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Let's Not Play Two: Tech Can't Repeat Rally, and Tumbles

The Dow extends its losing streak to two while tech stocks succumb to creeping worries.
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Stocks drifted along on the slow boat to nowhere today, unable to fight a negative tide that got stronger as the trading day ebbed.

Better-than-expected earnings failed to inspire as another setback in the bond market and continued reticence ahead of next week's


meeting dominated sentiment. The price of the 30-year Treasury bond closed down 15/32 to 88 29/32, its yield rising to 6.06%.


Dow Jones Industrial Average

suffered its second straight retreat, falling as low as 10,708.65 before closing off 94.35, or 0.9%, to 10,721.63.

Once again, cyclicals such as







International Paper


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paced Dow decliners. Cyclicals continue to suffer amid expectations the

Federal Reserve

will tighten and restrain growth, as well as profit-taking after a quarter of heady gains. The

Morgan Stanley Cyclical Index

fell 1.5%.

Weak cyclicals also hampered the

S&P 500

, which fell 13.12, or 1%, to 1335.88 after trading as high as 1351.12. Unlike

yesterday, big-cap technology stocks were unable to bail out the index.

In techland, better-than-expected quarterly results from

Cabletron Systems



Micron Electronics


failed to re-inspire the sector. In fact, Cabletron fell 10.6% despite posting a narrower-than-expected loss; Micron dipped a fraction.

Similar to Cabletron,

Lehman Brothers


stumbled 6.1% despite posting much better-than-expected profits. The

American Stock Exchange Broker/Dealer Index

slid 2.3%.

Beyond those (admittedly) second-tier names, tech traders focused on a view the

Nasdaq Composite Index

was due for a setback after rising 9.7% from June 14 through yesterday's close.

The tech-married (Married? Yes, married) index closed down 50.02, or 1.9%, to 2580.26 after trading as high as 2642.36.



fell 1.8% after

Donaldson Lufkin & Jenrette

cut earning estimates, while

Sun Microsystems











each suffered wider percentage losses. The

Nasdaq 100

shed 2.6% while the

Philadelphia Stock Exchange Semiconductor Index

lost 2.1%. Internet Sector

index dipped 17.46, or 2.9%, to 576.92 after rising as high as 606.37 at midafternoon.

Separately, E-Finance Index

fell 2 3/16, or 2.6%, to 83 19/32 after rising as high as 88 7/32 in its first day of trading on the

American Stock Exchange

. Index quotes are available using the symbol XEF. Options on the index will be available for trading later this summer on the Amex.

Despite downturns by Net proxies, some Internet stocks again failed to heed whatever cautionary tale the bond market is spinning; perhaps investors are thinking it's

The Bonds Who Cried Wolf


Net names such as

EchoStar Communications






Juno Online


enjoyed favorable sessions. Meanwhile,



soared 99% on much higher-than-normal volume after introducing a free Internet phone service and

Ramp Networks

(RAMP:Nasdaq) jumped 52.3% in its first day of trading. However,

Salon Internet

(SALN:Nasdaq) dipped 4.8% from its offering price.

"They're running and gunning the Internet stocks," said Scott Bleier, chief investment strategist at

Prime Charter

. "It's the end of the quarter. Big movers tend to trend at the end of the quarter. Money gets put to work -- it's that simple. They've got to buy 'em to keep the game going."

Bleier observed many Net stocks have rallied back to "breakdown points" but questioned whether they can break on through to the upside, despite admitting "you can't discount anything with these stocks because they're so surprising both up and down."


, for example, rallied as high as 119 7/16 today, having broken down from 120, before retreating to close up 2.2% at 108 3/4, he said. Similarly,



rose as high as 166 1/8 before closing off 4.1% at 152 1/2 and continues to trade between last week's lows around 120 and its breakdown point around 160.

As for why window dressing wouldn't shine on cyclicals, the strategist observed ''fundamental thought has changed" regarding the outlook for the economy and interest rates. He expects the Fed to tighten twice by year end but notes inflation is not "pervasive" and said

Alan Greenspan

and his central bank cohorts "don't want to precipitate a major market correction."

Given that expectation and prospects for better global growth, cyclicals "are not done," he said.

As for the bigger picture, Bleier observed -- as he has previously -- the S&P 500 is "stuck" in a trading range of between 1275 to 1375 and is likely to remain so for the foreseeable future.

Pismo Beach, and All the Clams You Can Eat

"It's like yesterday. Barely better on volume," said Jay Meagrow, vice president of trading at


in Cleveland. "It's an empty week as far as announcements go. It's going to be like this -- up 100, down 100 for a while. It's summertime -- we're in there now. All the islands are open for business. This week is a great time to take days off. Unfortunately, I don't get the luxury."


