Market Dodges Worries in Strong Rebound From Last Week

There's talk of Oct. 15 having been a meaningful bottom, but not everyone on the Street buys it.
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SAN FRANCISCO -- Having avoided the clutches of that dastardly villain, Mr. Crash, and freed from the railroad tracks of

IBM's

(IBM) - Get Report

cautious

comments, the stock market built on the late-day momentum displayed

yesterday, returning today with an episode of aggressive buying, good breadth and spectacular Internet IPOs.

In the one of the biggest first-day performances ever,

Sycamore Networks

(SCMR)

soared 386.1% from its IPO price of $38.

But just as it seemed we were returning to those thrilling days of yesteryear, somebody tried to muffle the rally with a chloroform-soaked handkerchief.

CNBC

reported rumors of a profit shortfall from

Cisco

(CSCO) - Get Report

contributed to a last-hour dip, which was focused on tech stocks. (Subsequently, the network reported Cisco shares were rising in after-hours trading after falling 3.8% in the New York session.)

Coming Week: Join the discussion on

TSC

Message Boards.

Notwithstanding the session-ending concerns, stocks ended in impressive fashion a week earmarked by the market's resiliency to obstacles both real and anticipated.

The

Dow Jones Industrial Average

rose 172.56, or 1.7%, to 10,470.25 after trading as high as 10,520.90. The

S&P 500

gained 18.04, or 1.4%, to 1301.65 vs. its intraday apex of 1308.81.

Blue-chip averages were led by

J.P. Morgan

(JPM) - Get Report

and

American Express

(AXP) - Get Report

as financials rallied on hopes for a compromise on

Glass-Steagall

reform. The

Philadelphia Stock Exchange/KBW Bank Index

rose 3.9%.

Securities law reform "has been in the works for so long," said one cynical market player. "Is

this latest development worth

almost 7 1/2 points in J.P. Morgan?

Nearly 5 points for

Merrill Lynch

(MER)

? Maybe it makes them a more attractive acquisition candidate, but I don't know. At one point today the BKX was up 5% -- that's big. That's Internet-like."

The Dow also got a boost from

Wal-Mart

(WMT) - Get Report

,

Caterpillar

(CAT) - Get Report

and IBM. The

American Stock Exchange Retail Index

and the

Morgan Stanley Cyclical Index

each gained 1.9%.

The

Nasdaq Composite Index

gained 14.55, or 0.5%, to 2816.50 although down considerably from its high of 2843.60. In addition to Cisco,

Sun Microsystems

(SUNW) - Get Report

, down 3.1%, restrained the index. The

Nasdaq 100

rose 0.4%.

TheStreet.com's

Red Hots

Red Hots index rose 9.5, or 4.3%, to 230.46. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money. As of today, Sycamore Networks

(SCMR)

has replaced Gadzoox Networks

(ZOOX)

in the Red Hots.

Small-cap names in general fared well; the

Russell 2000

rose 4.42, or 1.1%, to 418.69.

"I liked the way the day turned better over the course of the day," said Jay Meagrow, vice president of trading at

McDonald

in Cleveland. "That first 130 points on the upside were pretty shallow, there wasn't a lot of volume. In the afternoon, the broader market stayed up and caught up."

As for the "little click down" in the final hour, "I don't think there was anything to it," Meagrow said, calling the session "pretty encouraging. It was pretty broad-based."

However, the trader was quick to note "there's another round of earnings next week. Net-net we'll probably continue to trade up

but I don't know how much further."

In

New York Stock Exchange

trading, 959.2 million shares were exchanged while advancers led declining stocks 1,956 to 1,057. In

Nasdaq Stock Market

action 1.2 billion shares traded while gainers led 2,208 to 1,704. New 52-week lows outpaced new highs 225 to 53 on the Big Board and by 138 to 135 in over-the-counter trading.

Panic to Manic?

In an abrupt about-face, the action this week has many players convinced

Oct. 15 was a significant bottom.

"It's tough to say we hit a bottom but the beauty is there is still so much money on the sidelines that can come in," said Charles Payne, president and chief analyst at

Wall Street Strategies

. "I think the smoke is starting to clear."

Payne's only caution comes from a realization "we've been in a bear market if you're in the wrong stocks. Last year there were more losers than winners, this year it's a lot more."

And there were clearly some big losers today, such as

Pervasive Software

(PVSW)

, down 66.7% after warning of a possible shortfall going forward, and

Inktomi

(INKT)

, off 14.5% after a

Merrill Lynch

downgrade.

Additionally,

Gillette

(G) - Get Report

declined 5% after forecasting disappointing profits yet again. (

TheStreet.com

examined Gillette's cash management techniques in a

story Tuesday, part of

TSC's

Cracking the Books II series on corporate accounting shenanigans.)

