Market Falters Into Close as Players Question Its Staying Power

Wall Street is wondering whether seasonal strength will be enough to counter exhaustion from the recent surge and weak market breadth.
Publish date:

When pondering the performances of the

Nasdaq Composite Index

and the Treasury market over the last month or so, one only needs to think of that wonderful

Journey song,

Separate Ways (Worlds Apart)

. Over the last month, the 30-year Treasury bond has plummeted, while seemingly every day in the face of that horrendous weakness, the Nasdaq Comp was setting new records.

Today the Comp and the long bond got back together as the Comp -- joined by the rest of the market's major averages -- slumped along with bonds. The weakness in Treasuries was one of the reasons cited for the infirmity in stocks as the yield on the long bond climbed to 6.30%.


Nasdaq Composite Index

fell 26.44, or 0.8%, to 3421.37, after closing at an all-time high on Friday at 3447.81. The

Nasdaq 100

fell 1.7%.

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Meanwhile, the

Dow Jones Industrial Average

gave up 40.99, or 0.4%, to 10,947.92. Charge-card titan

American Express

(AXP) - Get Report


General Electric

(GE) - Get Report

were prominent losers in the average.

Conversely, Dow members

General Motors

(GM) - Get Report



(T) - Get Report

were the big winners in the blue-chip gauge. Internet Sector

index, after soaring to an all-time intraday high early in the afternoon, ended the session in the red, falling 16.21, or 1.6%, to 969.40. The DOT peaked intraday at 1008.98. Today was the first time the DOT has hit 1000; it finished its first trading session, Nov. 13, 1998, at 254.85.


S&P 500

fell 8.79, or 0.6%, to 1407.83. The

Russell 2000

shed 1.99, or 0.4%, to 456.95.

Scott Curtis, senior equity trader at

Brown Brothers Harriman

, pointed out that techs had a decent start to the day, but there wasn't any follow-through.

The trader also noted that the market is entering a month when people start to assess their holdings for tax-loss-selling purposes.

Red Hots index fell 6.84, or 2%, to 339.20. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.

The 30-year Treasury bond was down 30/32 to 97 17/32, yielding 6.31%. That's the highest yield since Oct. 27.

While major stock proxies didn't veer remarkably from Friday's closing levels, select sectors of the market jumped and swooned sizably.

The weakness in the long bond took a toll on financial stocks. The

American Stock Exchange Broker/Dealer Index

tumbled 3.7%; the

NYSE Financial Index

fell 2.1%; while the

Philadelphia Stock Exchange/KBW Bank Index

slumped 2.6%.

Stephen Shobin, chief technical analyst at

Lehman Brothers

, said the market "appears to be skating on thin ice" but is still "viable."

On the negative side, he pointed out that breadth on the Big Board made a new low two days after the S&P 500 made a new high and financials continue to struggle, as do bonds and dollar/yen. Shobin said the market tends to do best when financials are strong.

The dollar rose against the yen and the greenback was quoted late this afternoon at 102.36 yen, up from 101.78 Friday.

On the positive side, the new-issue market continues to act well; longs are working better than shorts; two of the best bellwethers, GE and


(CSCO) - Get Report

, are in pretty good shape; and seasonality is positive for the market, he said.

In light of that, Shobin said his guess was that the market will suffer a 3%-to-5% correction which will be short-lived, and then will rally to new highs.

As for the bond market: "Bonds look precarious," Shobin said. Shobin noted that his partner Jeff de Graaf at Lehman pointed out today that the bond market received a bullish piece of news with the drop in existing home sales, but bonds didn't respond well. A strong market should embrace good news, and the fact that it didn't "is not a good sign," he said. Sales of existing single-family homes fell 6.6% in October, the

National Association of Realtors


Also in the "not a good sign" department is that the

Philadelphia Stock Exchange Utility Index

made a new low today, he said. And the weakness in dollar/yen isn't helping either, he pointed out. The Philadelphia Stock Exchange Utility Index gave up 2.5% to 273.17.

As for observations on the market right now, Shobin said that "a lot of people talk about big-cap" vs. little-cap stocks and he said that capitalization is not the call to make. Sector and group is the call, and he pointed out that small-cap technology, Internet and telecom stocks have done well despite their size. "It's the sector or the group" that matters, he said. Of poor performers in the small-cap world, he pointed to small- and mid-cap financials, and small- and mid-cap oil-service stocks.

