Market Eases Into Postholiday Period With Minor Gains - TheStreet

Market Eases Into Postholiday Period With Minor Gains

Wall Streeters are waiting to see what kind of September this'll be, but clues are few so far.
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September and October have not been particularly kind to the stock market the last couple of years, and since midsummer investors have worried that this year would be no different.

It has not helped that stocks have followed a similar contour to 1997's and 1998's. The run-up in the winter, the spring consolidation, the jump to new highs in July, the drop down from there, the fake-out rally. Until Friday, it looked like the market was following the script perfectly. This year's demon would not be a crisis from overseas as in the past, but homegrown. The

Fed

would again tighten on Oct. 5, damaging the stock and bond markets -- perhaps accelerating capital flows away from the U.S. -- and driving major indices below the lows they hit in August.

But then came the weak

employment report

Friday, and everything looked different. While one report doth not an on-hold Fed make, even the more hawkish economists on the Street agree the new jobs data upped the odds that the central bank will stand pat. And while stocks are not making much headway today, it says something that, despite a bit of a pullback in the bonds, they are holding onto their gains they made on Friday's huge rally.

"Treasuries are a little heavy, and that's dampened the carryover enthusiasm from Friday," said Bill Schneider, head of U.S. equity block trading at

Warburg Dillon Read

.

But while the dangers of the markets getting upset this fall may have been diminished, it seems likely that volatility will continue to rule the roost, said Charles Crane, chief market strategist at

Key Asset Management

. "Watching the latest economic statistic crawl across the tape has become a great pastime," he said. "The market will remain very sensitive to indicators of business activity for the next several weeks. I suspect we continue this recent bout of volatility, and may even see it become more pronounced."

"The market is going to get too negative and too positive," Schneider agreed. "The pendulum for me is still swinging to the positive side of that equation. I think the market could do all right here."

The

Dow Jones Industrial Average

was lately up 3 to 11,082 while the

S&P 500

was up half a point to 1358. Big-cap techs continued to outperform -- the

Nasdaq Composite Index

was up 14, or 0.5%, to 2858.

TheStreet.com Internet Sector

index was up 11, or 1.8%, to 607. The

Russell 2000

was up 1 to 437.

Media stocks were the focus, on the heels of the news that

Viacom

(VIA.B)

and

CBS

(CBS) - Get Report

would combine. Investors liked the deal, in part because there is little overlap between Viacom's and CBS' operations. Viacom rose 6.5% on the news, while CBS was up 3.2%.

While the deal signals that investment bankers are apparently back from vacation -- cheering the Street with the thought that deals will get rolling again -- plenty of traders were stretching their Labor Day. Volume was light to moderate on slightly negative breadth. In

New York Stock Exchange

action, decliners were beating advancers on 1,516 to 1,288 with 395 million shares changing hands. There were 59 new highs and 48 new lows. On the

Nasdaq Stock Market

, decliners were leading advancers 1,842 to 1,737 on 521 million shares. There were 118 new highs and 36 new lows.

The bond market was slumping, with the bellwether 30-year Treasury off 19/32 to 100 27/32, its yield rising to 6.06%. (For more on the fixed-income market, see today's early

Bond Focus.)

Tuesday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

CBS and Viacom unveiled merger plans which call for Viacom to buy CBS, combining their media and entertainment divisions in a $37 billion stock swap. Viacom Chairman Sumner Redstone is expected to remain chairman and CEO of the merged company, while current CBS CEO Mel Karmazin will be tapped as its president and chief operating officer. CBS rose 1 9/16 to 50 1/2 while Viacom vaulted 2 15/16, or 6.5%, to 48.

Separately,

King World Productions

(KWP)

inched up 15/16 to 40 7/16 after saying it will delay until Sept. 14 its shareholder vote on a planned $2.5 billion merger with CBS. The decision followed news of the Viacom deal, though both CBS and King World reiterated their commitment to proceed with the merger.

Mergers, acquisitions and joint ventures

Bell Microproducts

(BELM)

was unchanged at 8 after saying it has inked a deal with

Advanced Micro Devices

(AMD) - Get Report

to use AMD's microprocessors.

Clarus

(CLRS)

added 7/16 to 12 1/4 after saying it signed a deal with

Compaq

(CPQ)

to sell Clarus business procurement software. Shares of Compaq slipped 1/8 to 23 1/8.

Fleet Financial Group

(FLT) - Get Report

lost 5/8 to 38 15/16 after it forged a $1.4 billion deal to sell 278 branches and other assets to

Sovereign Bancorp

(SVRN)

, lately up 25/32 to 10 3/4. The bank is attempting to meet regulatory requirements for its proposed acquisition of competitor

BankBoston

(BKB)

, lately down 5/8 to 45 5/16. Fleet announced plans in March to purchase BankBoston, establishing the eighth-largest bank in the U.S. Sovereign said it would receive $12 billion in deposits and an estimated $8 billion in loans, in what is being called the largest proposed bank divestiture.

Federal Realty Trust

(FRT) - Get Report

lost 15/16 to 23 after saying it will spin off its retail site unit to shareholders as a new public company. The REIT also said a third party may acquire most of its community shopping centers through a merger for a combination of cash and stock for about $18 a share.

Hilton Hotels

(HLT) - Get Report

slipped 3/4, or 5.8%, to 11 1/16 after it agreed to pay $4 billion in cash, stock and debt for

Promus Hotels

(PRH) - Get Report

. The deal calls for Hilton to pay $38.50 per share in cash for 55% of Promus shares. The remaining 45% of the Promus stock would be exchanged for Hilton common stock at a rate determined by market conditions. Promus CEO Norman Blake Jr. said he will not take a position with the merged company once the transaction is complete. Shares of Promus popped up 3 1/2, or 11.2%, to 34 7/8.

