"Eventually it won't work," conceded one trader this morning as stocks ran higher in one of the best looking rallies Wall Street has seen in a while. "But for now if you've got a weak market and you buy, it works out OK."
Again, the center of strength is big tech: The
Nasdaq Composite Index
lately was up 69, or 3%, to 2379 and the
-- up 73, or 3.8%, to 2017 -- was even stronger. But what's really impressive about today's move is the action in financial stocks.
Ever since Jan. 8, bank stocks have been chopping lower. That's meant that the market has depended on the tech issues with largest capitalization to draw it higher. So while the
was able to hit a new high at the end of January, that move was incredibly narrow. It was the kind of advance that made technical analysts and the more fundamentally minded alike tear their hair out. It was a market waiting for a fall.
There were some hopes. There was a brief rotation into cyclicals. There was another one into food stocks. Neither held. Neither was what the market needed to move higher. "I don't think you can get the market higher until the financials come back," said Jeffrey Applegate, chief investment strategist at
So today bodes well for a market trying to pull its way out of range bound trading. The
Philadelphia Stock Exchange/KBW Bank Index
was up 21, or 2.8%, to 787 -- its second day of good gains. Helping the bank stocks forward were these words from
, speaking out (again) on why the Glass-Steagall Act needs to be revamped:
In the United States, our financial institutions have been required to take elaborate steps to develop and deliver new financial products and services in a manner that is consistent with our outdated laws. The costs of these efforts are becoming increasingly burdensome and serve no useful public purpose. Unless soon repealed, the archaic statutory barriers to efficiency could undermine the global dominance of American finance, as well as the continued competitiveness of our financial institutions and their ability to innovate and to provide the best and broadest possible services to U.S. consumers.
Led by its tech and financial components, the
Dow Jones Industrial Average
was up 88 to 9265. The broader S&P 500 was up 20, or 1.7%, to 1244. Internet stocks -- good litmus paper for figuring out the market's tone -- were driving higher.
TheStreet.com Internet Sector
index was up 38, or 8.3%, to 488 and
TheStreet.com E-Commerce Index
was up 8, or 8.9%, to 103. Even small-caps were participating. The
was up 6 to 404.
Whether the market will be able to stage a sustainable rally, though, may have a lot to do with what happens to the Treasury market. In a way, that is odd. Equities and bonds decoupled nearly a year ago, and for some time the two markets were generally trading in opposite directions. That, apparently, is no longer the case. The rapid shifts in asset allocation from bonds to equities and back -- sustained by investors who depended heavily on models that valued stocks relative to bonds -- have finally ended. The market is acting normal again.
"The major thing that has been hanging on the market and why we're stuck here is the long bond has backed up 25 basis points or so," said Applegate. He professed himself perplexed over the drop in the long bond. There is, after all, a dwindling supply of Treasuries coming onto the market, and inflation data remains benign. Right now, he said, the market's view is that the Fed's next move will likely be toward a tightening. Applegate doesn't buy it.
Tom McManus, equity strategist at
NationsBanc Montgomery Securities
, takes the view that the Fed will tighten sometime in the latter half of this year, but that doesn't change his fundamentally bullish stance.
"The environment that will make the Fed start snugging is an environment of rising earnings estimates," he said. With earnings looking better, the market will be able to handle the prospect of higher rates.
As for the choppiness the market's gotten mired in lately, McManus said it's important to fend off myopia. "You need to commit yourself to the view that you're in the market for more than just a few days. The market is attractive if you have a horizon of more than two months."
New York Stock Exchange
action, advancers were topping decliners 1,662 to 1,100 on 455 million shares. Over on the
Nasdaq Stock Market
, advancers were beating decliners 2,109 to 1,453 on 552 million shares. The 30-year Treasury bond was off 2/32 to 98 7/32, lifting the yield to 5.37%. (For more on the fixed-income market, see today's early
Thursday's Midday Movers
True to its name,
(VERT:Nasdaq) was gliding up 33 1/8, or 207%, to 49 after
priced its 3.5 million-share IPO above range last night.