A drop in oil prices helped doom oil-service stocks to a down day. The January crude-oil futures contract fell 91 cents to $25.96 a barrel. The

Philadelphia Stock Exchange Oil Service Index

dropped 3.7%.

Gold mining stocks were decimated as the price of gold tumbled in the wake of the

Bank of England's

auction of 25 tons of the precious metal, which didn't enjoy the frenzy of buyers that September's auction did. The

Philadelphia Stock Exchange Gold and Silver Index

swooned 6.7%.

On the plus side, retailers did well today. The

S&P Retail Index

soared 2%.


New York Stock Exchange

trading, 870 million shares were exchanged while declining stocks beat advancers 2,126 to 989. On the

Nasdaq Stock Market

, 1.533 billion shares changed hands while losers beat winners 2,334 to 1,797. New 52-week lows beat new highs 373 to 54 on the Big Board, while new highs beat new lows 256 to 78 in over-the-counter trading.

Among other indices, the

Dow Jones Utility Average

continued its abysmal performance and hit a 52-week low today at 274.76 before closing a little off that level. It tumbled 4.43, or 1.6%, to 276.94. Elsewhere, the

Dow Jones Transportation Average

slipped 8.97, or 0.3%, to 2900.19, and the

American Stock Exchange Composite Index

advanced 1.72, or 0.2%, to 832.12.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 117.84, or 1.5%, to 7772.10 and the

Mexican Stock Exchange IPC Index

lost 34.35, 0.5%, to 6303.10.

Monday'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.


Few sectors were spared from the selling pressure today, but financial stocks were hit especially hard as the yield on the benchmark 30-year Treasury climbed to 6.3%, amid weakness in the dollar against the yen. American Express lost 4 13/16 to 147 13/16, while

J.P. Morgan

(JPM) - Get Report

fell 2 1/16 to 131 1/2, weighing on the Dow.

Meanwhile, AT&T was doing its best to lift the Dow in the opposite direction, rising 2 7/16 to 59 7/8, after Salomon Smith Barney upped its rating to buy from hold and set a 12-month price target of 75 after a detailed analysis of the company.

Mergers, acquisitions and joint ventures

Algos Pharmaceutical


fell 1 3/4, or 11.9%, to 13 after it agreed to merge with

Endo Pharmaceuticals Holdings

in an all-stock deal. The agreement, which should be completed by the second quarter of 2000, calls for Algos to merge with a division of Endo with Algos holders receiving one share of Endo for every share they own. The merged company will be publicly traded and take Endo as its name.

Amkor Technology

(AMKR) - Get Report

added 2, or 8.6%, to 25 3/16 after it said it is negotiating a $1 billion agreement to purchase the testing facilities of

Anam Semiconductor

. According to Amkor, the transaction would call for it to pay roughly $800 million for three Anam packaging and testing facilities in Korea and $500 million to $600 million for newly issued Anam shares.

Carnegie Investment Management

upped its offer for a 3% interest in


(MAT) - Get Report

to $15.75 a share from $14.35. Carnegie set a tender offer for 11.34 million Mattel shares on Nov. 1, while the stock was trading at $13.50 a share. Shares of Mattel slipped 1/8 to 14 15/16.



fell 1/4 to 32 1/2 after it set a pact to buy 14.9% of

Shorewood Packaging


from an institutional investor. Shorewood climbed 1 5/8, or 11.5%, to 15 3/4. The transaction calls for Chesapeake to pay $17.25 a share for 4.1 million shares of Shorewood.

Cumulus Media

(CMLS) - Get Report

climbed 1 to 39 3/8 after saying it will buy 35 radio stations from

Connoisseur Communications

, in a cash deal valued at $242 million.


(XON) - Get Report

gained 1 3/8 to 79 3/8 after

The Wall Street Journal

reported its $79.75 billion merger with



is expected to be approved by the

Federal Trade Commission

, possibly by tomorrow. Mobil climbed 9/16 to 103 1/2. The FTC is expected to call for the divestiture of certain gas stations, a refinery and other assets.

