Late Recovery Masks a Truly Muddled Day

The major-index bounce into the close looks reassuring, but there's a dearth of certainty on Wall Street.
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Having suffered through a storm last week, Wall Street enjoyed a bit of calm today. Following some morning volatility, major proxies advanced cautiously and then closed with a surge in a fairly subdued session.

The absence of dramatic developments at either extreme of the news spectrum kept morning losses in check and then the market's bullish trend reestablished itself once again. A stock-split announcement from

Microsoft

(MSFT) - Get Report

proved enough of an impetus to reestablish tech stock leadership, overshadowing disappointing developments at

Merck

(MRK) - Get Report

.

Other than citing enthusiasm about Microsoft's split, traders were loathe to explain the late-day action.

"I was watching the market tight and I don't know the reasoning behind it other than the fact the market got its head handed to it last week," said Jay Meagrow, vice president of trading at

McDonald

in Cleveland. "We were directionless all morning, really all over the place. There's nothing to explain

the close, but it felt like it was some kind of program. It was all back-end loaded and there were a lot of imbalances late in the day."

Thanks largely to Mister Softee's 3.6% rise, the

Nasdaq Composite Index

was the best performer among major indices. The tech-leaning index rose 30.43, or 1.3%, to 2369.31, just fractionally off its best level of the session.

In addition to Microsoft,

Sun Microsystems

(SUNW) - Get Report

and

MCI WorldCom

(WCOM)

showed the most muscle among traditional tech bellwethers, while

Dell

(DELL) - Get Report

and

Intel

(INTC) - Get Report

rambled higher toward the close. The

Nasdaq 100

gained 1.7% but the

Philadelphia Stock Exchange Semiconductor Index

shed 0.7%.

TheStreet.com Internet Sector

index rose 6.58, or 1.3%, to 496.59, as strength in

Yahoo!

(YHOO)

and

RealNetworks

(RNWK) - Get Report

offset weakness in components such as

Amazon.com

(AMZN) - Get Report

and

Onsale

(ONSL)

. Outside the index,

broadcast.com

(BCST)

jumped 12.7%.

'I was watching the market tight and I don't know the reasoning behind

the late recovery other than the fact the market got its head handed to it last week,' said McDonald's Jay Meagrow

Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo., said Microsoft's "leadership" is significant because the software giant is so heavily owned by institutions its performance is something of a proxy for the market overall.

"With

IBM

(IBM) - Get Report

breaking below 180 and still volatile, the market is looking for someone to step to the forefront, whether that's

General Electric

(GE) - Get Report

or Microsoft, it bodes well for an eventual turn to the upside," Belski said. "Microsoft continues to be one to keep an eye on. Not only because it's a market leader but it's action historically has been one that helps pull the market out of its doldrums."

The

Dow Jones Industrial Average

closed up 82.65, or 0.9%, to 9203.32 after falling as low as 9063.25 intraday.

For much of the day, IBM was one of the big laggards in the Dow. But Big Blue closed up 0.7% at 180 15/16, well above its nadir of 173 1/2. Merck fell 1.4% to 137 following disappointing test results for a new antidepressant drug, but climbed from its intraday low of 134 15/16.

3M

(MMM) - Get Report

was the best Dow performer, rising 5.4% after posting fourth-quarter earnings that narrowly exceeded expectations and predicting better things ahead in 1999. Other Dow leaders included GE and

American Express

(AXP) - Get Report

, which posted fourth-quarter earnings today in-line with expectations. Financial stocks overall benefited from a holiday in Brazil's financial markets, although the real was quoted down a further 3.9% to $1.79 in currency trading.

The

S&P 500

rose 8.79, or 0.7%, to 1233.98, overcoming an earlier decline to as low as 1219.46. The

Russell 2000

closed off its low of 420.38 but still down 0.33, or 0.1%, to 422.11.

Small-Cap Stability Seen Encouraging

Ironically, Belski is encouraged by the small-caps' recent performance. "We saw a broadening out of the rally in the fourth quarter with small-caps at least keeping pace, when in 1998 small stocks didn't always follow the market," he said. "So far in 1999, small-caps have been less volatile, which is a plus long-term. You don't need those stocks to be on fire to the upside and want to see some stability, especially after a long drought. But the megacaps are whipping around and doing some strange things, like trading down on good-to-decent earnings news."