NewYork Stock Exchange

trading, 710.9 million shares were traded while declining stocks led advancers 1,671 to 1,283. In

Nasdaq Stock Market

activity, 1.007 billion shares were exchanged while losers led 2,256 to 1,624. New 52-week highs bested new lows 88 to 54 in Big Board action and by 114 to 41 in over-the-counter trading.

Meagrow said orders on McDonald's desk were "mixed" today, suggesting the reversal "wasn't a landslide" or the result of anything fundamental. "I don't think it was a big deal," he said. "With volume down, any kind of move is more dramatic, more exaggerated in both directions."

McDonald deals mainly with mid-cap stocks, banks specifically, and the trader observed bids and offers "aren't backed by as much volume. It feels like more work for less results." But even mega-caps such as

America Online


are suffering from the same malady, he said.

Among other indices, the

Russell 2000

dipped 2.11, or 0.5%, to 447.33; the

Dow Jones Transportation Average

fell 36.59, or 1.1%, to 3391.63; the

Dow Jones Utility Average

added 1.62, or 0.5%, to 328.39; and the

American Stock Exchange Composite Index

shed 0.28 to 765.47.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

lost 40.17, or 0.6%, to 6954.91 and the

Mexican Stock Exchange IPC Index

fell 50.18, or 0.9%, to 5773.53.

SEC Sets Confab on After-Hours Trading

Securities industry regulators and broker-dealers who have been mulling over after-hours trading plans will have a chance to speak out during a June 30

Securities and Exchange Commission

roundtable meeting in Washington, the commission confirmed today.

Demand for evening trading hours has grown with the number of individual investors placing trades in the evening through online brokerages. Alternative trading system

Eclipse Trading

is due to start an evening trading session for retail investors this summer and the Nasdaq Stock Market is considering a move to extended hours as early as this fall.

Two weeks ago, the New York Stock Exchange diverted what seemed to be a universal move towards longer trading hours. The Big Board decided not to go forward with any extension until after dealing with year 2000 computer fixes and decimalization.

Extended trading plans have produced an intense debate on Wall Street among brokers, exchanges, data vendors and other utilities. The SEC meeting will get the different parties in one room talking about extended trading and how it's going to work, said Michael Satow, Eclipse Trading's founder and president.


Caroline Humer

Tuesday'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.


As noted above, Lehman Brothers skidded 3 11/16, or 6.1%, to 56 5/8 after posting second-quarter earnings of $2.09 a share, smashing the 11-analyst outlook of $1.68 a share but moving down from the year-ago $2.12. Lehman's move reflected today's downward action in finance stocks more than any reaction to its earnings report. Among other brokerages,



dropped 4.9%,

Merrill Lynch


dropped 3.2%,

Donaldson Lufkin & Jenrette


dropped 4.1%,

Morgan Stanley Dean Witter


dropped 3.6% and

Goldman Sachs


dropped 2.2%.

Meanwhile, Ramp Networks rocketed 5 3/4, or 52.3%, to 16 3/4 after

BancBoston Robertson Stephens

priced its 4 million-share IPO mid-range at $11. The company provides shared Internet access for the small-office market.

Salon fared less well in its debut, falling 1/2 to 10 after

W.R. Hambrecht

priced 2.5 million shares at $10.50 each through a Dutch auction.

And Juno stormed up 2 1/4, or 16%, to 16 5/16, below an earlier high of 19 7/8, after two firms started coverage of the ISP yesterday.

Mergers, acquisitions and joint ventures



rose 1 1/2 to 47 3/4 after last night

Abbott Laboratories


agreed to acquire the company in a stock swap valued at $7.3 billion. Under the terms of the deal, each Alza share will be exchanged for 1.2 Abbott shares. Abbott said it expects to record a charge of $100 million in 1999 related to the deal and that it sees dilution of 3 cents a share in 2000 earnings. Abbott gave up 11/16 to 43 1/2.

Chartwell Re


soared 5, or 33.1%, to 20 1/8 after



agreed to acquire the reinsurer for about $368 million. Trenwick lost 2 5/16, or 8.1%, to 26 1/2. Under the terms of the deal, Trenwick will pay Chartwell shareholders 0.83 of a share for each Chartwell share.



shaved off 5/16 to 51 11/16 after its


unit set a pact with

United HealthCare


to provide specialty pharmacy mail order services. United fell 1 5/16 to 64 1/2.

EarthLink flew 9 5/8, or 20.2%, to 57 1/4 on market chatter



might make a buyout offer for the company. Gateway launched its own Internet access service several years ago as a way to generate incremental revenue.



picked up 3 7/8, or 5.6%, to 73 5/8 in sympathy.