Royal Bank of Scotland

has launched a hostile bid of 15.90 pounds a share for

National Westminster Bank


after NatWest rejected a late-Friday friendly bid from the bank. NatWest dropped 9 7/8, or 6.7%, to 137. The latest offer comes in slightly ahead of the separate

Bank of Scotland

previous hostile bid of 15.77 pounds a share (including a special dividend). Royal Bank Deputy CEO Fred Goodwin said in an interview with


that the company expects the $42.51 billion offer for NatWest would add to EPS starting in the first year, excluding write-offs and restructuring charges.

Redback Networks


climbed 13 1/2, or 9.9%, to 150 after it agreed to buy

Siara Systems

, a maker of optical networking equipment and software, for $4.3 billion. The transaction calls for Redback to issue 31.3 million shares for all outstanding shares, options and warrants of Siara, with the combined company maintaining the Redback Networks name.

Walker Interactive Systems


jumped 6 3/32, or 180.5%, to 9 1/2 after it set a joint marketing and development partnership with stock market highflier

Commerce One


Commerce One climbed 8 1/8 to 323 3/4.


(W) - Get Report

fell 1/4 to 29 3/4 after it announced its plans to purchase privately-held

Mebane Packaging

, for an undisclosed amount. The deal should be completed by the end of the year.

Earnings/revenue reports and previews

Value City Department Stores


added 7/8, or 5.6%, to 16 5/8 after it posted third-quarter earnings of 23 cents a share, above the five-analyst estimate of 19 cents and the year-ago 12 cents a share.



lost 3/8 to 226 1/8 after it said that Friday's shopping volume rose 400% from last year.

Offerings and stock actions

CK Witco


rose 5/8, or 6%, to 11 after it set a repurchasing program to buy back 11.9 million shares, or roughly 10% of its stock.

Columbia/HCA Healthcare


slipped 1/4 to 26 1/2 after it set a $1 billion share-buyback plan.


(CNMD) - Get Report

gained 1 9/16, or 6.9%, to 24 1/2 after saying it cannot explain the recent decline in its stock price and that it has met its financial goals.


(ENT) - Get Report

lost 4 1/4 to 97 3/4 after it said stockholders are selling 26 million shares, or 12.9% of the total. Those shareholders include the

Sita Foundation

and some private equity funds handled by

Morgan Stanley Dean Witter Capital Partners



New York Stock Exchange

said it has suspended and will move to delist the ADRs of



as part of a merger deal with France's

Rhone Poulenc


Rite Aid

(RAD) - Get Report

inched up 1/16 to 7 11/16 after it said it has finished the refinancing of its current $300 million accounts-receivable securitization facility with



viaLink Company


added 4 3/16, or 10.2%, to 45 7/16 after setting a 2-for-1 stock split, which would be paid on Dec. 20 to shareholders of record Dec. 15.

Analyst actions

Bear Stearns

upped its price target on


(ADPT) - Get Report

to 62 to66 from 55 and raised its third-quarter 2000 EPS estimates to 50 cents from 48 cents a share. Shares of Adaptec fell 1 1/2 to 53 15/16.

Merrill Lynch

raised its intermediate-term rating on

American Airlines




to buy from accumulate. Shares of AMR climbed 1 3/8 to 60 3/16.

Donaldson Lufkin & Jenrette

initiated coverage of

Be Free


with a buy rating and a price target of 70. Shares of Be Free mounted 11 1/2, or 33%, to 46 3/8.

Warburg Dillon Read

upped its price target for


(CLS) - Get Report

to 91 from 72. Celestica added 1 9/16 to 74 7/16.

Credit Suisse First Boston

reinstated coverage of



with a buy rating and a price target of 105. Clarent advanced 1 9/16 to 85 7/16.

Merrill Lynch rolled out coverage of



with an intermediate long-term buy rating and a price target of 225. Shares of DoubleClick retreated 6 to 170 5/8.

Merrill Lynch upped its intermediate-term buy rating for



. Shares of Hadco advanced 1 3/8 to 47.

Merrill Lynch rolled out coverage of

ImClone Systems


with an accumulate rating and a long-term price objective of 46. ImClone Systems dwindled 3 3/16, or 7.7%, to 38.

Lehman Brothers


Koninklijke Ahold


on its recommended list. Shares of Ahold hopped 1 13/16, or 5.8%, to 32 15/16.

Morgan Stanley Dean Witter raised its price target for


(MRK) - Get Report

to 90 from 80. Shares of Merck added 7/16 to 80 5/16.