A host of other stocks began their first day trading today:
- Catapult Communications (CATT:Nasdaq) was up 2, or 20%, to 12 1/16 after
Hambrecht & Quist priced its 3.35 million-share IPO midrange.
Gabelli Asset Management (GBL:NYSE) was up 3/4 to 18 1/4 after its 6 million-share IPO priced within range by
Salomon Smith Barney. (
TheStreet.com wrote about the offering
Korn/Ferry (KFY) - Get Report was down 1/2 to 13 1/2 after
Credit Suisse First Boston priced its 11.75 million-share IPO midrange.
Prodigy (PRGY:Nasdaq) was flying 12 5/8, or 85%, to 27 after
Bear Stearns priced its 8 million-share IPO at the high end.
In other news:
is expected to find six Japanese steelmakers guilty of dumping hot-rolled steel in the U.S., according to a report in the morning edition of the
Nihon Keizai Shimbun
. The ruling could be good news for U.S.-based steelmakers.
was up 1/8 to 26 9/16;
was flat at 16; and
was up 1/32 to 1 9/16.
Electronic Data Systems
was up 2 3/16 to 48 1/16 after setting an information technology services pact valued at $17 billion with
. MCI WorldCom was up 4, or 5.3%, to 80 1/4. EDS will acquire
for $1.65 billion in cash. And more than 12,000 employees, primarily in the U.S. and Canada, are expected to move to EDS from employment with MCI WorldCom and Systemhouse.
Separately, MCI WorldCom posted fourth-quarter earnings of 23 cents a share, excluding its investment in
, a Brazilian long-distance carrier, beating the 21-analyst view by a penny and moving up from the year-ago 10 cents.
, a direct marketing company, was up 5 11/16, or 29.9%, to 24 7/16 on news
Federated Department Stores
will buy the company in a deal valued at about $1.7 billion, including debt. Fingerhut shareholders will receive $25 a share in cash under a tender offer expected to commence within a week. Federated was down 1 11/16 to 40 13/16.
was up 3 1/8, or 5.9%, to 56 1/2 after last night saying it will acquire
fiber laser business for $5 million. SDL said it plans to post a $2.5 million first-quarter charge on the purchase. Polaroid was up 1 3/16, or 6.2%, to 20 5/16.
was up 5 1/4, or 15.2%, to 40 after
extended by five years the companies' equity-for-promotion exchange that created
. CBS' stake in SportsLine USA has increased 18%, which could grow to more than 27%. The extended agreement allows CBS to promote CBS SportsLine during broadcasts pursuant to a promotional schedule projected to be worth in excess of $100 million over the five-year extension term. CBS was up 3/8 to 35 13/16.
American International Group
was up 6 7/8, or 7%, to 105 5/8 after posting fourth-quarter earnings of 95 cents a share, topping the 18-analyst view of 93 cents and the year-ago 84 cents.
was continuing its after-hours ascension from yesterday, lately up 19 3/16, or 21%, to 111. Along with declaring a 2-for-1 stock split, the company posted earnings of 18 cents a share, 8 cents higher than the 11-analyst outlook and above the year-ago loss of 62 cents. Today, NationsBanc Montgomery Securities raised the stock to buy from hold.
, which went public in January, was up 3 5/16, or 5.1%, to 69 after last night posting a fourth-quarter loss of 47 cents a share vs. a pro forma loss of $1.38. Today, the company announced a partnership with
, the Internet service unit of
, to create a financial news center site on CompuServe. AOL was up 7 1/16 to 157 15/16.
was down 1 3/4, or 19.7%, to 7 5/32 after last night saying it sees a third-quarter loss of 9 cents a share because revenue was hurt by a slower-than-expected ramp of a major product enhancement. The seven-analyst view called for a profit of 3 cents vs. the year-ago nickel.
was up 3 5/8, or 10.4%, to 38 3/4 after last night saying it sees fourth-quarter earnings of 93 cents to 95 cents a share on strong sales. The four-analyst estimate called for 81 cents vs. the year-ago 63 cents.