Some of the volatility in big-caps is part and parcel of investors' "indecision regarding the market," which leads to "whippy, consolidation-type trading," the strategist surmised. That is further manifested in that "there's a lot of speculation involved in the selling vs. hard-core fundamentals," he said. For instance, investors are looking further out in terms of earnings projections and trying to guess when the next recession or rebirth of inflation will arrive.

Despite the trend and a narrowing of the market other strategists view with consternation, Belski believes the market remains healthy. Regarding market internals, he said up and down volume is "relatively even" even though declining issues are leading in absolute terms.

In

New York Stock Exchange

trading today, 727.4 million shares traded while declining stock led advancers 1,519 to 1,440. In

Nasdaq Stock Market

activity, losers led 2,101 to 1,990 while 877.9 million shares traded, snapping at 12 a record string of sessions with more than a billion shares exchanged. New 52-week lows led new highs 49 to 37 on the Big Board but new highs led 87 to 25 in over-the-counter trading.

Among other indices, the

Dow Jones Transportation Average

rose 49.17, or 1.6%, to 3112.97; the

Dow Jones Utility Average

fell 0.12, or 0.04%, to 308.61; and the

American Stock Exchange Composite Index

gained 1.32, or 0.2%, to 706.01.

Today's gains put the Dow and S&P 500 back into positive territory for the year and extended the Nasdaq's 1999 gain to 8%. Belski and Meagrow agreed the old saw "so goes January, so goes the year" could be in the back of market players' minds this week.

"It's just another statistic; You could also say, 'As go the first five days, so goes the year,'" Belski said. "But as we get later in the week, you could see the market trade higher" to ensure the sentiment indicator remains positive.

The price of the 30-year Treasury bond fell 16/32 to 102 2/32, its yield rising to 5.11%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 24.59 to 6618.50 and the

Mexican Stock Exchange IPC Index

added 10.77 to 3707.80.

Monday's Company Report

By Heather Moore
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.

)

Microsoft scored 5 5/8 to 161 7/8 after its board approved a 2-for-1 stock split, effective March 12. Meanwhile, Microsoft and

NTL

(NTLI)

of Britain agreed to jointly develop broadband services for delivery to customers in the U.K. and Ireland. Microsoft will make a $500 million investment in NTL to accelerate deployment of high-speed voice, video and data services over its national fiber-optic telecommunications networks and to continue the company's introduction of advanced Internet, telephone and cable television services over its broadband facilities. NTL shot up 12, or 17.7%, to an all-time high of 79 3/4.

Shares of three leading Y2K solutions companies --

Keane

(KEA)

,

IMRglobal

(IMRS)

and

Computer Horizons

(CHRZ)

-- fell sharply after a BT Alex. Brown analyst downgraded all three stocks. Edward Caso, the Alex. Brown analyst, downgraded Keane to market performer from buy; IMRglobal to market performer from strong buy; and Computer Horizons to buy from strong buy.

Keane closed down 2 1/2, or 6.8%, to 33 15/16. IMRglobal plummeted 4 3/8, or 15.1%, to 24 1/16, on a volume of 1.24 million shares, compared with a three-month average of 376,356. And Computer Horizons edged down 13/16 to 19, well off its Feb. 27 all-time high of 52 3/16. Caso was unavailable for comment.

--

Spencer E. Ante

Mergers, acquisitions and joint ventures

Broadcast.com lifted 17 1/16, or 12.7%, to 151 7/8 after joining up with Japan's

Softbank

to launch a Japanese language-based Internet audio and video programming concern.

Compaq

(CPQ)

added 11/16 to 46 7/8 after it and

eBay

(EBAY) - Get Report

announced a strategic marketing alliance. Under the agreement, Compaq will feature an eBay icon exclusively on its

Prosignia Desktop 310

and

Notebook 210

PCs. In turn, eBay, which rose 20 1/2, or 10.4%, to 217 1/2, will promote Compaq's Prosignia computers at more than 90 trade-show events throughout the year.

General Electric brought in 2 5/8 to 100 1/2 after its

GE Capital

said it will buy the leasing business of troubled

Japan Leasing

for an estimated $7 billion.

Britain's auto-parts maker

LucasVarity

(LVA)

swelled 9 1/4, or 25.5%, to 45 1/2 after refusing a buyout offer from

Federal-Mogul

(FMO) - Get Report

. FMO slid 1 7/16 to 61 13/16.

Yahoo! surged 26 1/16, or 9.1%, to 312 after entering a national media and marketing promotional program intended to span national network and cable television properties and the Internet with

News Corp.

(NWS) - Get Report

. News Corp. rose 5/16 to 26 3/4.