General Dynamics


tacked on 1/8 to 66 3/4 after agreeing to buy three units from



for $1.05 billion in cash. GTE lowered 7/16 to 70 5/8.



hopped up 3/16 to 26 5/16 after saying

Schroder Ventures

, an international private equity specialist, is buying its worldwide

Photo Color Systems

business and its Italian manufacturing facility. Imation expects proceeds of $55 million after taxes from the planned sale, which is expected to be break-even on its second-quarter financial statement.



jumped 1 3/4, or 7.1%, to 26 9/16 after last night agreeing to be acquired by

Warburg Pincus Ventures

and members of Knoll Management for $28 a share in cash.



flourished 5/8 to 31 1/2 after AOL said it would provide email access through the company's Palm series of handheld computers.

Earnings/revenue reports and previews

Applied Power


sliced off 1 1/2, or 5.7%, to 24 3/4 after announcing third-quarter earnings of 51 cents a share, a penny higher than the nine-analyst outlook and ahead of the year-ago 48 cents.

Cabletron Systems sloughed off 1 5/8, or 10.3%, to 14 1/8 even after last night reporting first-quarter earnings of 4 cents a share, topping the 20-analyst estimate by 3 cents and moving ahead of the year-ago break-even results. The company also announced a strategic alliance with Compaq.

Countrywide Credit Industries


lost 2 3/4, or 6.1%, to 42 1/2 after reporting first-quarter earnings of 88 cents a share, in line with the 14-analyst estimate and up from the year-ago 78 cents.

Dan River


tumbled 1 3/8, or 14.7%, to 8 after warning it sees second-quarter earnings of 13 cents to 15 cents a share, which would be below the four-analyst prediction of 18 cents. The company said its apparel fabrics business performed below expectations and that imports from Asia hurt pricing and operations.

J.P. Morgan

cut the stock to long-term buy from buy.

Kaufman & Broad Home


closed unchanged at 23 1/2 after posting second-quarter earnings of 58 cents a share, beating the 10-analyst estimate of 55 cents and moving up from the year-ago 42 cents.

Methode Electronics


vaulted 1 13/16, or 9.2%, to an annual high of 21 7/16 after late last night topping the four-analyst fourth-quarter earnings forecast by 4 cents a share. The company's earnings of 29 cents also topped the year-ago 24 cents.



declined 1 13/16, or 15.3%, to 10 1/16 after last night saying it sees second-quarter operating earnings of 18 cents to 20 cents a share, which would be behind the three-analyst call for 31 cents. In the year-ago period, the company earned 20 cents.

United Road Services


plunged 1 13/16, or 26.6%, to 5 1/32 after warning it sees second-quarter earnings of 5 cents to 8 cents a share. The five-analyst estimate called for 16 cents vs. the year-ago 5 cents. United Road said the towing line portion of its businesses were hurt by scrap steel costs under one contract and recent mild weather. Also, the company said Edward Sheehan will no longer serve as chairman and CEO. Donald Moorehead, an independent director, will replace Sheehan as chairman. United Road is beginning a search for a new chief executive.

Analyst actions

Digital River


climbed 2 1/4, or 9.1%, to 27 after

Dain Rauscher Wessels

upgraded it to strong buy-aggressive from buy-aggressive, citing the company's near-term operating strength and long-term business opportunities.

Intel slid 1 to 55 11/16 after Donaldson Lufkin & Jenrette lowered its fiscal 1999 and 2000 earnings estimates for the chipmaker to $2.20 from $2.27 and to $2.50 from $2.60, respectively. DLJ -- noting the company's unfavorable product mix, price pressures and delay in the introduction of its next-generation chip -- also lowered its price target on Intel to 70 from 75.

Meanwhile, Intel's CEO Craig Barrett told a technology conference in London that the company expects 90% of its revenue to come from e-commerce transactions in the next two to three years.

Time Warner


added 9/16 to 67 1/4 after

Merrill Lynch

named the stock its Focus One stock of the week.



grew 1 13/16 to 93 15/16 after

Bear Stearns

restarted coverage with a buy.



expanded 5, or 6.7%, to an all-time high of 79 3/8 after BancBoston Robertson Stephens reiterated a buy on the stock. Yesterday, the company announced that the

Federal Trade Commission

appealed a decision by an FTC administrative law judge that dismissed the agency's complaint against Visx regarding certain patents.




slipped 3/4 to 41 after saying it hired

Goldman Sachs

to help it explore strategic alternatives for its 58% stake in

Arch Coal


. Arch Coal gained 5/16 to 13 13/16.

Bristol-Myers Squibb


excelled 1 3/16 to 69 after filing a supplemental new drug application with the

Food and Drug Administration

to use its


injection with Genentech's


as a therapy for breast cancer.

Cardinal Health


advanced 2 7/8, or 5.1%, to 59 3/4 after forming

Cardinal One Source

, a group of businesses marketed together to help pharmaceutical companies develop, package, distribute, launch and market products.

As originally published, this story contained an error. Please see Corrections and Clarifications