Dutch supermarkets group

Koninklijke Ahold

(AHO)

added 1 3/8 to 37 1/16 after acquiring Spanish supermarket chains

Mercasol

and

Las Postas

. Ahold said it will operate seven supermarket chains in southern Spain and Madrid when the deals are completed.

Nokia

(NOK) - Get Report

lost 1/16 to 87 9/16 after setting an agreement with

Tele 1 Europe's

Finnish division to provide its DX 200 switching system to the Nordic telecom operator's customers by September.

Professional Bancorp

(MDB) - Get Report

shed 4 3/8, or 21.7%, to 15 3/4 and

FirstFed Financial

(FED)

added 7/16 to 16 5/8 after the companies said they had ended merger talks, scuttling a potential $50 million deal. Professional said its board had decided to kill the deal with FirstFed when it concluded it would not secure the $23.50 per share the banks had agreed on earlier this year.

Russian cell-phone operator

Vimpel Communications

(VIP)

rose 3/16 to 15 3/8 after it said it was in talks with strategic partner

Telenor

of Norway for joint financing of up to $300 million in investments.

Earnings/revenue reports and previews

Circuit City

(CC) - Get Report

lost 13/16 to 36 15/16 despite reporting same-store sales for August up 6%.

Zale

(ZLC)

sparkled 2 1/16, or 5.9%, to 37 1/4 after posting fourth-quarter earnings of 23 cents a share, beating both the 12-analyst estimate of 21 cents and the year-ago 16-cent gain. The retailer also said that board member and former president and COO Beryl Raff would become its acting CEO after Robert DiNicola resigned from the position. DiNicola will remain the company's chairman.

Offerings and stock actions

Westpoint Stevens

(WPSN)

gained 1 9/16, or 6.8%, to 24 5/8 after it added 4 million additional shares to its current share repurchasing program, raising the possible total of the buyback to 6.4 million shares. The company said the increase gives it authorization to repurchase about 12% of its 55 million outstanding shares.

Analyst actions

Merrill Lynch

airline analysts Candace Browning and Mike Linenberg sliced their estimates on U.S. airlines, citing increasing fuel prices, air traffic control delays and capacity growth.

US Airways

(U) - Get Report

lost 13/16 to 29 1/2 after third-quarter estimates were cut to 45 cents a share from 95 cents.

Southwest

(LUV) - Get Report

lost 5/8 to 16 7/16 after third-quarter estimates were lowered to 24 cents a share from 26 cents and

Northwest

(NWAC)

lost 3/4 to 27 5/8 after third quarter numbers were chopped to $2.10 from $2.30.

Delta

(DAL) - Get Report

fell 2 to 50 11/16 when its third-quarter estimates were trimmed to $2.10 from $2.15. Separately Delta said it tapped Edward West to replace Warren Jenson as its CFO. Jenson left Delta to become the CFO of

Amazon.com

(AMZN) - Get Report

.

Blockbuster

(BBI) - Get Report

added 1/8 to 14 11/16 after

PaineWebber

rolled out coverage of the stock with an initial buy rating.

Cigna

(CI) - Get Report

lost 11/16 to 93 1/8 after

ING Barings

started coverage with a buy rating and a price target of 110.

Cytec

(CYT)

added 1 1/4, or 5.4%, to 24 9/16 after

Credit Suisse First Boston

rolled out coverage with a strong buy rating and a price target of 35.

Ixnet

(EXNT)

lost 1 11/6, or 8%, to 19 3/8 after Merrill Lynch initiated coverage of the stock with a long-term buy rating.

PaineWebber axed both

Dow Chemical

(DOW) - Get Report

and

Union Carbide

(UK)

to neutral from attractive. Dow lost 1 5/16 to 114 1/16 while Union Carbide slipped 15/16 to 57 7/16.

El Paso Energy

(EPG)

darkened 1 5/16 to 38 1/8 despite Merrill Lynch's upgrade of its intermediate-term rating to a buy from an accumulate.

General Electric

(GE) - Get Report

climbed 2 17/32 to 118 15/16 after Salomon Smith Barney raised its rating on the shares to buy from outperform and set a new price target of 135.

Hotjobs.com

(HOTJ)

powered up 5 3/8, or 18%, to 35 after

SG Cowen

started coverage of the stock with a buy rating.

Kansas City Power

(KLT)

added 1/16 to 24 3/16 after

ABN Amro

initiated coverage with a buy rating.

Oregon Steel

(OS)

added 3/4, or 6.7%, to 11 7/8 after ABN Amro upped its rating to a buy from an outperform.

Provantage Health Services

(PHS)

lost 1/16 to 13 3/8 after

Lehman Brothers

initiated coverage of the stock with a buy rating.

SBA Communications

(SBAC) - Get Report

lost 7/16 to 11 1/4 after

Wachovia Securities

started coverage of the stock with an initial long-term buy rating.

Merrill Lynch reiterated its buy rating on

Texas Instruments

(TXN) - Get Report

and set a price target of 110,

CNBC

reported. Texas Instruments added 2 1/8 to 90.

Miscellany

PepsiCo

(PEP) - Get Report

lost 3/8 to 34 1/4 after saying it chose former

Tropicana

head Gary Rodkin as its president and CEO. Tropicana is a unit of PepsiCo.