Goldman Sachs

raised its rating on

Metal USA

(MUI) - Get Report

to trading buy from market outperformer. Shares of Metal USA gained 1 3/16, or 15.7%, to 8 3/4.

Warburg Dillon Read raised its price target on

National Semiconductor


to 58 from 42. National Semiconductor shares mounted 1 3/4 to 43 1/4.

Merrill Lynch downgraded shares of

Northwest Airlines


to a long-term accumulate from buy. Northwest Airlines slipped 13/16 to 23 3/16.

SoundView Technology

raised its rating on

Open Market


to strong buy from buy. Shares of Open Market bounced 5 9/16, or 18.9%, to 34 15/16.

Salomon Smith Barney

raised its rating on


(PFE) - Get Report

to buy from neutral, based on the expectation that it will win the



merger dispute. Pfizer advanced 1 1/2 to 37 1/2, while Warner Lambert popped 2 3/8 to 91 3/8.

Goldman Sachs moved

Portal Software


to its recommended list from market performer. Portal Software rose 4 5/16 to 119 7/8.

Goldman Sachs said it added



to its recommended list. Shares of SPX edged up 1/16 to 77 1/4.

Merrill Lynch sliced its intermediate- and long-term ratings on

US Airways


to neutral and accumulate from accumulate and buy. US Airways fell 1/4 to 28.

Merrill Lynch upped its price objective range for



to 110 to 120 from 85 to 90 while maintaining its buy rating. Shares of Xilinx climbed 6 3/4, or 7.5%, to 95 5/8.


Unauthorized trading losses at

Plains All American Pipeline

(PAA) - Get Report

spooked investors today, sending the stock plummeting 9 1/8, or 46.8%, to 10 3/8.

Plains Resources

(PLX) - Get Report

, the parent of

Plains All American

, a master limited partnership that controls Plains All American Pipeline, said today that unauthorized trading activity by an employee in the pipeline company's crude oil trading division may yield losses estimated at $160 million for the year. As a result of the expected losses, the pipeline company and certain affiliates (not including Plains Resources) are in default on certain covenants under existing credit facilities.

The pipeline company is talking to its lenders about the problems, and Plains Resources has said it will provide up to $64 million in cash to Plains All American.

The companies said the pipeline company's "operating results for 1999 will be adversely affected,", and previous financial results may have to be restated. The companies have authorized a full investigation by outside counsel and


, while an additional investigation may be conducted by

Arthur Andersen

on behalf of Plains' lenders.

Trading in Plains Resources, which owns 54% of the master limited partnership that controls Plains All American Pipeline, has not yet opened. The unauthorized trading at the pipeline company does not affect Plains' Resources upstream, or exploratory operations.

The bulk of the unauthorized trading took place between April and November, but may have started as early as January. "It appears that the trader in question violated Plains All American's policy of maintaining a position that is substantially balanced between crude oil purchases and sales or future delivery obligations," the company said in a statement. The trader has been fired.

joint newsroom covered the Plains mess in a

story today.


Mavis Scanlon

America Online


lost 3 1/2 to 79 7/8 after it said more than 4 million AOL members shopped online Thanksgiving week, tripling last year's numbers.



will probably set major plans for its small-car strategy, which could produce new models and a possible pact with another carmaker,

The Wall Street Journal

reported. According to the


, the plan could be the company's largest effort since its merger. Shares of DaimlerChrysler stumbled 1 9/16 to 68 1/8.

Delta Air Lines

(DAL) - Get Report

slid 1/2 to 48 5/8 after it said it is offering discounted December travel to those who make their reservations online this week. Delta offered discounts of up to 5% off any fare that has an advance purchase requirement of three days or more for travel to all U.S. destinations the airline serves between Dec. 2 and Jan. 1.

Electric Lightwave


tacked on 11/16 to 15 1/4 after it said its board elected Rudy Graf as CEO. Graf is currently president and COO of

Citizens Utilities



HSB Group


was unchanged at 34 5/8 after it named Richard Booth as president and CEO.





(DIS) - Get Report

Toy Story 2

raked in roughly $80.8 million in ticket sales since Wednesday, setting Thanksgiving-weekend movie records. Shares of Pixar skidded 2 5/16 to 44 3/16, while Disney gained 7/8 to 28 7/16.

Wolverine Tube


climbed 1/4 to 15 3/16 after it announced its plans for at least a 5% price hike on all of its tube products, as of Wednesday.