal 2000. Intel fell 1 15/16 to 69 7/16.

J.P. Morgan

upgraded shares of

Nortel Networks

(NT)

to buy from hold.

Last night, Nortel posted third-quarter earnings before items of 28 cents a share, 2 cents ahead of the 22-analyst estimate and up from the year-ago 21 cents, which excludes items. Shares of added 2 1/2 to 58.

Warburg Dillon Read

upped its rating on

Owens Corning

(OWC)

to buy from hold. Owens added 5/16 to 18 1/8.

Credit Suisse First Boston upped its rating on

Rayonier

(RYN) - Get Report

to buy from hold. Rayonier climbed 1 1/8 to 38 5/8.

Deutsche Banc Alex. Brown

cut shares of

Smithfield Foods

(SFD)

to buy from strong buy. Smithfield dropped 1 5/8, or 7%, to 21 11/16.

Merrill Lynch started coverage of

Williams Communications

(WCG) - Get Report

with intermediate-term accumulate and long-term buy ratings. Williams added 1/16 to 31.

ING Barings

cut its rating on

Wesco International

(WCC) - Get Report

to buy from strong buy. Shares of WESCO lost 3/8, or 5.4%, to 6 5/8.

Miscellany

City Financial

said it brought federal legal proceedings against

Citigroup

(C) - Get Report

to prevent Citigroup from branding divisions with the name CitiFinancial. According to City Financial, it filed the suit in a federal district court in Southern California after denying Citigroup permission to use the name. City Financial said Citigroup took the name to market its commercial credit business,

CitiFinancial Credit Co.

Citigroup shrugged off the news, lifting 2 13/16, or 5.8%, to close at 51 5/16.

The

Nasdaq Stock Market

is mapping out plans to roll out a pan-European stock market in early 2001, which would be known as

Nasdaq Europe

,

The Wall Street Journal

reported.