Payne is nonetheless optimistic. "If you're in the right place, forget about it," he said, noting big winners such as Sycamore;

Liberate Technologies

(LBRT) - Get Report

, up 11.9%; and

Silknet Software

(SILK) - Get Report

, which gained 9.9%.

"I'm excited about individual prospects," he said. "I wouldn't say we won't test 10,000 again, but I got a feeling we'll end the year with a bang. December is going to be a lay-up."

Hoping -- Yes, Hoping -- for a Tightening

Ironically, that outlook is based on a hope that

Federal Reserve

officials raise interest rates at their Nov. 16 meeting. "If they don't

tighten the same dark cloud hangs over the market," Payne said. But if they do, "convention wisdom" will be the Fed will have "evened the score" from its three easings of last fall. I think it's going to be a launching pad" with 10,800 being key resistance. If the index gets through that level it "opens the floodgates," the strategist said.

A far less optimistic view comes from John Bollinger, president of

Bollinger Capital

in Manhattan Beach, Calif., and

EquityTrader.com

.

"I don't buy it," Bollinger said flatly when asked about talk of the market's having bottomed last Friday. "The function of a rally in a bearish environment to convince as many people as possible. My forecast is for volatility though I believe it will have a downside bias due to a hostile monetary environment."

The veteran technician said "poor forward visibility is making manager nervous" and thus they're moving "whichever way trend breaks," whether it be bullish or bearish (clearly the former today). Add a lack of liquidity within individual names and the Fed getting "chary" with money and "you have a reasonable explanation of what's happening in the market place."

Among other indices, the

Dow Jones Transportation Average

rose 51.06, or 1.8%, to 2863.15; the

Dow Jones Utility Average

gained 1.16, or 0.4%, to 294.73; and the

American Stock Exchange Composite Index

added 6.52, or 0.8%, to 792.61.

For the week, the Dow gained 4.5%, the S&P climbed 4.3%, the Nasdaq added 3.1%, the Russell rose 1%, the DOT jumped 4.5%, the Dow transports gained 0.3%, the Dow utilities were unchanged, and the Amex Composite climbed 2%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

gained 87.92, or 1.3%, to 7040.30 and the

Mexican Stock Exchange IPC Index

rose 50.79 or 1%, to 5156.06.

Friday'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.

)

Sycamore Networks rocketed up 146 3/4, or 386.1%, to 184 3/4 on its first day of trading. The Chelsford, Mass. company makes products that send voice data over wavelengths of light. Shares were priced above range at $38 last night, by lead underwriter

Morgan Stanley Dean Witter

.

Website developer

NaviSite

(NAVI) - Get Report

also enjoyed a solid first day of trading, sailing up 20 9/16, or 146.8%, to 34 5/8 after being priced last night at $14 a share.

Mergers, acquisitions and joint ventures

Deutsche Telekom

(DT) - Get Report

climbed 15/16 to 46 3/4 after it said its buying

MediaOne Group's

(UMG)

mobile-phone assets in Poland, Hungary and Russia for $2 billion. MediaOne gained 5/8 to 69 5/8.

H.J. Heinz

(HNZ)

fell 15/16 to 45 1/2 after it announced plans to purchase

United Biscuits'

frozen foods division. Heinz said the deal is valued at roughly $137 million.

Mechanical Technology

(MKTY)

lost 7/16 to 24 3/4 after it announced plans to buy a 16% interest in

SatCon Technology

(SATC)

, in a deal valued at $7 million. The transaction calls for Mechanical to swap its

Ling Electronics

divisions, along with $7 million for 1.8 million newly issued SatCon shares and warrants.

Nokia

(NOK) - Get Report

rose 1 1/8, to 105 1/8 after it said it purchased U.S.-based corporate communications firm

Telekol

, in a deal valued at $56.5 million.

Phelps Dodge

(PD) - Get Report

climbed 1 7/16 to 58 1/16 after it said its exchange offer for

Cyprus Amax

(CYM)

is finished and it is now ready to give cash and stock to Cyprus shareholders. According to the agreement, Cyprus Amax shareholders would exchange each share for $7.61 in cash and 0.2203 Phelps Dodge shares. Cyprus added 1/2 to 20 1/4.

Earnings/revenue reports and previews

Consumer goods giant Gillette gave up 1 7/8, or 5%, to 36 after warning it sees fourth-quarter sales and earnings declining as it tries to trim excess inventory. Gillette said it expected its results to bounce back and return to high growth rates "in the near future," according to

Reuters

.

TheStreet.com

took a look at Gillette's announcement in a

story last night.

The company announced third-quarter earnings of 32 cents a share, in line with the downward-revised 12-analyst estimate and up from the year-ago 30 cents. Separately, Gillette said its board authorized the repurchase of an additional 25 million shares as part of its stock buyback plan, bringing the total plan to 100 million shares.