Earnings/revenue reports and previews

R.G. Barry

(RGB)

sliced off 1 9/16, or 12.9%, to 10 9/16 after warning it expects 1998 earnings to come in at 95 cents a share, below the single-analyst forecast for $1.15. The company blamed unseasonably warm weather and reduced footwear reorders.

Coastcast

(PAR) - Get Report

tumbled 2, or 21.1%, to 7 1/2 after saying it expects to post a fourth-quarter loss of 9 cents to 14 cents a share vs. the year-ago profit of 35 cents on lower sales. The single-analyst outlook called for earnings of 7 cents.

Wind River Systems

(WIND)

jumped 2 7/8, or 9%, to 35 after last week forecasting fourth-quarter earnings will meet expectations. The five-analyst outlook calls for 29 cents a share vs. the year-ago 22 cents.

In other earnings news:

Offerings and stock actions

Ameritrade

(AMTD) - Get Report

climbed 4 7/8, or 9.7%, to 55 5/8 after announcing a 2-for-1 split. The stock has climbed more than 300% in the past year, closing at 50 on Friday. It reached a closing high of 59 on Jan. 12. The split is intended to increase the shareholder base and provide more liquidity for the stock, according to Chairman and Chief Executive Joe Ricketts. He said the rise in the stock reflects the strength of the company's financial performance and business model. The stock will begin trading at the post-split value on Feb. 23 when Ameritrade said it will have approximately 58 million shares outstanding.

Elsewhere in the sector, online investing company

E*Trade

(EGRP)

expanded 1 1/4 to 79 3/4 after saying it set a single-day record of $108.6 million in new customer deposits last week.

Gucci

(GUC)

dropped 1 7/8 to 71 even after

LVMH Moet-Hennessy Louis Vuitton

(LVMHY)

upped its stake in the company to 34.4%. LVMHY fell 1/2 to 46 3/4.

Analyst actions

Cambridge Technology

(CATP)

advanced 3 7/16, or 13.8%, to 28 1/2 after

Adams Harkness & Hill

upgraded it to strong buy from accumulate.

EchoStar Communications

(DISH) - Get Report

won 3 7/8, or 7.4%, to an all-time high of 56 1/8 after

ING Baring Furman Selz

reiterated a strong buy and increased its 12- to 18-month price target to a range of 63 to 75 from 50 to 60.

Forcenergy

(FEN) - Get Report

plunged 1/2, or 28.6%, to an annual low of 1 1/4 after

Goldman Sachs

slashed it to market outperform from trading buy.

Georgia-Pacific

(GP)

excelled 4 13/16, or 8%, to 64 13/16 after

Morgan Stanley Dean Witter

upgraded it to strong buy from outperform.

Louisiana Pacific

(LPX) - Get Report

took in 15/16, or 5.4%, to 18 7/16 after the firm upped it to outperform from neutral.

LSI Logic

(LSI) - Get Report

vaulted 2 3/16, or 10.3%, to 23 3/8 after

Prudential Securities

raised the stock to strong buy from hold.

Metris

(MTRS)

powered up 3 3/8, or 6.8%, to 53 27/32 after Goldman Sachs started coverage with a market perform.

Qwest

(QWST)

sloughed off 1 7/16 to 58 11/16 after

Legg Mason

initiated coverage with a market perform.

USX-Marathon

(MRO) - Get Report

gave up 1 7/16, or 5.2%, to 26 after

Deutsche Bank Securities

reduced its 1999 earnings estimate for the company to $1.05 a share from $1.15. The 18-analyst First Call consensus calls for $1.65.

Miscellany

Amazon.com lowered 10 5/8, or 8.6%, to 112 3/8 after

The Wall Street Journal

said that price wars could trim margins for some electronic retailers.

Florida Panthers

(PAW)

shot up 1 7/8, or 21%, to 10 13/16 after a mention in

Barron's

as one of investor Archie MacAllaster's top stock picks. Also,

Vesta Insurance

(VTA) - Get Report

rose 1 3/16, or 18.3%, to 7 11/16 and

Frontier Oil

(FTO)

rose 3/4, or 14%, to 6 1/8 on positive comments from the investor.

Trimeris

(TRMS)

spiked up 2, or 13.5%, to an all-time high of 17 after saying preliminary results from a Phase II trial of its T-20 showed the drug was well tolerated at all doses and cut the viral load in HIV patients.

TheStreet.com

took a closer look at the news in a

story this morning.