TheStreet.com

closely examined Gillette's cash management techniques in a prescient

Tuesday story, part of

TSC's

Cracking the Books II series on corporate accounting shenanigans.

Cincinnati Bell

(CSN)

climbed 3/4 to 21 1/16 after it posted third-quarter earnings of 22 cents a share, a penny better than the six-analyst estimate and up from the year-ago 15 cents a share.

Ericsson

(ERICY)

ascended 5 1/4, or 15.6%, to 39 1/16 after saying third-quarter sales rose 14% over last year, but income before taxes fell 19% from the year-ago period.

IXC Communications

(IIXC)

climbed 1 9/16 to 43 3/16 after posting a third-quarter loss of $2.29 a share, which includes a restructuring charge. The six-analyst estimate was for a $2.27 loss, while the year-ago report was a $3.53 loss, which also included a restructuring charge.

Public Service Company of New Mexico

(PNM) - Get Report

edged up 9/16 to 17 1/2 after it posted third-quarter earnings of 52 cents a share, missing the five-analyst estimate of 63 cents and the year-ago 84 cents.

Standard Motor Products

(SMP) - Get Report

lost 1/4 to 16 1/8 after it posted third-quarter earnings of 80 cents a share, missing the single-analyst estimate of 82 cents but up from the year-ago 72 cents.

U.S. Can

(USC)

slipped 7/8 to 21 5/8 after it posted third-quarter earnings of 44 cents a share, in line with the four-analyst consensus estimate and above the year-ago 30 cents.

U S West

(USW)

lost 7/16 to 59 after it posted third-quarter earnings of 83 cents a share, beating the 16-analyst estimate of 80 cents and the year-ago 75 cents

Washington Post

(WPO)

jumped 5 1/4 to 495 3/8 after it reported third-quarter operating earnings of $5.90 a share, beating the six-analyst estimate of $5.61 and the year-ago $5.00. The company said results rose on an increase in advertising revenue from publications, growth in subscriber revenue at its cable unit, a 24% decline in newsprint expense and an increase in the company's pension credit.

Waste Management

(WMI)

, the garbage-hauling titan, added 7/16 to 17 1/4 despite warning that preliminary findings from an internal audit will likely "have a material unfavorable impact" on the company's third-quarter and full-year results.

Offerings and stock actions

Bear Stearns

said it is pushing back a 3.1 million-share IPO for

EMed Technologies

indefinitely, due to market conditions. The offering was expected to price between $12 and $14.

Harris

(HRS)

climbed 1/2 to 24 1/2 after it approved the spinoff of

Lanier Office Equipment

. Shareholders will receive one share of Lanier for each Harris share. Harris also said it will buy back 15 million shares following the spinoff.

MCK Communications

(MCKC)

rose 4, or 25%, to 20 in its trading debut.

Symyx Technologies

has set plans for a 4.615 million-share IPO, which is expected to price between $12 and $14 a share, according to a

Securities and Exchange Commission

filing.

Credit Suisse First Boston

,

Donaldson, Lufkin & Jenrette

and

Schroder

are serving as the deal's underwriters.

Analyst actions

Credit Suisse First Boston

analysts Wendell Laidley and David Eller raised the company's fiscal 2000 estimates on

Micromuse

(MUSE)

to 62 cents from 60 cents a share and introduced a 2001 estimate of 79 cents a share. The stock is currently stamped as a strong buy. Micromuse was soaring 20 3/8, or 28.20%, to 92 5/8.

ABN Amro

sliced its price target on

Biogen

(BGEN)

to 75. Shares of Biogen fell 9 5/8, or 13%, to 64 3/8.

Morgan Stanley raised its 1999 earnings estimates on

Cox Radio

(CXR)

to $2.10 from $2.05 and upped its price target to 70 from 64. Cox shares hopped 1 1/2 to 42 11/16.

Salomon Smith Barney raised

E.W. Scripps

(SSP) - Get Report

to buy from neutral and set a price target of 62. E.W Scripps bounced 2 1/2, or 5.8%, to 45 1/2.

Morgan Stanley Dean Witter

upped its rating on

Exodus

(EXDS)

,

National Semiconductor

(NSM)

and

Atmel

(ATML)

to strong buys from market perform ratings. Shares of Exodus climbed 1/4 to 73 11/16 and National Semiconductor skidded 11/16 to 28 3/16, while Atmel hopped 2 9/16, or 7.7%, to 35 3/4.

Merrill Lynch downgraded Inktomi to intermediate-term neutral from intermediate-term accumulate for valuation reasons and "a significant increase in our operating-loss estimates" for fiscal year 2000. Merrill maintained its long-term buy rating on Inktomi, however.

Shares of Inktomi sank 17 1/2, or 14.5%, to 103 1/16.

Lehman Brothers

raised its rating on

Nabors Industries

(NBR) - Get Report

, which mounted 11/16 to 24 5/8.

Goldman Sachs

upped its rating on

NetZero

(NZRO)

to trading buy from market outperform. Shares of Netzero hopped 5 3/16, or 27%, to 24 1/16.

Deutsche Bank

upped its 1999 earnings estimates for

Nokia

(NOK) - Get Report

by 9% and its fiscal 2000 estimates by 19%, while maintaining its buy rating. Nokia advanced 1 1/8 to 105 1/8.

First Albany

cut

Pervasive Software

(PVSW)

to accumulate from buy. Pervasive plummeted 24 1/16, or 66.75, to 12.

Deutsche Bank sliced its 1999 earnings estimates for

Reuters

(RTRSY)

by 5% and its fiscal 2000 estimates by 10%, while maintaining its market perform rating. Reuters shares slipped 4 1/8, or 7.2%, to 53 7/16.

Morgan Stanley Dean Witter

raised its rating on four steel producers.

AK Steel

(AKS) - Get Report

was raised to strong buy from outperform with a price target of 32, while

USX

(X) - Get Report

was raised to strong buy from neutral with a price target of 30.

Commercial Metals

TICKER TYPE="EQUITY" SYMBOL="CMC" EXCHANGE="NYSE" NAME="Commercial Metals" PRIMARY="NO" ACTIVE="YES"/> was raised to outperform from neutral with a price target of 36.

Nucor

(NUE) - Get Report

was also raised to outperform from neutral with a price target of 50. AK Steel advanced 2 1/16, or 14.4%, to 16 3/8 and USX climbed 1 3/16, or 5.3%, to 23 1/2, while Commercial Metals mounted 1/2 to 31. Nucor gained 2 13/16, or 6.5%, to 45 15/16.

Merrill Lynch upgraded

Symbol Technologies

(SBL)

to intermediate-term buy from accumulate. Symbol Technologies added 5 7/16, or 16.5%, to 38 3/8.

Donaldson Lufkin & Jenrette

raised its rating on Tidewater to buy from hold.

Tidewater

(TDW) - Get Report

. Shares of Tidewater popped 2 1/8, or 7.9%, to 28 7/8.

Goldman Sachs added

Viant

(VIAN)

to its recommended list. Viant shares soared 18 3/4, or 26.6%, to 89 1/4.

Miscellany

Amazon.com

(AMZN) - Get Report

said it plans to sue

barnesandnoble.com

(BNBN)

, claiming that the retail Web site copied Amazon's patented

1-Click

technology for online shopping. The proceedings charge patent infringement and seek an immediate court order to stop barnesandnoble.com from using the technology. Shares of Amazon slipped 2 1/8 to 78 5/8, barnesandnoble.com advanced 3/16 to 18 1/2.

Apple

(AAPL) - Get Report

said it plans to roll out its new Internet-enhanced operating system for its

Macintosh

computers this weekend. The new

Mac OS 9

operating system, which has a suggested retail price of $99, includes

Sherlock 2

, Apple's Internet search and shopping feature. Apple fell 2 3/16 to 73 15/16.

Cendant

(CD)

and

Homestore.com

(HOMS)

said Homestore will issue 250,000 of its shares to Cendant to settle litigation. At current market prices, the settlement is worth about $9.4 million, well below the $300 million in damages Cendant originally sought, alleging that Homestore failed to honor a commitment to sell it an equity stake. The companies also reaffirmed previous business agreements. Cendant lost 2, or 9.1%, to 19 15/16, while Homestore.com bounced 5 13/16.

The

Clinton

administration and

Congress

reached a pact early today that is expected to clear the way for overhauling Depression-era banking laws,

Reuters

reported.

Ford

(F) - Get Report

said that Philippe Paillart has stepped down from his roles as chairman and CEO of its

Ford Credit

division. The automaker has tapped Jac Nasser to immediately replace Paillart, who will remain as the division's president until sometime after January 2000. Shares of Ford advanced 3/4 to 53 7/8.

Intel

(INTC) - Get Report

said it plans to roll out its fastest

Pentium III

chips on Monday without its highly anticipated 820 chipset family, which PC makers such as

Dell

(DELL) - Get Report

are relying on for their own products' production. The 700-megahertz chipset will compete with

Advanced Micro Devices'

(AMD) - Get Report

new

Athlon

chip family. Shares of Intel mounted 1 3/4 to 73 7/16.

The

Nasdaq Stock Market

, a unit of the

National Association of Securities Dealers

, said it will make its pricing and quote systems available for after-hours trading from Oct. 25, though broker-dealers won't be required to participate until Nov. 15 Starting Monday, broker-dealers can vountarily begin using Nasdaq's reporting systems through 6:30 p.m. EST., instead of 5:15 p.m. EST. Firms that may have technological problems will have until Nov. 15 to make their internal systems compliant with the new hours.